529s have become a hot investment again, after a brief slowdown, according to the Wall Street Journal.

Growth in the state-run college savings plans began to pick up after Congress made them permanent in the Pension Protection Act—they were going to sunset in 2010.  

Net new contributions to many of the plans for which Vanguard Group provides investment management and clients services, including New York, Nevada, Iowa and Colorado, were up 16% in the two months ended Nov. 30 from a year earlier.

T. Rowe Price Group Inc. reported that net contributions to the 529 plans it manages for Alaska and Maryland increased 18% in the five months ended Nov. 30 from the year-earlier period.  

Growth is coming from both new accounts and current customers making bigger contributions, state officials state. 

The Municipal Securities Rulemaking Board, which regulates broker sales and marketing of 529 plans, last month filed proposed rule changes with the Securities and Exchange Commission that would make it easier for states and program manager to advertise the plans.   

Though investors can set up 529 accounts directly with states, Financial Research Corp. of Boston estimates that 80% of net new 529 sales are bought through brokers or financial advisors. Investors should first check out their own state’s plan, since many states offer a tax deduction for contributions. Costs are likely to be cheaper when bought directly from the state.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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