Are you daunted by the astronomical (and rapidly rising) cost of a college education? You’re not alone. According to the National Center for Education Statistics, the total annual cost of attendance (including tuition, room and board, and miscellaneous fees) at private four-year colleges and universities in the United States averaged $37,600 for the 2020-21 academic year.
Most families can’t afford that kind of expense out of pocket for one child, let alone two or three entering college in close succession. Scholarships and student loans help reduce the upfront cost of higher education. But they often leave parents with hefty balances due before graduation — balances that household cash flows can’t cover alone. That’s why it’s crucial for parents to start college savings funds as early as they can afford to.
If you’re overwhelmed, know that you don’t have to do it alone. Millions of parents like you use or have used 529 college savings plans to store and grow their higher-education nest eggs. All benefit from key tax advantages, including no federal or state income taxes on account earnings and a federal gift tax carveout that allows individuals to contribute up to $85,000 per year and joint filers to contribute up to $170,000 per year — five times more than the usual yearly gift tax threshold — without triggering a taxable event. And many reap additional tax benefits via state income tax deductions on eligible contributions.
Best State 529 Plans
Every U.S. resident can participate in their home state’s 529 college savings plan. In states where eligible 529 plan contributions are deductible on participants’ state income tax returns, the home-state plan is often the soundest financial choice.
But your home-state plan isn’t the only option. Because investment balances held in all 529 plans grow free from state and federal income taxes, it can pay to shop around.
If you live in a state with no income taxes, that’s doubly true. Most states only allow you to deduct eligible contributions from state taxes if you choose your home state’s plan. If that’s not an option, anyway, there’s no reason to stick with your state’s plan if there’s a better alternative in another state.
This list features the best state 529 plans available to U.S. residents right now. Review each listing for information about in-state tax benefits (if any), minimum contribution and balance limits, maximum aggregate contribution limits per beneficiary (student), and plan fees and management expenses, which can impact investment returns (and thus the ultimate size of that all-important education nest egg) to a greater extent than many realize.
Unless otherwise noted, all 529 plans on this list are direct-sold, meaning any U.S. taxpayer with a valid street address can contribute to them without using a financial advisor as an intermediary.
1. The Vanguard 529 Plan: Nevada
- Minimum Opening Balance: $3,000 ($1,000 for Nevada residents)
- Minimum Additional Contribution: $50
- Maximum Cumulative Contribution: $500,000 per beneficiary
- Fees and Expenses: 0.14% investment expense ratio for target enrollment portfolios; 0.12% to 0.42% for individual portfolios
- Tax Benefits for In-State Participants: None (Nevada doesn’t have state income tax)
The Vanguard 529 Plan is one of the best state 529 plans available to American savers today.
That’s a bit ironic, considering Nevada is one of the handful of states that don’t levy state income tax. As such, the Vanguard 529 Plan doesn’t offer direct state tax benefits to Nevada residents.
The plan more than makes up for this modest shortcoming elsewhere. In keeping with Vanguard’s famous commitment to low investment management fees, the Vanguard 529 Plan has some of the lightest expenses of any 529 scheme: just 0.14% of assets under management per year for target enrollment portfolios, passively managed accounts that automatically reduce risk as the beneficiary’s expected college enrollment date approaches.
Expenses aren’t much higher for the plan’s individual portfolios, which mix and match Vanguard mutual funds to create custom investment mixes finely tuned to account holders’ risk tolerance and investing objectives.
And as one of the United States’ largest 529 plan managers (it manages or sponsors several other state plans), the legendary investment house brings a wealth of experience to bear for its plan participants.
2. CollegeAdvantage: Ohio
- Minimum Opening Balance: $25
- Minimum Additional Contribution: $25
- Maximum Cumulative Contribution: $377,000 per beneficiary
- Fees and Expenses: About 0.15% to about 0.45% inclusive of all management and account fees, depending on portfolio type
- Tax Benefits for In-State Participants: Up to $4,000 state income tax deduction per beneficiary per year
CollegeAdvantage is Ohio’s 529 college savings plan. Unlike the Vanguard 529 Plan, it offers a generous tax benefit for Ohio taxpayers: a state income tax deduction worth up to $4,000 per beneficiary per year. If you have three kids en route to college, that’s up to $12,000 in state tax deductions each year.
