Perspective: How some states are ripping off people who try to save for college
Students walk on the campus of the University of Maryland, Dec. 2017. By Quinn Curtis Quinn Curtis is the Albert Clark Tate Jr. professor of law at the University of Virginia. He has written extensively on the regulation of mutual funds and retirement accounts. May 22 at 3:07 PM Parents worried about how they’re going to pay for college have been steering more and more money into college-saving plans, also known as 529 plans.
The worst offenders are plans sold by commission-compensated brokers. Investors in these plans are also more likely to pay brokerage fees, further offsetting the tax advantages. CollegeAmerica offers dozens of fund options, but not a single index fund, which typically have lower fees than managed funds do. And though CollegeAmerica is run by American Funds, Virginia charges investors a fee to buy into the plan, generating $40 million annually. That’s enough for Virginia to fully cover the expenses of operating its other 529 programs, with millions left over.
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