10 Best State 529 Plans – Saving & Investing for College

Are you scared of how high the expense of college is (and how quickly it is going up)? You’re not the only one. The National Center for Education Statistics says that the average total yearly cost of attending a private four-year college or university in the United States for the 2020–21 school year was $37,600. This includes tuition, accommodation and board, and other fees. 10 Best State 529 Plans – Saving

Most families can’t afford to pay for that kind of thing for one child, let alone two or three who are going to college in a row. Student loans and scholarships assist lower the initial cost of going to college. But they often leave parents with big bills to pay before graduation, bills that the family’s economic flow can’t meet on its own. That’s why parents need to start saving for college as soon as they can.

You don’t have to do it all by yourself if you’re feeling overwhelmed. Just like you, millions of parents have used or are using 529 college savings plans to save and grow money for college.Everyone benefits from important tax breaks, such as not having to pay federal or state income taxes on account earnings and a federal gift tax carveout that lets individuals give up to $85,000 per year and joint filers give up to $170,000 per year—five times more than the normal yearly gift tax threshold—without having to pay taxes on the gift. And a lot of people get more tax breaks by deducting qualified contributions from their state taxes.

Best State 529 Plans

Every U.S. resident can participate in their home state’s 529 college savings plan. In states where eligible 529 plan contributions are deductible on participants’ state income tax returns, the home-state plan is often the soundest financial choice.

But your home-state plan isn’t the only option. Shopping around can be beneficial because all 529 plans allow investment balances to grow free from state and federal income taxes.

If you live in a state with no income taxes, that’s doubly true. Most states only allow you to deduct eligible contributions from state taxes if you choose your home state’s plan. If that’s not an option, anyway, there’s no reason to stick with your state’s plan if there’s a better alternative in another state.

This list features the best state 529 plans available to U.S. residents right now. Review each listing for information about in-state tax benefits (if any), minimum contribution and balance limits, maximum aggregate contribution limits per beneficiary (student), and plan fees and management expenses, which can impact investment returns (and thus the ultimate size of that all-important education nest egg) to a greater extent than many realize.

Unless otherwise noted, all 529 plans on this list are direct-sold, meaning any U.S. taxpayer with a valid street address can contribute to them without using a financial advisor as an intermediary.

1. The Vanguard 529 Plan: Nevada (10 Best State 529 Plans)

Minimum Opening Balance: $3,000 ($1,000 for Nevada residents)
Minimum Additional Contribution: $50
Maximum Cumulative Contribution: $500,000 per beneficiary
Fees and Expenses: 0.14% investment expense ratio for target enrollment portfolios; 0.12% to 0.42% for individual portfolios
Tax Benefits for In-State Participants: None (Nevada doesn’t have state income tax)

The Vanguard 529 Plan is one of the best state 529 plans available to American savers today.

That’s a bit ironic, considering Nevada is one of the handful of states that don’t levy state income tax. As such, the Vanguard 529 Plan doesn’t offer direct state tax benefits to Nevada residents.

The plan more than makes up for this modest shortcoming elsewhere. In keeping with Vanguard’s famous commitment to low investment management fees, the Vanguard 529 Plan has some of the lightest expenses of any 529 scheme: just 0.14% of assets under management per year for target enrolment portfolios, passively managed accounts that automatically reduce risk as the beneficiary’s expected college enrolment date approaches.

Expenses aren’t much higher for the plan’s individual portfolios, which mix and match Vanguard mutual funds to create custom investment mixes finely tuned to account holders’ risk tolerance and investing objectives.

And as one of the United States’ largest 529 plan managers (it manages or sponsors several other state plans), the legendary investment house brings a wealth of experience to bear for its plan participants.

2. CollegeAdvantage: Ohio

Minimum Opening Balance: $25
Minimum Additional Contribution: $25
Maximum Cumulative Contribution: $377,000 per beneficiary
Fees and Expenses: About 0.15% to about 0.45%, inclusive of all management and account fees, depending on portfolio type
Tax Benefits for In-State Participants: Up to $4,000 state income tax deduction per beneficiary per year

CollegeAdvantage is Ohio’s 529 college savings plan. Unlike the Vanguard 529 Plan, it offers a generous tax benefit for Ohio taxpayers: a state income tax deduction worth up to $4,000 per beneficiary per year. If you have three kids en route to college, that’s up to $12,000 in state tax deductions each year.

CollegeAdvantage also has impressively low plan fees, topping out at around 0.30% of assets under management, including all account fees. This single fee includes account fees not directly tied to investment management, which other 529 plan administrators don’t always willingly disclose.

Although low fees and generous tax incentives are the highlights, CollegeAdvantage has another, less quantifiable advantage worth noting: a user-friendly website and investment dashboard that actually makes the experience of contributing to and managing plans fun. Considering how scary the thought of a six-figure college tuition bill can seem years out, that’s no small thing.

