Morningstar Top 529 College Savings Plan Rankings 2017

mstarlogoInvestment research firm Morningstar has released their annual 529 College Savings Plans Research Paper and Industry Survey. While the full survey appears restricted to paid premium members, they did release their top-rated plans for 2017. This is still useful as while there are currently over 60 different 529 plan options nationwide, the majority are mediocre and can quickly be dismissed.

Here are the Gold-rated plans for 2016 (no particular order). Morningstar uses a Gold, Silver, or Bronze rating scale for the top plans and Neutral or Negative for the rest.

The Bright Start College Savings Plan from Illinois was upgraded to Gold this year due to a manager change and thus an entire new set of investment options and age-based tracks. The new plan is cheaper and removed a $10 maintenance fee. The other 3 plans were Gold last year as well.

Here are the consistently top-rated plans from 2011-2017. This means they were rated either Gold or Silver (or equivalent) for every year the rankings were done from 2011 through 2017. No particular order.

  • T. Rowe Price College Savings Plan, Alaska
  • Maryland College Investment Plan
  • Vanguard 529 College Savings Plan, Nevada
  • CollegeAdvantage 529 Savings Plan, Ohio
  • CollegeAmerica Plan, Virginia (Advisor-sold)
  • Utah Educational Savings Plan

The “Five P” criteria.

  • People. Who’s behind the plans? Who are the investment consultants picking the underlying investments? Who are the mutual fund managers?
  • Process. Are the asset-allocation glide paths and funds chosen for the age-based options based on solid research? Whether active or passive, how is it implemented?
  • Parent. How is the quality of the program manager (often an asset-management company or board of trustees which has a main role in the investment choices and pricing)? Also refers to state officials and their policies.
  • Performance. Has the plan delivered strong risk-adjusted performance, both during the recent volatility and in the long-term? Is it judged likely to continue?
  • Price. Includes factors like asset-weighted expense ratios and in-state tax benefits.

State-specific tax benefits. Remember to first consider your state-specific tax benefits that may outweigh other factors. If you don’t have anything compelling available, you can open a 529 plan from any state (I would pick from the ones listed above). Also, if you like an in-state plan now but your situation changes, you can roll over your funds into another 529 from any state.

My picks. Overall, the plans are getting better and most Gold/Silver picks are solid. If your state doesn’t offer an significant local perks, I narrow things down and recommend these two plans to my friends and family:

  • Nevada 529 Plan has low costs, solid automated glide paths, a variety of Vanguard investment options, and long-term commitment to consistently lowering costs as their assets grow. This is only plan that Vanguard puts their name on, and you can manage it within your Vanguard.com account. This is the keep-it-simple option.
  • Utah 529 plan has low costs, investments from Vanguard and DFA, and has highly-customizable glide paths. Over the last few years, the Utah plan has also shown a history of passing on future cost savings to clients. This is the option for folks that enjoy DIY asset allocation.

I feel that a consistent history of consumer-first practices is most important. Sure, you can move your funds if needed, but wouldn’t you rather watch your current plan just keep getting better every year?

Comments

  1. Hi Jonathan,

    I believe last year Ohio State was there in the list. Any reason, Ohio State is not in the list. I have my plan with Ohio with funds in Vanguard. Do you recommend moving or staying with Ohio as I believe you also have account in Ohio

    • Ohio is still on there under “Consistently top-rated plans from 2011-2017”. Ohio is consistently ranked a Silver plan, which is in the Top 10-15 plans. If you are already with Ohio and happy with them, I see no reason to leave. Ohio also provides access to Wellington Fund which is hard to find in a 529.

  2. I have the Utah plan and highly recommend it. (I’m now saving for some kids and withdrawing for others.) I live in PA where we get a state tax break for any 529 plan contributions so I researched and chose the plan many years ago.

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