Our top picks of timely offers from our partners

More details
Chase Sapphire Preferred® Card
Learn More
Terms Apply
New 100K bonus point offer - highest bonus ever offered for the card!
Citi Custom Cash℠ Card
Learn More
Terms Apply
New no-annual-fee card that rewards you for your top eligible spending category
Blue Cash Preferred® Card
Learn More
Terms Apply
$150 offer and, in the first 6 months, 20% back at Amazon.com, up to $200 back
American Express® Gold Card
Learn More
Terms Apply
Our pick for the best rewards and best travel card of 2021
No annual fee and all of the miles earned at the end of your first year are matched
Select’s editorial team independently created this content. We may receive a commission from affiliate partner links. Click here to read more about Select. Click here to read our full advertiser disclosure.
Resources

The best 529 plans: How to maximize saving for college

Share
kali9 | E+ | Getty Images
Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.

When it comes to helping your child pay for their college education, the astronomical cost of tuition can be overwhelming. Taking advantage of a 529 plan, and the many benefits they offer, can help parents sleep better at night knowing their children won't one day be burdened by overwhelming student loan debt.

These state-sponsored savings plans are designed to encourage parents to invest in their child's future by allowing earnings to grow tax-free. Withdrawals are also tax-free as long as they are used for qualified educational expenses — think tuition, books and necessary equipment. Plus, assets held in a 529 plan aren't weighed as heavily toward your expected family contribution (EFC), meaning the amount you save won't negatively impact eligibility for federal aid. 

There's good news when it comes to choosing a 529: You're not limited to your own state's plan. You can shop around for a 529 that offers the lowest fees and the best investment choices, allowing you to squeeze as much as possible out of your dollars. So, a California resident could potentially sign up for Utah's plan if they thought it was a better fit for them. That said, it's worth remembering that some states do offer better incentives for their residents including Idaho and New York

To help you in your research, Select reviewed and analyzed more than a dozen 529 plans considering basic features like fees, expenses and investment choices (Read more about our methodology below). Here are our top picks can help you maximize your returns from this major investment. 

Best 529 college savings plans

529 college savings plan FAQs

my529 (Utah)

my529 (Utah)

Information about my529 has been collected independently by Select and has not been reviewed or provided by the issuer prior to publication.
  • Minimum opening balance

    None

  • Maximum overall contribution

    $510,000

  • Portfolio options

    4 age-based options with various risk tolerance, which automatically rebalances each year; 10 static options based on risk tolerance and U.S. stocks and bonds (investors will need to manually change their allocations); 2 customizable options (either age- or static-based)

  • Underlying funds

    Investors can choose from Dimensional Fund Advisors mutual funds, PIMCO Interest Income Fund, Vanguard Group funds, and FDIC-insured accounts from Sallie Mae Bank and U.S. Bank

  • Fees and expenses

    Underlying fund fees (expense ratios) up to 0.33%; administrative fees up to 0.15% 

Pros

  • Offers both age-based and do-it-yourself investment options
  • Expense ratios as low as 0%
  • Underlying funds managed by reputable companies such as Vanguard

Cons

  • Expense ratios may be higher compared to other providers on our list

Parents, no matter their preferred investing style, will love the plentiful options offered, from age-based to fully customizable portfolios. The website is very transparent about the finer details such as information on underlying funds, which include PIMCO and Vanguard. Fees are reasonable, with management fees up to 0.15% and expense ratios up to 0.33% (though some are higher than other 529 plans on our list).  

Account holders can choose from age-based portfolios, which automatically rebalance to ensure the right asset allocation, moving toward more conservative investments by the time your child is ready to head off to college. There are also other options including risk-based and customizable choices. You also don't have to worry about additional fees, so more of your money goes toward your child's education.

Bright Start College Savings Program (Illinois)

Bright Start College Savings Program (Illinois)

Information about Bright Start College Savings Program has been collected independently by Select and has not been reviewed or provided by the issuer prior to publication.
  • Minimum opening balance

    None

  • Maximum overall contribution

    $450,000

  • Portfolio options

    Choose from age-based, target (based on risk tolerance and/or fixed-asset allocation) and individual fund portfolios

  • Underlying funds

    Investors can choose from 11 funds including ones through DFA, Dodge & Cox, T. Rowe Price and Vanguard

  • Fees and expenses

    Management fee 0.08%; state fee 0.03% (on some funds); expense ratios up to 0.34%

Pros

  • Wide selection of fund options
  • Offers risk tolerance questionnaire to help investors looking for some guidance
  • Low management fees

Cons

  • Not much information about 5-year historical performance

Like Utah's 529 plan, the Bright Start College Savings programs offers a myriad of investment options, many of which are from well-respected companies such as T. Rowe Price and Vanguard —11 in total. There are three investment portfolio options — age-based, target and customizable. The age-based choices have varying risk tolerances, with asset allocations automatically rebalanced to more conservative investments the closer your child gets to college age. Target-based portfolios offer choices ranging from ones with safer securities all the way to equity-based investments. 