3. Bright Start: Illinois (10 Best State 529 Plans)

Minimum Opening Balance: $0
Minimum Additional Contribution: $0
Maximum Cumulative Contribution: $450,000 per beneficiary
Fees and Expenses: Investment fees and expenses range from about 0.10% to about 0.40%, depending on portfolio type
Tax Benefits for In-State Participants: Up to $10,000 state income tax deduction per individual taxpayer per year; up to $20,000 per married couple per year (cumulative for all beneficiaries)

Bright Start is the 529 plan for Illinois residents. It has two key benefits: nonexistent minimum balances (no minimums to open and no ongoing contribution minimums) and a very generous in-state tax benefit that’s particularly nice for smaller families.

Bright Start has reasonable account fees and investment expenses as well, topping out around 0.50% of assets under management, inclusive of all fees and expenses. That, along with an unusually rich mix of investment options backed by big names like Vanguard, T. Rowe Price, and Dimensional, is enough to earn Bright Start a coveted gold rating from Morningstar — the investment rating agency’s highest tier.

4. Invest529: Virginia

Minimum Opening Balance: $10
Minimum Additional Contribution: $10
Maximum Cumulative Contribution: $500,000 per beneficiary
Fees and Expenses: Investment fees and expenses range from 0.09% to 0.62%, depending on portfolio type
Tax Benefits for In-State Participants: Up to $4,000 state income tax deduction per beneficiary per year

Invest529 is Virginia’s 529 plan. Like Ohio’s and Illinois’, it has an impressive in-state tax benefit that delivers a state income tax deduction worth up to $4,000 per beneficiary per year. Low minimums and a high cumulative contribution limit further sweeten this account’s appeal for a range of participants, from lower-income families pinching pennies to relatively well-off households.

Invest529 has a broad range of investment options too. These include low-cost target enrolment portfolios in the mould of the Vanguard 529 Plan, target risk portfolios that conform to participants’ tolerance for market gyrations, and specialty portfolios that offer exposure to more advanced strategies (like environmental, social, and governance investing) or nontraditional asset classes. Invest529 even offers a savings account insured by the Federal Deposit Insurance Corporation (FDIC) for participants who’d rather not chance their education nest egg to the equities markets.

5. NY’s 529 College Savings Program (Direct Plan): New York

Minimum Opening Balance: $0
Minimum Additional Contribution: $0
Maximum Cumulative Contribution: $520,000 per beneficiary
Fees and Expenses: Investment fees top out at 0.12% for all portfolio types
Tax Benefits for In-State Participants: Up to $5,000 state income tax deduction per individual taxpayer per year; up to $10,000 per married couple per year (cumulative for all beneficiaries)

NY’s 529 College Savings Program Direct Plan has a lot going for it: nonexistent account minimums, high lifetime contribution limits, and incredibly low investment fees, regardless of portfolio type. The tax benefits aren’t half bad, either, topping out at $10,000 in state income tax deductions per married couple per year.

The Direct Plan has a manageable if not vast lineup of investment options. Investors can customise their investment vehicles by mixing and matching from 13 prebuilt portfolios. And those who’d just as soon leave things to the professionals can choose from age-based (target-date) portfolios suitable for three general levels of risk tolerance: aggressive (mostly stocks), balanced (a mix of stocks and fixed-income), and conservative (mostly fixed-income and cash).

6. ScholarShare 529: California

Minimum Opening Balance: $0
Minimum Additional Contribution: $0
Maximum Cumulative Contribution: $529,000 per beneficiary
Fees and Expenses: Expense ratios range from about 0.05% up to about 0.45%, depending on portfolio type
Tax Benefits for In-State Participants: None

ScholarShare 529 is the largest direct-sold state 529 plan, mainly because California is the biggest state in the country. That said, ScholarShare 529 has a lot to brag about, including nonexistent minimums, extremely high lifetime contribution caps per beneficiary, and a vast array of investment options.

The biggest drawback is the lack of tax benefits for in-state participants. In fact, there’s a 2.5% surtax on certain plan withdrawals, like K-12 tuition expenses and student loan payments. Those non-advantaged withdrawal types are also subject to regular state income tax. In a relatively high-tax state like California, these penalties can add up and could spur would-be participants to consider alternatives like the Vanguard 529 Plan.

