For most parents looking for a way to save for their child’s college education, a 529 college savings plan is a wise choice. That’s because the money you invest in one of these accounts grows tax-free if you use the funds toward eligible education expenses.
Individual states offer 529 plans. Below you’ll find a searchable map where you can find details for each state’s plan, along with its rating from our data partner, Savingforcollege.com. You’re not required to use your state’s plan; we’ve only included in our rankings the top-rated plans that consumers in any state can access.
- Best 529 Plans of 2024
- New York's 529 College Savings Program - Direct Plan
- U.Fund College Investing Plan (Massachusetts)
- UNIQUE College Investing Plan (New Hampshire)
- Bright Start Direct-Sold College Savings Program (Illinois)
- Ohio's 529 Plan, CollegeAdvantage - Direct Plan
- Oregon College Savings Plan
- Summary: Best 529 College Savings Plan
- Tips for Comparing 529 Plans
- What Is a 529 Plan?
- How Does a 529 Plan Work?
- Benefits of a 529 Plan
- How To Open a 529 Plan
- Methodology
- Frequently Asked Questions
Best 529 Plans of 2024
Summary: Best 529 College Savings Plan
Tips for Comparing 529 Plans
Despite their advantages, only 29% of college-saving parents use 529 plans, according to Sallie Mae’s 2018 report “How America Saves for College.” In many cases, parents could end up with more money saved by using a 529 plan rather than, or in addition to, a general savings account.
But since there are many 529 plans to choose from, the decision can be complex. First, take note of whether your state offers a tax break for choosing the local plan. Then calculate how much it could be worth to you based on your expected 529 plan contributions, income and filing status. Vanguard, Fidelity and other sources offer online 529 state tax benefit calculators. If you’re not getting meaningful savings—or another state’s plan offers substantially lower fees or broader investment choices—you’re not bound to using your own state’s plan.
When you’re comparing 529 plans and underlying investments, also check the total annual fee you’ll be charged, including not only management and state fees but the costs of the investment portfolios themselves. Some 529 plan websites make that easy to do, while others may not; be sure to ask if the plan costs aren’t clear. Fees can reduce your investment earnings, and while some fees are inevitable, understanding how much they add up to will help you compare plan options.
Some states offer two types of 529 plans: one sold by the state directly to consumers and one sold by financial advisors only. In each case where a state offered both types, the direct-sold plan was higher-rated based on Savingforcollege.com’s analysis. As a result, we’ve included only direct-sold plans on our list.
Some 529 plans also provide useful consumer-friendly features that might be important to you, like an online platform where friends and family can make a contribution to your child’s plan. Look into the perks and extras available from your state’s plan.
What Is a 529 Plan?
A 529 plan is a tax-advantaged savings account that’s designed to help you save for education costs. Also known as qualified tuition plans, 529 plans are offered by every state and Washington, D.C., as well as some educational institutions. While you’re not restricted to using the 529 plan offered by your state of residence, there may be benefits to choosing it, such as state tax deductions or credits.
As long as you use your savings on qualified education expenses, you won’t have to pay income tax on your earnings. You can spend 529 plan savings on college expenses, as well as K-12 tuition, certain apprenticeship costs, and student loan repayment up to $10,000 per beneficiary and each sibling.
How Does a 529 Plan Work?
How a 529 plan works depends on the type of plan—specifically, whether it’s a college savings plan or a prepaid tuition plan.
- College savings plan. This plan works similarly to a Roth IRA or Roth 401(k) that you use to save for retirement. You invest after-tax dollars into a variety of options, such as mutual funds and exchange-traded funds. The value of your investment will increase or decrease based on the performance of your investments. You can typically use the savings on tuition, fees, and room and board at any college or university.
- Prepaid tuition plan. This plan lets you lock in today’s tuition rates to use at a future date. Since tuition costs typically increase year after year, these prepaid plans offer a way to save in the future. However, they’re more restrictive than a college savings plan, since you’re supposed to use the savings on tuition at specific in-state public colleges. You also cannot prepay for tuition for elementary and secondary schools with this plan.
Benefits of a 529 Plan
There are a number of benefits to using a 529 plan to save for your child’s education.
- Tax-free distributions. When withdrawing your 529 plan savings for qualified education expenses, you won’t have to pay taxes on the amount.
- Tax benefits. Many states offer tax deductions or credits if you contribute to a 529 plan.
