Simplifying College Savings Plans

Parents reeling from the complexity of their 529 college savings plan will be glad to know that help may be on the way. Congress last week grilled industry watchers on how the plans, which let money invested for college grow free of federal tax, are designed and sold. They have ballooned in popularity and now hold more than $50 billion in assets. But with each state designing its own program, 529s have developed into a hodgepodge of variations, many with multiple layers of fees not clearly disclosed. The National Association of Securities Dealers has launched an investigation into broker-sold plans, while the Securities and Exchange Commission is studying the industry. Action by Congress or other regulators probably won't come soon. But Joe Hurley, who runs the information clearinghouse Savingforcollege.com, says the attention makes it more likely that the tax benefits of 529s will be extended. Currently the provision that allows for tax-free withdrawals is set to expire after 2010.