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Estate Taxes and the Five-Year Election

Plus, a middle-taskforce, best 529s, and more.

Susan T. Bart, 05/15/2009

College-savings expert Susan Bart answers advisors' questions on 529 plans and other education-planning matters. E-mail your questions to advisorquest@morningstar.com.

President Obama wants the United States to lead the world in percentage of adults with a college degree by 2020. The Middle Class Task Force, led by Vice President Joe Biden, is focusing some of its attention on "Making College More Affordable for Our Families," the topic of an April 17, 2009 Middle Class Task Force meeting.

In furtherance of the administration's commitment to making college affordable for the middle class, Vice President Biden has asked the Treasury Department and the Secretary of Education to study ways of making 529 accounts more effective and reliable.

"We aren't interested in empty promises. We need real, substantive ways to reinvest in student aid and putting money directly into the pockets of students who need help affording a college education," said Vice President Biden. "That's why today I am asking the Treasury Department and Secretary of Education to look into 529 plans and ways to make them more effective and reliable. Their analysis will examine how people save in the 529s, whether they are taking appropriate approaches to risk, and try to identify options and best practices for helping these funds be there for families when they need them."

The Best and Worst
Morningstar has issued its annual article on the best and worst 529 plans. The five best selected by Morningstar are:

Ohio College Advantage
Indiana CollegeChoice 529 Direct Savings Plan
Utah Educational Savings Plan Trust
Virginia Education Savings Trust
Virginia CollegeAmerica 529 Savings Plan

In assessing 529 plans, Morningstar looks for:
* Sensible allocations among stocks, bonds and cash that are appropriate for the age of the beneficiary.
* Diversification across major asset classes, including exposure to foreign bonds, real estate investment trusts and Treasury Inflation-Protected Securities.
* Low fees.
* Varied investment options.
* Quality investment options with experienced managers, a history of good stewardship and sensible strategies.

Question: Can a qualified distribution be made from a 529 savings account to repay a student loan?

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