Savings Incentives and Investment Management Fees : A Study of the 529 College Savings Plan Market

This paper analyzes the 529 College Savings Plan market using a plan level panel data set covering the years 2002 - 2006. The results show evidence of limited market competition and a positive relationship between state tax benefits and 529 plan fees. A $100 increase in potential taxable income benefit from investing in a 529 plan is associated with a 3-6 basis point increase in investment management fees for direct-sold 529 College Savings Plans. This suggests that government policies designed to make college more affordable could enable investment firms to charge excess fees