| What's new for college financing: a look ahead |
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The Municipal Securities Rulemaking Board, which oversees banks, brokers and dealers who sell 529 plans, will be focusing on making sure information on 529 performance and fees is easier to obtain.
"In 2007, we'll be doing some additional toughening up and adjusting on our advertising requirements to make sure ads are fair and reasonable," says Ernie Lanza, senior associate counsel at the MSRB. "We're pushing for much more standardized performance information and expenses for 529 plans."
That's not to say you'll be able to rely on a broker for all the information you need to make an informed choice about the 529 plan that's right for you. They will likely tell you only about those plans that pay them a commission, known as "broker-sold" plans. In fact, there are plenty of "direct-sold" plans that don't have sales costs which individuals can invest in, but it's up to them to thoroughly research plans before making an investment.
That should be
easier to do this year. The
College
Savings Plan Network, a
consortium of 529s, is in the
process of "completely
overhauling" its Web site
to provide comprehensive data
about the various plans. Individuals
who log on the site in 2007
should expect to be able to
more easily compare investment
performance, fees and costs,
tax benefits, background about
the 529 investment managers
and other plan details, says
CSPN's chair, Jacqueline T.
Williams.
"It's going
to be more consumer friendly,"
she says.
Finally, "tax parity" will continue to be an issue among 529s. It could mean additional dollars in your pocket. Here's how.
About half the states give residents who invest in their 529s a tax break for doing so, but most don't offer such perks if an individual invests in an out-of-state 529 plan. The amount you can deduct varies from state to state. In fact, about half of all states offer no tax deduction to 529 savers.
The nonprofit College Savings Foundation is among groups gearing up to persuade those states that do offer income tax breaks to extend them to residents who invest in any plan, regardless of where they originate. Pennsylvania was the first to step up to the plate; Maine and Kansas begin offering "full parity" in 2007 to their residents.
"We're formulating a policy on which states to pursue next," says David Pearlman, president of College Savings Foundation. States are weighing the trade-offs of offering full parity. While they'd like to see an increase in their population of college savers, there's "a concern about the drain on their Treasuries."
Available tax breaks
As for other tax breaks, much depends on politics. What else?
The restoration of the above-the-line tuition and fees tax deduction of up to $4,000 remains in limbo.
But why wait on
politicians to make changes?
Some tax breaks haven't gone
away, including the Hope and
Lifetime Learning credits. The
Hope is worth $1,500 per student
for the first two years of college.
The Lifetime credit lets taxpayers
deduct up to $2,000 annually
for college costs.
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