We also like how easy it is to navigate the website. You can easily find out how much you may pay in fees — administrative fees are 0.11% of your portfolio balance — and expense ratios for respective funds. You don't need a minimum opening balance to sign up for an account.

CollegeAdvantage (Ohio)

CollegeAdvantage (Ohio)

Information about CollegeAdvantage has been collected independently by Select and has not been reviewed or provided by the issuer prior to publication.
  • Minimum opening balance

    $25

  • Maximum overall contribution

    $377,000

  • Portfolio options

    Choose from age-based, risk-based, DIY options and FDIC-insured accounts

  • Underlying funds

    Age- and risk-based portfolios from Vanguard; individual options includes ones from Dimensional Fund Advisors and Vanguard

  • Fees and expenses

    Management fee 0.015%; OTTA Fee 0.02%; record-keeping fee 0.01%; expense ratios up to 0.28%

Pros

  • Offers a wide range of investment options from age-based, risk-based and individual funds
  • Charges one of the lowest overall fees on our list
  • High historical returns on many of their funds

Cons

  • Doesn’t offer many fund companies compared to others on our list

There isn't much not to like about the CollegeAdvantage 529 plan — there's a good mix of investment options (including FDIC-insured accounts), low fees and plans from top companies like Dimensional Fund Advisors. In fact, overall management fees are some of the lowest we've seen. Combined with low expense ratios, this makes this plan one of our top picks. 

Portfolio options range from age-based, enrollment-based, risk-based and individual picks. Enrollment-based funds are similar to target date funds, where you pick a date based on when you expect your child to enroll in college. There's also a "graduate" option for those who plan on using the funds for graduate school. Age- and risk-based portfolios are from Vanguard, whereas individual funds are from Dimensional Fund Advisors, Vanguard and Fifth Third Bank.

Michigan Education Savings Program

Michigan Education Savings Program

Information about Michigan Education Savings Program has been collected independently by Select and has not been reviewed or provided by the issuer prior to publication.
  • Minimum opening balance

    $15

  • Maximum overall contribution

    $500,000

  • Portfolio options

    Investors can choose from enrollment year-based, multi-fund investments, single funds or the guaranteed fund option

  • Underlying funds

    A mix of funds from Schwab, TIAA-CREF and Vanguard

  • Fees and expenses

    Management fee 0.02%; state fee 0.025%; expense ratios up to 0.09%

Pros

  • Has a generous maximum limit of $500,000
  • Low overall fees
  • No application fees or transfer fees when changing investment plan options

Cons

  • No FDIC-insured account option available
  • Individual funds aren’t as plentiful

While you won't find as many individual funds or FDIC-insured options, there's still a lot to like about Michigan's 529 savings plan. There are low fees, a decent variety of fund companies and no application fees. Plus, account holders can contribute a maximum of $500,000 to their accounts, one of the highest on our list. 

Allocations you'll find are a mix of Vanguard funds, Schwab ETFs and TIAA-CREF funds. All of them are reputable companies and have good historical returns. You can select from risk-based, enrollment year-based and guaranteed investment funds once you enroll. 

ScholarShare 529 (California)

ScholarShare 529 (California)

Information about ScholarShare 529 has been collected independently by Select and has not been reviewed or provided by the issuer prior to publication.
  • Minimum opening balance

    None

  • Maximum overall contribution

    $529,000

  • Portfolio options

    Choose from active enrollment year, passive enrollment year; active multi-fund, passive multi-fund and single-fund portfolios

  • Underlying funds

    Offers funds from companies such as Dimensional Fund Advisors, Metropolitan West, PIMCP, T. Rowe Price and TIAA-CREF

  • Fees and expenses

    Management fee 0.01%; board administrative fee up to 0.05%; expense ratios up to 0.47%

Pros

  • Offers 37 investment portfolio options, including one geared toward those interested in socially responsible investing
  • Extremely competitive management fees
  • No application fees, commissions or sales charges

Cons

  • Some expense ratios higher than other plans on our list
  • Active portfolios have higher management fees

California's 529 plan allows account holders to invest up to $529,000. In addition to no application, cancellation or transfer fees, you'll find the expense ratios extremely competitive. Plus, the management fees are extremely low, making this plan one of the most cost-effective 529s out there. 

