Savings Incentives and Prices: A Study of the 529 College Savings Plan Market

This Version: June 2010AbstractAlthough 529 College Savings Plans have existed for over a decade, there has been limitedscholarly attention on this investment vehicle. I analyze the market for 529 plans using a planlevel panel data set covering the years 2002 - 2006. I flnd evidence of limited market competitionand a positive relationship between state tax rates and 529 plan fees. A $100 increase in potentialwage beneflt from investing in a 529 plan is associated with a 3-6 basis point increase in fees fordirect sold 529 College Savings Plans. This suggests that government policies designed to makecollege more afiordable could enable investment flrms to charge excess fees. (JEL: G10, G11,H24, I22)