- High contribution limits. Depending on which plan you choose and what state you live in, you may be able to contribute as much as $235,000 to $553,098 to your 529 plan.
- Control your account. As the account owner, you’ll retain control over your account until you withdraw the money.
529 Plans by State
How To Open a 529 Plan
Opening a 529 plan is easy. Most have low (or no) minimum contributions or income restrictions and simply require that you have a U.S. mailing address and Social Security number or tax ID. Here are the steps you’ll need to take to open your account:
- Determine the 529 plan you want to open. Decide whether you want a college savings plan or a prepaid tuition plan.
- Compare your options. You’re not limited to your state’s plan, though it may come with tax perks for residents. Compare the costs and quality of various plans to pick the one that’s right for you. You also have the option of opening multiple 529 plans in different states.
- Choose a beneficiary. If you’re saving for your child’s future education, you’ll enter their name, date of birth and any other details the plan requires.
- Fund the account. You can open a 529 account online and fund it directly from your bank account. Make sure to read over your account agreement for any fees and other fine print details.
- Choose your investments. Finally, you can build your portfolio by selecting investments. The most hands-off way to do this is to choose age-based or target-date portfolios, which will adjust your investments based on the beneficiary’s age.
Methodology
The best 529 plans listed here received five-star ratings for both in-state and out-of-state residents on Savingforcollege.com. The rating system on Savingforcollege.com takes into account each plan’s investment performance history, fees, extra features and reliability.
While you don’t have to choose your state’s plan, more than 30 states provide a tax break on contributions (usually—though not always—for residents only). Nearly all of our top-rated plans provide state tax benefits to residents, but they also offer enough features and cost savings to appeal to non-residents who don’t qualify.
To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Loans Rating & Review Methodology.
Frequently Asked Questions (FAQs)
Why should I consider saving for college in a 529 plan?
The biggest reasons to consider a 529 plan are the structured savings and the tax benefits. Merely having a specific college savings vehicle could encourage you to save more than you would have otherwise. And choosing a 529 plan rather than a traditional savings account gives you the benefit of tax-free growth on investments and a potential state tax break.
What are the drawbacks of 529 plans?
Some consumers may be concerned about the possibility that investing for college could lead to losses on your contributions, rather than earnings. But it’s best to start saving in a 529 plan early, when your child is as young as possible. That gives your money more time to grow. Additionally, plans typically offer age-based investment portfolios, which help balance your investments based on how close your child is to college, potentially lowering your risk.
What happens to money saved if my child doesn’t use it for college?
Money in 529 plans must be used to pay for qualified education expenses, which gives you less flexibility than if you’d saved in a brokerage account or savings account. You can always take the money out to pay for expenses other than education, but you’ll pay federal income tax and a 10% penalty to do so.
You have other options, however, if your child doesn’t go to college or gets a scholarship that covers their expenses. For example:
- Your child can use the money for a registered apprenticeship program instead
- You can transfer the money to another beneficiary who is a qualifying family member—including yourself—to use for education expenses
- In the event your child receives a full scholarship, you can withdraw money from the account for non-education expenses and pay only federal income tax (not the 10% penalty)
- Up to $10,000 in 529 plans can be used to pay off existing student loans, so you may transfer the money to a beneficiary who can use the money to pay off debt. Money in the account also can be used to repay beneficiaries’ siblings’ student loan debt, up to ,000 per sibling
- Up to $10,000 in 529 plans can also be used to pay tuition at K-12 schools
Can you lose money in a 529 plan?
It’s possible to lose money in a 529 college savings plan. When you contribute funds to a 529 plan, you’re investing in vehicles like mutual funds, stocks and bonds. These assets can go up or down in value, and your savings will increase or decrease along with them. Opting for a diversified portfolio can help reduce your risk of losing money in a 529 plan.
What is the contribution limit for a 529 plan?
The contribution limits for a 529 plan vary by state, but they range from $235,000 to $553,098.
Can 529 plans be used for purposes other than college?
You can use 529 plan funds for purposes other than college. For instance, you can use 529 plan savings of up to $10,000 per year on K-12 tuition and registered apprenticeship programs without penalty.
You can also use up to $10,000 to repay the beneficiary’s qualified student loans and up to $10,000 to repay student loans of each of the beneficiary’s siblings. This $10,000 per beneficiary and sibling is a lifetime limit, not an annual one.
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