This paper examines the incentives created by the 529 and Coverdell tax-advantaged savings accounts. I find that the advantages of the 529 and Coverdell rise sharply with income, for three reasons. First, those with the highest marginal tax rates benefit the most from sheltering income, gaining...

529 saving plans and Coverdell Educational Savings Accounts are marketed as attractive vehicles for college savings. The main finding of this paper is that college savings plans can actually harm some families. The joint treatment by the income tax code and financial aid system of college...