CollegeAdvantage also has impressively low plan fees, topping out at around 0.30% assets under management, including all account fees. This single fee includes account fees not directly tied to investment management, which other 529 plan administrators don’t always willingly disclose.
Although low fees and generous tax incentives are the highlights, CollegeAdvantage has another, less quantifiable advantage worth noting: a user-friendly website and investment dashboard that actually makes the experience of contributing to and managing plans fun. Considering how scary the thought of a six-figure college tuition bill can seem years out, that’s no small thing.
3. Bright Start: Illinois
- Minimum Opening Balance: $0
- Minimum Additional Contribution: $0
- Maximum Cumulative Contribution: $450,000 per beneficiary
- Fees and Expenses: Investment fees and expenses range from about 0.10% to about 0.40%, depending on portfolio type
- Tax Benefits for In-State Participants: Up to $10,000 state income tax deduction per individual taxpayer per year; up to $20,000 per married couple per year (cumulative for all beneficiaries)
Bright Start is the 529 plan for Illinois residents. It has two key benefits: nonexistent minimum balances (no minimums to open and no ongoing contribution minimums) and a very generous in-state tax benefit that’s particularly nice for smaller families.
Bright Start has reasonable account fees and investment expenses as well, topping out around 0.50% assets under management, inclusive of all fees and expenses. That, along with an unusually rich mix of investment options backed by big names like Vanguard, T. Rowe Price, and Dimensional, is enough to earn Bright Start a coveted gold rating from Morningstar — the investment rating agency’s highest tier.
4. Invest529: Virginia
- Minimum Opening Balance: $10
- Minimum Additional Contribution: $10
- Maximum Cumulative Contribution: $500,000 per beneficiary
- Fees and Expenses: Investment fees and expenses range from 0.09% to 0.62%, depending on portfolio type
- Tax Benefits for In-State Participants: Up to $4,000 state income tax deduction per beneficiary per year
Invest529 is Virginia’s 529 plan. Like Ohio’s and Illinois’, it has an impressive in-state tax benefit that delivers a state income tax deduction worth up to $4,000 per beneficiary per year. Low minimums and a high cumulative contribution limit further sweeten this account’s appeal for a range of participants, from lower-income families pinching pennies to relatively well-off households.
Invest529 has a broad range of investment options too. These include low-cost target enrollment portfolios in the mold of the Vanguard 529 Plan’s, target risk portfolios that conform to participants’ tolerance for market gyrations, and specialty portfolios that offer exposure to more advanced strategies (like environmental, social, and governance investing) or nontraditional asset classes. Invest529 even offers a savings account insured by the Federal Deposit Insurance Corporation (FDIC) for participants who’d rather not chance their education nest egg to the equities markets.
5. NY’s 529 College Savings Program (Direct Plan): New York
- Minimum Opening Balance: $0
- Minimum Additional Contribution: $0
- Maximum Cumulative Contribution: $520,000 per beneficiary
- Fees and Expenses: Investment fees top out at 0.12% for all portfolio types
- Tax Benefits for In-State Participants: Up to $5,000 state income tax deduction per individual taxpayer per year; up to $10,000 per married couple per year (cumulative for all beneficiaries)
NY’s 529 College Savings Program Direct Plan has a lot going for it: nonexistent account minimums, high lifetime contribution limits, and incredibly low investment fees, regardless of portfolio type. The tax benefits aren’t half bad, either, topping out at $10,000 in state income tax deductions per married couple per year.
The Direct Plan has a manageable if not vast lineup of investment options. Do-it-yourself investors can mix and match from 13 prebuilt portfolios to create fully customized investment vehicles. And those who’d just as soon leave things to the professionals can choose from age-based (target-date) portfolios suitable for three general levels of risk tolerance: aggressive (mostly stocks), balanced (a mix of stocks and fixed-income), and conservative (mostly fixed-income and cash).
6. ScholarShare 529: California
- Minimum Opening Balance: $0
- Minimum Additional Contribution: $0
- Maximum Cumulative Contribution: $529,000 per beneficiary
- Fees and Expenses: Expense ratios range from about 0.05% up to about 0.45%, depending on portfolio type
- Tax Benefits for In-State Participants: None
ScholarShare 529 is the largest direct-sold state 529 plan, mainly because California is the biggest state in the country. That said, ScholarShare 529 has a lot to brag about, including nonexistent minimums, extremely high lifetime contribution caps per beneficiary, and a vast array of investment options.
