The MSRB regulates firms distributing or underwriting 529 college savings plans. Section 529 college savings plans are mutual fund-like investment programs states have established under I.R.C. 529 to help families save for future higher education expenses. See MSRB’s Revised 529 Plan Gains But Raises Concerns, The Bond Buyer (Jan. 3, 2013)
Section 529 plans are named after I.R.c. 529. There are two types of 529 plans: (1) prepaid; and (2) savings.
Prepaid plans allow one to purchase tuition credits at today’s rates to be used in the future. Performance of this type of plan is therefore based upon tuition inflation. Currently, twelve stated provide a prepaid tuition plan. Prepaid plans may be administered by states or institutions of higher education.
Savings plans provide growth based on market performance of the underlying investments in the plan, which typically consist of mutual funds. Savings plans may be administered only by states. Record-keeping and administrative services for most savings plans are delegated to a mutual fund company or other financial services companies.
Most 529 savings plans offer a variety of age-based asset allocation option where the underlying investments become more conservative as the beneficiary gets closer to college age.
Qualified distributions from 529 plans for qualified higher education expenses are exempt from federal income tax. Money from a 529 plan can be used for tuition, fees, books, supplies and equipment required for study at any accredited college, university of vocational school in the United States and at some foreign universities. The money may also be used for room and board, as long as the fund beneficiary is at least a half-time student.
For a more detailed summary, see Wikipedia.org.