Low fees, high benefits: How to choose the best 529 plan

College isn’t getting any cheaper: According to the College Board, attending a four-year, in-state public college topped $28,840 for the 2023-2024 school year, an 11% increase in just five years.

A smart way to start saving is through a 529 plan, which is a tax-advantaged savings account that can be used for education expenses, including qualified student loan repayments of up to $10,000 per beneficiary. In some states, 529 plan funds can also be tapped into for K-12 tuition expenses.

We crunched the numbers, spoke with industry experts, and evaluated each company based on established methodology to determine the best 529 plans. 

529 terms to know

To better understand how 529 plans work and their benefits, it helps to start with the terminology. Contribution limits and tax benefits generally apply to each investment account beneficiary.

• Income tax deduction: This is an amount you can deduct from income on your state income taxes. There is no federal income tax deduction for 529 plans, and you generally need to be a state resident to claim a deduction for contributions to that state’s plan.
• Tax credit: This reduces the amount of tax you owe on a dollar-for-dollar basis, making it a better benefit than an income tax deduction in many cases.
• Annual contribution limit: 529 plans don’t have annual contribution limits, but state tax benefits may only apply to contributions up to a certain amount.
• Aggregate contribution limit: 529 plan rules limit how much can be contributed on behalf of a single beneficiary over the lifetime of all accounts per state. States set their own limits.
• 529 plan fees: Plan fees, or asset-based fees, generally consist of administrative or program management fees plus underlying fund-specific expenses. 
• Static portfolio: Investment allocations are fixed and do not update or adjust based on age but may be periodically reallocated to match investment goals. It’s up to the account owner to change a static portfolio.
• Age-based and enrollment date portfolios: These investment blends are designed to automatically re-allocate, generally to a more conservative mix, as the account grows and college enrollment nears. This plan type may carry less risk than a static portfolio and is designed for less experienced investors.

Best 529 plans 

1. Utah’s my529: Best for highest contribution limit and state tax credits

My529 is Utah's official 529 plan. You don't have to be a state resident to participate or use the account funds at a Utah school. No minimum contribution is required to open Utah's my529 plan, and the plan's aggregate contribution limit is among the highest of any state. Utah’s plan is one of the few offering tax credits.

There are various investment options, including portfolios that automatically adjust depending on target enrollment date or age and static portfolios in which you can choose specific investments or allocate based on risk. 

• Tax benefit: Utah taxpayers can claim a state income tax credit of up to $109.66 for single filers or $219.31 for married filing jointly. 
• Aggregate contribution limit: Up to $560,000 across all accounts for the same beneficiary.
• Fees: Total annual asset-based fees range from 0.131% to 0.453% depending on investments, including underlying fund expenses and administrative fees.

2. Illinois’ Bright Start College Savings: Generous state income tax deduction

Illinois' Bright Start College Savings plan boasts a generous state income tax deduction for Illinois taxpayers and a high aggregate contribution limit. The plan's fees are competitive, though they can be on the high side depending on fund selection, and there’s no minimum required contribution to open an account. 

Investment options include 17 fund portfolios from mutual funds families, including Vanguard and T. Rowe Price, and age-based and target portfolios.

• Tax benefit: State income tax deduction for Illinois taxpayers of up to $10,000 for single filers and $20,000 for married filing jointly.
• Aggregate contribution limit: $500,000.
• Fees: There is a 0.07% program management fee and a 0.025% state fee. Investment expenses range from 0% to 0.67%, and total asset-based fees range up to 0.77%, depending on your chosen fund.

3. Ohio’s CollegeAdvantage: Best investment plan options

You'll only need $25 to start saving with Ohio's CollegeAdvantage 529 plan, the minimum contribution amount. The CollegeAdvantage Direct Plan offers a slew of investment options, including ready-made, age-based, and risk-based portfolios. Plus, individual investment options and FDIC-insured tax-free bank accounts from Fifth Third Bank are available on Ohio’s 529 plan. Many of its investment options are managed by Vanguard, with some overseen by Dimensional Fund Advisors.

• Tax benefit: Ohio residents can claim a state income tax deduction of up to $4,000 per year per child. If they contribute more in one year, they can carry the amount forward to deduct in future years. 
• Aggregate contribution limit: $523,000.
• Fees: Total annual asset-based fees range from 0.00% to 0.425%, depending on investments.

