How I got schooled on college savings plans

  @FortuneMagazine February 10, 2014: 5:53 PM ET
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(Fortune)

Is your child eventually going to wish he'd been born in another state? The federal government did a great service 17 years ago when it allowed states to set up Section 529 college savings plans as a way for overwhelmed parents to save for the ever-rising costs of higher education. The money you put in today gets to grow free from any federal taxes until you decide to spend it -- a big advantage that can massively multiply your savings, especially if you start putting money away years before your child goes to college.

But each state runs its own plan, and unfortunately not all college plans are created equal. And if you want to take advantage of any potential state tax benefits, you have to invest in the plan offered by your home state. The result: The plans are an essential monopoly in most states, granted by the state treasurer or other officials to a money management firm. And some state plans are taking advantage by charging oversize fees.

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