Assets in 529 Plans Jump 49% in 2004

Assets in state-sponsored 529 college savings plans soared 49% last year to $52.3 billion, as investors sought to guard against rising tuition costs, new data show.

The appeal of 529 plans -- named for a section of the tax code -- is that they allow people to invest money for college, then withdraw it later free of federal income tax if the proceeds are used for tuition, books and other qualified expenses.

The plans’ assets have grown dramatically in recent years in tandem with rising college costs.

In the fourth quarter, assets in the plans rose nearly 16% from the end of the third quarter, according to data tracker Financial Research Corp. in Boston.

In the 2004-05 academic year, in-state students at public four-year institutions are paying average tuition and fees of $5,132, up 10.5% from the year before, according to the College Board, an association of educational organizations. At four-year private institutions, average tuition and fees run about $20,082, up about 6% from a year ago.