As the cost of a college education continues to climb each year, exchange traded funds (ETFs) are looking to develop new growth paths into 529 college savings plans.

Murray Coleman for IndexUniverse was able to catch up with Rob Nestor, senior director of product management for the iShares family of ETFs, and inquire about the role iShares ETFs could have in the 529 market. Nestor explains that since this market is newer and iShares is getting into it much earlier, they expect to obtain a large portion of it over time.

The 529 market has only begun to take off over the past four or five years, after the legalities were changed, giving 529 plans their tax-free positions. Currently, the 529 market consists of about $120 billion, but is projected to be nearly $250 billion by 2012.

The iShares 529 plan was just launched and it is the first all-ETF plan for the 529 marketplace. iShares has just started to market their 529 plan and Nestor claims it is now “full steam ahead.”

Meanwhile, there are college savings registries out there now. The Freshman Fund lets people with any 529 plan, including the new iShares 529 plan, ask their friends to give birthday and holiday gifts directly into their 529 plan. It’s a way to tap into the $454 billion spent each year on holiday gifts, not to mention birthday, graduation and other gifts that would otherwise depreciate over time.

Tags: 529 Savings Plan