Funds are from reputable companies such as Dimensional Fund Advisors, T. Rowe Price and Vanguard. Portfolio options include enrollment-based, multi-fund and single funds. Both the enrollment year and multi-fund choices allow you to select from active or passive funds. Active portfolios primarily consist of actively managed mutual funds, which may result in higher fees. Compare this to the passive fund portfolios, which consist of index mutual funds, resulting in potentially lower fees. 

All it takes is $25 to start investing, or $15 if you opt for payroll deductions. 

Frequently Asked Questions

How do I open a 529 plan?

You can work with a financial advisor to open a 529 plan, or you can choose a direct-sold plan by yourself. Plans sold by financial advisors tend to be more expensive due to higher fees. Don't forget that some professionals may not look out for your best interests, encouraging you to select investments that give them a higher commission. If you go the financial advisor route, make sure to do your research — asking for 529 account recommendations from trusted friends and family members is a great starting point.

Opening a 529 plan yourself simply requires that you visit the plan's website and fill out an enrollment form. Information you'll need includes your full name, Social Security number and the same for your beneficiary. Then, select your investments and fund the account. 

How do I fund a 529 account?

When you open a 529 account, you'll be asked how you want to contribute funds. Your options include a one-time electronic funds transfer, mailing a check, scheduling recurring payments from your bank account or through payroll deductions. Some 529 plans may require minimum contribution amounts depending on the funding method.  

How much does it cost to open a 529 account? 

Most 529 plans don't charge you a fee for opening an account, though you will be required to make an initial deposit to start choosing investments. There are, however, fees you will need to pay to maintain your account: underlying and administrative fees. Underlying fees goes toward funds you choose within your portfolio — these amounts are deducted by the funds themselves. Your 529 plan charges administrative fees for the upkeep of your account. Both types of fees are a percentage of the balance in your account. 

Can I use a 529 plan for more than one child?

A 529 plan allows you to only name one beneficiary at a time — when you make withdrawals, you can only do so for this person. Parents who have more than one child can set up a single account and change the beneficiary later on. So if you use part of your savings for one child, the remaining balance can be used for additional children, as long as you update the beneficiary. Otherwise, you can open separate 529 accounts for each child.

What if I don't use my 529 plan?

You can transfer your 529 account to another child, your grandchild or for your own qualified educational needs if your child winds up getting large grants or scholarships or doesn't go to college. You can also roll over the funds to another family member's ABLE account, which won't incur any penalties. This type of account is for individuals who are disabled before turning 26 years old and receive social security insurance benefits.

Another option if you don't use the cash in your 529 plan is to withdraw the funds, though you'll have to pay income taxes on that amount plus a 10% penalty on earnings.

Our Methodology

To determine which 529 plans offered the best underlying investments, low fees and a variety of investment choices, Select analyzed dozens of offerings and narrowed it down to a list of 10 finalists. We looked at plans with offerings from reputable companies and investment managers and a variety of options to help the investor meet their goals. We didn't evaluate 529 plans based on advantages (such as lower fees) for in-state residents or prepaid college plans. 

We focused on the following features when comparing the best 529 plans:

  • Management fees: The plans on our list offer some of the lowest management fees, important since these fees can affect your annual balance. Even a small fraction of a percent in fees can mean thousands of dollars in savings for the investor. 
  • Investment returns: Past results do not guarantee future performance of any investment. However, seeing historical patterns of returns may indicate the plan manager is doing their job well. We looked at returns over a five-year time period.
  • Fund expenses: Aside from management fees, we chose plans offering the lowest maintenance fees for their underlying funds. We looked at 529 plans offering more passive types of securities like index funds, with the expense ratio being a major deciding factor. These costs also affect the amount investors will be able to save. 
  • Investment options: Having more choices means that parents and guardians can decide how involved they want to be when selecting their portfolio. We looked at 529 plans offering more hands-off choices such as age-based portfolios as well as individual funds. 

Each state's 529 plan may have different minimum contribution amounts. Some may not have minimum contribution amounts but do for automatic contributions, such as payroll deductions. Each state also imposes its own cumulative contribution limit.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.