Last Updated Oct 31, 2011 10:54 AM EDT
But, you may be wondering, how do you pick the best 529 plans and avoid the worst? Morningstar, the investment research firm, has made the task easier for you. In its new industry survey of 529 plans, Morningstar has selected the top five 529 plans, as well as the seven worst. Here is your 529 cheat sheet:
Five Best 529 College Savings Plans
Vanguard 529 College Savings Plan (Nevada)
This plan offers a large number of Vanguard index funds at some of the 529 industry's lowest prices. To keep costs low for the plan, the minimum investment to open an account is $3,000. I saved for college for my two children through this plan, as well as the Utah plan, which is next up.
Utah Educational Savings Plan
Utah's plan, which features Vanguard index funds, has always offered extremely low prices and they were just reduced again. The plan has introduced the first do-it-yourself age-based investment track where colleges savers can set a mix of investment to change yearly.
T. Rowe Price College Savings Plan (Alaska) and College Savings Plans of Maryland
The plans offer an "excellent set of actively managed funds run by a very strong, tested team" from the T. Rowe Price mutual fund family, according to Morningstar. The asset allocation among the age-based options are heavier in stocks than the norm.
CollegeAdvantage 529 Savings Plan (Ohio)
This plan, which has low-cost investment options, offers managers from a variety of firms including Vanguard, PIMCO, Oppenheimer and GE.
CollegeAmerica 592 Savings Plan (Virginia)
This is the nation's largest 529 plan because it is popular with financial advisers, who earn a fee when they place their clients' money in this fund. The fund includes high quality American funds operated by risk-aware veteran managers.
Nation's Worst 529 PlansThe good news this year is that no 529 plans landed in Morningstar's worst category. Seven funds, however, earned below average ratings. Reasons for landing in Morningstar's cellar include high fees and/or inadequate investment choices.
7 Worst 529 College Savings Plans
- Tomorrow's Scholar College Savings Plan (Wisconsin)
- Upromise College Fund 529 Plan (Nevada)
- CollegeBoundfund (Rhode Island)
- NextGen College Investing Plan (Maine)
- TD Ameritrade 529 College Savings Plan (Nebraska)
- Schwab 529 College Savings Plan (Kansas)
- Minnesota College Savings Plan
Read more on The College Solution:25 Most Expensive Colleges in the Nation
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Lynn O'Shaughnessy is author of The College Solution, an Amazon bestseller, and Shrinking the Cost of College workbook. She also writes her own college blog at The College Solution.
529 plan image by Mindsay Mohan. CC 2.0.