7. My529: Utah (10 Best State 529 Plans)

Minimum Opening Balance: $0
Minimum Additional Contribution: $0
Maximum Cumulative Contribution: $510,000
Fees and Expenses: Investment fees and expense ratios range from 0.13% to 0.53%, depending on portfolio type
Tax Benefits for In-State Participants: 4.95% tax credit on contributions up to $2,130 per beneficiary per year for individual taxpayers and $4,260 per beneficiary per year for joint taxpayers (married couples) — the credit amounts are yoked to inflation and change each year

My529 is the designated direct-sold 529 plan for Utah residents. Like Illinois’s Bright Start, it earns Morningstar’s coveted gold honor thanks to a well-balanced lineup of age-based investment options and a robust set of globally diversified portfolios that cater to investors at every point on the risk-tolerance spectrum.

My529 has some familiar features of other elite 529 plans as well: nonexistent minimums, high lifetime contribution limits, and reasonable fees and expenses. But it does the tax advantage thing differently from many other plans — through a percentage-based credit on contributions up to a fixed amount per beneficiary per year. That credit is still impressive, though; it knocks a couple hundred bucks off participants’ tax bills when fully utilised.

8. Oregon College Savings Plan: Oregon (10 Best State 529 Plans)

Minimum Opening Balance: $25
Minimum Additional Contribution: $5
Maximum Cumulative Contribution: $400,000 per beneficiary
Fees and Expenses: All accounts have an unavoidable account management fee of 0.20%; investment fees and expenses range from 0.0% to 0.46%, depending on portfolio type
Tax Benefits for In-State Participants: Up to $170 in annual state income tax credits on contributions from individual taxpayers and up to $340 in annual state income tax credits on contributions from joint taxpayers (married couples)

The Oregon College Savings Plan mirrors my529’s unorthodox but effective strategy for delivering tax advantages to in-state participants. That advantage knocks up to $170 off individual participants’ state income tax bills and $340 off married couples’ when fully utilized. The Oregon plan also has manageable account minimums, solid maximum aggregate contribution limits, and reasonable investment fees and expenses.

The biggest drawback is an unavoidable state account management fee of 0.20% per year on top of plan fees and expenses. That’s particularly painful for frugal savers invested in low-cost index funds and could well be a deal-breaker for the truly fee-averse.

9. Michigan Education Savings Program: Michigan

Minimum Opening Balance: $25
Minimum Additional Contribution: $15
Maximum Cumulative Contribution: $500,000 per beneficiary
Fees and Expenses: Investment fees and expenses range up to about 0.11%, depending on portfolio type
Tax Benefits for In-State Participants: Up to $5,000 state income tax deduction per individual taxpayer per year; up to $10,000 per married couple per year (cumulative for all beneficiaries)

The Michigan Education Savings Program (MESP) has one of the more generous in-state tax benefits for smaller families and boasts impressively low investment fees and expenses.

MESP’s cohort of low-cost investment fund managers, which includes penny-pinching stalwarts like Vanguard, Schwab, and TIAA-CREF, makes that fee schedule possible. Even portfolio types that typically take a healthy cut of earnings are reasonable. For example, a portfolio option heavily weighted toward international equities carries an expense ratio of just 0.125%.

MESP has additional benefits worth noting, including relatively low minimums and high lifetime contribution limits per beneficiary. But risk-averse investors might find MESP lacking since it lacks an FDIC-insured savings-only option.

10. U.Fund College Investing Plan: Massachusetts (10 Best State 529 Plans)

Minimum Opening Balance: $25
Minimum Additional Contribution: $25
Maximum Cumulative Contribution: $500,000 per beneficiary
Fees and Expenses: Investment fees and expenses range from about 0.1% to about 1%, depending on portfolio type
Tax Benefits for In-State Participants: Up to $1,000 state income tax deduction per individual taxpayer per year; up to $2,000 per married couple per year (cumulative for all beneficiaries)

The UFund College Investing Plan is a Fidelity-managed program for families based in Massachusetts. It’s worth noting upfront that U.Fund has higher investment fees and expense ratios than many competing plans because of its robust lineup of actively managed funds. But it’s possible to find lower-cost investment options too, with age- and risk-based portfolios composed entirely of index funds.

For starters, U.Fund has other advantages that easily push it into the 529 elite: low account minimums and a relatively high aggregate contribution limit. And though the in-state tax benefits aren’t amazing, the peace of mind that comes with professional management by a top investment house certainly counts for something.

Final Word (10 Best State 529 Plans)

There are 529 other college savings plans available to U.S. parents and students right now, but these are the best of the best. They offer the best combination of low fees and expenses, generous in-state tax benefits, and favourable balance and contribution limits.

Any of these plans can help your family on its college savings journey. But don’t feel your choices are limited to the ones on this list. If the promise of in-state tax benefits wins out over other considerations, stick with your home-state plan. Or start with another education savings option, like a Coverdell ESA. Or research other ways to save or invest for your child’s college education.

As long as you start saving early and choose a vehicle that combines risk-appropriate growth potential with state or federal tax benefits and know how much to invest based on your child’s age, you’re on the right track.