Originally, Section 529 plans were only state-sponsored programs but later were expanded to allow educational institutions, either public or private, to establish and operate prepaid tuition plans. For college savings plans and state sponsored prepaid tuition plans, taxpayers are actually investing in a program authorized by the Federal government and run by the various states, or a state agency or instrumentality.  To attract their own residents, some states offer tax deductions for contributions, while others will disregard the account balances when calculating state financial aid.  It is important to understand that taxpayers are not limited to establishing a plan with their resident state.  They should investigate the various state plans available and evaluate their performance, expenses, and investment options before selecting a plan.