The nadir of the economic downturn ravaged many American families’ college savings accounts, sending balances down almost 50%, according to Deborah Fox, founder of Fox College Funding. It frustrated investors, but it also prompted some to become more educated about the fees associated with 529 plans.
“It’s always been a touchy area, but especially so now in a stock market environment that is sideways at best,” said Fox, whose San Diego-based company works with parents of high school-aged students to assemble higher education savings plans.
Now that the stock market has started to recover and account balances have also rebounded, 529 plan managers are reducing fees to retain clients. Baltimore-based
“There have been quite a few plans that have announced fee reductions,” said Tom Kazmierczak, a senior product manager for 529 college savings at T. Rowe Price. “We’re in the current wave that is occurring now.”
Industry sources agree that T. Rowe Price’s move is the latest in a competitive round of fee reductions. Since December, several states and mutual fund companies have lowered internal fees on 529 plans, including Arizona, Arkansas, California, Colorado, Iowa, Kentucky, Massachusetts, Minnesota, Nevada, New Hampshire, New York and Vermont, Fox said. Between Nov. 1 and Dec. 1, plan managers lowered total 529 fees to 1.17% from 1.19% on adviser-sold plans and to 0.69% from 0.71% on direct-sold plans, according to Boston-based
“This move is a sign of the times,” Fox said, adding that plan managers like T. Rowe Price are using the fee reductions to get consumers to use the plans to save for their children’s educations. It hasn’t been easy.
“The biggest complaint they’ve had regarding the 529 plans is the [extra] layer of fees that the clients pay,” Fox said. “Over the years we’ve seen states jettisoning one mutual fund company for another based on the fees they charge,” Fox said.
