What is a 529 college savings plan?


Quick Answer

A 529 college savings plan is a state-sponsored investment option intended to encourage saving funds for future higher education expenses. College savings plans differ from 529 pre-paid tuition plans in which individuals purchase credits or units from an institution in advance to lock in tuition prices.

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Full Answer

In establishing a 529 college savings plan a contributor has several different investment options to choose among, such as mutual funds, bond mutual funds and money market funds. These plans are subject to market risk because accounts fluctuate in value according to each particular investment option's performance. Almost every state offers different types of 529 plans, and many include tax incentives.

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