Released: November 24, 2006

Fees drop for 529 college savings plans

Source: Kathy Chu, USA Today

It’s getting less expensive for parents to save for their kids’ education as competition and regulatory scrutiny lead financial firms to cut expenses on state-sponsored 529 college-savings plans.

Last week, Fidelity dropped its $20 annual account fee. It also began offering low-cost index funds in the 529 plans it manages for New Hampshire, Massachusetts, Delaware, Arizona and California. Fidelity acted after Vanguard, American Century, TIAA-CREF and T. Rowe Price announced this year that they were cutting fees in their 529 plans.

“One of the things we keep hearing loud and clear is that investors want additional flexibility and low-cost options,” says Joe Ciccariello of Fidelity Investments. “Certainly, the lower fees make (529s) more affordable” for investors as college costs rise.

Regulators have been scrutinizing 529 fees as assets in these plans have surged to $97.3 billion in September. The NASD has cautioned savers to compare different plans because, “Expenses vary greatly, even among plans offered within the same state.”

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