4. Michigan’s Education Savings Program: Best for low fees

Michigan's Education Savings Program boasts very competitive fees and benefits for Michigan taxpayers in the form of state income tax deductions. The initial deposit and subsequent deposits must be at least $25. Investment options include portfolios based on enrollment year or capital preservation (for short time horizons), plus customizable portfolios for more experienced investors.

• Tax benefit: State income tax deduction for Michigan taxpayers of up to $5,000 for single filers and $10,000 for married filing jointly.
• Aggregate contribution limit: $500,000.
• Fees: Annual asset-based fees range from 0.065% to 0.185%, depending on investments.

5. Smart529 WV Direct College Savings Plan: Best for no maximum tax deduction

Whereas many states cap the maximum deduction for resident taxpayers, the Smart529 WV Direct College Savings Plan allows West Virginia residents to deduct their entire annual contribution from their federal gross adjusted income for state income tax purposes.

The plan has a high aggregate contribution limit, at $550,000, and investment options include a modest selection of age-based and risk-based portfolios, plus two individual portfolios.

• Tax benefit: West Virginia residents can deduct up to the full contribution from their adjusted gross income.
• Aggregate contribution limit: $550,000.
• Fees: Total asset-based fees range from 0.12% to 0.21% depending on investments.

6. Virginia’s Invest529: Best for older taxpayers and ESG funds

Virginia's Invest529 plan offers tax benefits for all state residents, but most notably for residents 70 and older, who can deduct the entire amount they contribute to the plan in one year. Ivest529 offers 20 different investment portfolios, including specialty portfolios like the ESG Core Equity Portfolio, for those concerned about the environmental implications of their investments.

• Tax benefit: State income tax deduction for Virginia taxpayers of up to $4,000; Virginia taxpayers age 70 and up can deduct the entire amount contributed.
• Aggregate contribution limit: $550,000.
• Fees: Asset-based fees on most portfolios are modest but could be as high as 1.11% for specialty portfolios. 

7. New York’s 529 Savings Program: Best for low fees and investment options

There's no minimum contribution amount to start saving through New York's 529 Savings Program, which boasts very low, straightforward fees. Vanguard is the plan's investment manager. There are 20 different target enrollment portfolios, and investors who would rather create their own investment mix can also choose individual portfolios.

• Tax benefit: State income tax deduction of up to $5,000; up to $10,000 if you're married filing jointly.
• Aggregate contribution limit: $520,000.
• Fees: 0.12% total annual asset-based fee.

8. Future Scholar 529 College Savings Plan: Best for no maximum tax deduction

Offered through the state of South Carolina, the Future Scholar 529 College Savings Plan has a high maximum contribution limit of $540,000. Residents of the state can take a state income tax deduction up to the amount they contribute for the year (up to the maximum aggregate account balance). Three different investment options are age-based, target allocation, and single-fund.

• Tax benefit: State income tax deductions up to the maximum account balance.
• Aggregate contribution limit: $540,000.
• Fees: Total annual asset-based fees range from 0.00% to 0.20%; no program management fee is charged. 

9. The Education Plan: Best for no maximum tax deduction

The Education Plan's college savings program is New Mexico's official 529 plan. New Mexico is among the handful of states that allow its taxpayers to deduct annual contributions up to the 529 account maximum of $500,000. There's also a DIY investment option, which allows you to choose any combination of available portfolios in the plan, or you can opt for an enrollment year-based investment strategy.

• Tax benefit: New Mexico taxpayers can deduct annual contributions up to the account maximum.
• Aggregate contribution limit: $500,000.
• Fees: Total asset-based fees ranging from 0.10% to 0.44%.

Related: How to pay for college: 6 strategies

529 plans by state 

Even if your state offers a 529 plan, you don’t necessarily have to choose it. You might prefer another state's 529 plan because of its investment options, lower fees, or higher maximum contribution limit.

However, it is always a good idea to check your state's plan first for 529 tax deductions or credits, special benefits, or waived or lower fees.

“If you need help choosing or would like to complement your home state's plan with another, remember you can have more than one account in more than one state's plan for the same beneficiary,” says Roberts. 

