The Best 529 College Savings Plans

Morningstar recently picked its five best 529 plans listing the top five as follows:

• Colorado Scholars Choice
• Maryland College Investment Plan
• Nebraska College Savings Plan
• Utah Educational Savings
• Virginia CollegeAmerica

When I saw the first choice, I couldn't believe it. Especially since the Colorado Scholars Choice 529 has "investors pay a front-end load of 3.5%. You'll pay a management fee to plan administrators of 0.10% to 1.09%. Portfolio expense ratios for the funds themselves range from 0.49% to 0.91%." This simply seemed like too many costs to make this program worthwhile.

So I headed over to the expert in 529s, Saving for College to check out their 5-cap rating for each of these programs just to make sure. Here's what that site had for each of these five:

• Colorado Scholars Choice -- 4 1/2 caps (In state), 3 1/2 caps (Out of State)
• Maryland College Investment Plan -- 4 1/2 caps (In state), 3 1/2 caps (Out of State)
• Nebraska College Savings Plan -- 4 1/2 caps (In state), 4 caps (Out of State)
• Utah Educational Savings -- 5 caps (In state), 4 caps (Out of State)
• Virginia CollegeAmerica -- 4 1/2 caps (In state), 4 caps (Out of State)

So I was right -- and wrong. I was right that the Colorado plan isn't the best, but I was wrong in thinking it wasn't good.

That said, I looked through the entire Saving for College list and found that they have these listed as the best:

5 caps (In state), 4 1/2 caps (Out of State)

• Ohio CollegeAdvantage 529 Savings Plan
• Rhode Island CollegeBoundfund
• University of Alaska College Savings Plan

5 caps (In state), 4 caps (Out of State)

• Utah Educational Savings
• West Virginia Director SMART529 College Savings Plan

4 1/2 caps (In state), 4 caps (Out of State)

• DC 529 College Savings Program
• Illinois Bright Directions College Savings Program
• College Savings Iowa
• Michigan Education Savings Program
• Minnesota College Savings Plan
• MOST - Missouri's 529 Advisor Plan
• MOST - Missouri's 529 College Savings Plan
• Nebraska College Savings Plan of Nebraska (Advisor-sold)
• Nebraska College Savings Plan of Nebraska (Direct-sold)
• New Mexico Scholar'sEdge
• New Mexico The Education Plan's College Savings Program
• New York's 529 College Savings Program
• Oregon College Savings Plan
• South Carolina Future Scholar 529 College Savings Plan
• Virginia CollegeAmerica
• West Virginia SMART529 Select

Note: These were accurate as of a few days ago, but they are subject to change. If you want to look at the list yourself, you can find it here. Also, if you want detail on how they rate the funds, see this link.

As I noted a few months ago, I'm invested in Michigan's 529 plan. It's still at 4 1/2 caps for in-state investors, so I'm happy with that -- it's as good as I could have gotten by going to an out-of-state plan. 

The other thing that struck me is the difference in the lists. I wonder why they are so different. So different, in fact, that the Maryland and Colorado plans that made the first list didn't make the second one. Obviously it's the difference in criteria that results in a different list, but I'm surprised at the ultimate results.

Comments

[zen]

Thanks for posting this - I've been going crazy trying to cipher through the 529 plans for my (soon to be) young one. This will make it so much more tolerable to figure out where we should begin saving.

[Joe Banks]

What about tax savings. I just moved to CT from NY. I noticed that CT just passed a law to make in-state 529s tax deductable. I haven't really looked into it but would it pay for me to change my 529 from NY to CT?

[maxconfus]

Something to keep in mind before you invest in a 529 is that some states offer a tax break on your contribution. For instance, take a look at the tax benefits for NY.

[FMF]

Joe --

I'm not sure if it's worth it to change or not. If I was in a similar situation, I'd check out Saving for College and see what they had to say.

Max --

Saving for College takes tax issues into account as they rate the different plans. See their site for how NY compares to all others.

[Hazzard]

I chose Ohio for my daughter's fund due to it's 4.5 rating for out of state, it's low fees and it's choice of Vanguard index funds. Since I live in Washington state I don't have a state income tax benefit and our state's education plan kind of stinks.

[T Struck]

I think you have to question the motive of Moningstar here ... I can't see how/why they would recommend loaded funds in their top 5.

Below is from the Virginia plan. You get charged in several directions!
"Annual Fees: Investors pay a front-end load of up to 5.75%, which reduces as your assets increase. There is no management fee. Portfolio expense ratios range from 0.42% to 1.9%. There is a $10 maintenance fee. You'll also pay a one-time $10 enrollment fee."

Okay, no Management fee ... but 5.75% front-end load? You have to be kidding me. And the Colordado plan has a front-end load PLUS management fees PLU expense ratios!

Can we really TRUST every source for financial information? As always, I think it is better to do you own research and make your own decisions that suit you and your family right. I like to say ... you have to look out for numero uno.

Tim

[ali]

I guess if you live in a state with a 5 Cap instate plan it makes sense to get that one.
I am in ohio and plan to get that set up soon for my step daughter.
any different thoughts?