There are plenty of plans to choose from, and every state except Wyoming has a plan. 

Choosing the best plan

Several factors, including the costs involved, potential tax benefits, and investment options, must be considered when choosing the best 529 plan.

Tax benefits

Even if your state's plan has slightly higher fees, the tax benefits could offset those costs.

Investment options

You can invest directly with state 529 plans or get guidance from a financial professional on finding the right plan for your goals.

Either way, you’ll need to know your investment objectives (like aiming to cover 50% of the cost of a four-year in-state public school degree), time horizon, risk tolerance, and other factors unique to your situation. 

“A popular option tends to be what is referred to as ‘age-based’ (with a professional investment design based on the beneficiary's age) or ‘target date’ (with a professional investment design based on the year in which the beneficiary is likely to pursue post-secondary education),” says Roberts.

Costs and fees

Costs vary by plan and the investment options you select. Fees can include enrollment or application fees, account maintenance, program management, and asset management fees. 

Also, consider whether a 529 plan is direct- or advisor-sold. Many states offer both options. A broker-sold option may provide more guidance in choosing a plan or investments but will involve more fees than a direct-sold plan.

Contribution limits

Not all 529 plans allow you to contribute the same maximum amount. 

If you're hoping to maximize a 529 education savings plan, it's worth seeing which plans have the highest contribution limits.

How to open a 529

Think you’ll have to invest a lot of time to open a 529? Think again.

To open a 529, you must provide basic information, including details for yourself and the account beneficiary. 

This information may include: 

• Address
• Social Security Number or Individual Taxpayer Identification Number
• Date of birth
• State-issued identification information, such as a driver’s license

Providing these details for a designated survivor is also a good idea.

From there, you'll need to finish setting up your account:

1. Choose your investment options.
2. Set up a contribution method. If you plan to make contributions electronically, you can fund them with bank routing and account numbers.
3. Make an initial contribution (a minimum initial and/or ongoing contribution amount may sometimes be required).

Funding your account

You can open an account with as little as $25. Even better: Anyone can make contributions to the account.

Roberts recommends that friends and family skip the more traditional gifts for birthdays, holidays, and other special occasions and instead contribute any amount to the 529 plan account of a child they love. 

“Friends and family may welcome the suggestion to give a gift that will grow with a child they care about and have a meaningful impact on their future—versus shopping for something that may be quickly outgrown in interest or size,” she adds. 

Many companies now offer education on 529 plans, payroll deduction to these plans (to make it easy to contribute regularly), and even matching contributions to employees' 529 plan accounts. 

“The education and tools offered in the workplace are priceless because two-thirds of Americans are not familiar with 529 plan accounts and, thus, are missing out on one of the best ways to prepare for higher education.”

Frequently asked questions

Which state has the best 529 plan? 

Your state’s 529 plan will generally be the best for you due to the tax breaks offered to resident taxpayers. That said, most states offer 529 plans, and you can use another state's plan if it's better for your savings needs, whether due to a higher maximum contribution limit or different investment options.

How many 529 plans can a child have?

A child can be the beneficiary of multiple 529 plans. The maximum balance of each account is limited, and the caps vary by state.

What happens to a 529 if my child doesn’t go to college?

Control of a 529 always remains with the original account owner. You may save the money for a future child of the original beneficiary, as there are no time limits on using these accounts.

“You can use it to pay for other permitted forms of post-secondary education for a child who doesn't want to pursue a traditional four-year degree, save it for a later date in the event they change their mind (as there are no time limits on the use of 529 plan accounts), or switch all or part of the account balance to an eligible family member.

You can also roll over up to $35,000 to a Roth IRA for the 529 plan beneficiary, save it for the child's future children's education, or use it for yourself (if you are a parent or other relative of the child.

 “It’s also possible to take a non-qualified withdrawal and pay only tax on the earnings and a possible 10% federal penalty, unless due to scholarship, military academy attendance, death, or disability,” says Roberts.

Methodology

We ranked 529 plans based on independent research by CNBC Select and Saving for College and selected the top results based on each of their methodologies; we selected “best for” categories supplemented by weighing each plan’s:

• Management fees
• Investment returns and performance
• Fund expenses
• Investment options
• State-based perks