The biggest drawback is the lack of tax benefits for in-state participants. In fact, there’s a 2.5% surtax on certain plan withdrawals, like K-12 tuition expenses and student loan payments. Those non-advantaged withdrawal types are also subject to regular state income tax. In a relatively high-tax state like California, these penalties can add up and could spur would-be participants to consider alternatives like the Vanguard 529 Plan.
7. My529: Utah
- Minimum Opening Balance: $0
- Minimum Additional Contribution: $0
- Maximum Cumulative Contribution: $510,000
- Fees and Expenses: Investment fees and expense ratios range from 0.13% to 0.53%, depending on portfolio type
- Tax Benefits for In-State Participants: 4.95% tax credit on contributions up to $2,130 per beneficiary per year for individual taxpayers and $4,260 per beneficiary per year for joint taxpayers (married couples) — the credit amounts are yoked to inflation and change each year
My529 is the designated direct-sold 529 plan for Utah residents. Like Illinois’s Bright Start, it earns Morningstar’s coveted gold honor thanks to a well-balanced lineup of age-based investment options and a robust set of globally diversified portfolios that cater to investors at every point on the risk-tolerance spectrum.
My529 has some familiar features of other elite 529 plans as well: nonexistent minimums, high lifetime contribution limits, and reasonable fees and expenses. But it does the tax advantage thing differently from many other plans — through a percentage-based credit on contributions up to a fixed amount per beneficiary per year. That credit is still impressive, though, knocking a couple hundred bucks off participants’ tax bills when fully utilized.
8. Oregon College Savings Plan: Oregon
- Minimum Opening Balance: $25
- Minimum Additional Contribution: $5
- Maximum Cumulative Contribution: $400,000 per beneficiary
- Fees and Expenses: All accounts have an unavoidable account management fee of 0.20%; investment fees and expenses range from 0.0% to 0.46%, depending on portfolio type
- Tax Benefits for In-State Participants: Up to $170 in annual state income tax credits on contributions from individual taxpayers and up to $340 in annual state income tax credits on contributions from joint taxpayers (married couples)
The Oregon College Savings Plan mirrors my529’s unorthodox but effective strategy for delivering tax advantages to in-state participants. That advantage knocks up to $170 off individual participants’ state income tax bills and $340 off married couples’ when fully utilized. The Oregon plan also has manageable account minimums, solid maximum aggregate contribution limits, and reasonable investment fees and expenses.
The biggest drawback is an unavoidable state account management fee of 0.20% per year on top of plan fees and expenses. That’s particularly painful for frugal savers invested in low-cost index funds and could well be a deal-breaker for the truly fee-averse.
9. Michigan Education Savings Program: Michigan
- Minimum Opening Balance: $25
- Minimum Additional Contribution: $15
- Maximum Cumulative Contribution: $500,000 per beneficiary
- Fees and Expenses: Investment fees and expenses range up to about 0.11%, depending on portfolio type
- Tax Benefits for In-State Participants: Up to $5,000 state income tax deduction per individual taxpayer per year; up to $10,000 per married couple per year (cumulative for all beneficiaries)
The Michigan Education Savings Program (MESP) has one of the more generous in-state tax benefits for smaller families and boasts impressively low investment fees and expenses.
That fee schedule is made possible by MESP’s cohort of low-cost investment fund managers — a group that includes penny-pinching stalwarts like Vanguard, Schwab, and TIAA-CREF. Even portfolio types that typically take a healthy cut of earnings are reasonable. For example, a portfolio option heavily weighted toward international equities carries an expense ratio of just 0.125%.
MESP has additional benefits worth noting, including relatively low minimums and high lifetime contribution limits per beneficiary. But risk-averse investors might find MESP lacking since it lacks an FDIC-insured savings-only option.
10 U.Fund College Investing Plan: Massachusetts
- Minimum Opening Balance: $25
- Minimum Additional Contribution: $25
- Maximum Cumulative Contribution: $500,000 per beneficiary
- Fees and Expenses: Investment fees and expenses range from about 0.1% to about 1%, depending on portfolio type
- Tax Benefits for In-State Participants: Up to $1,000 state income tax deduction per individual taxpayer per year; up to $2,000 per married couple per year (cumulative for all beneficiaries)
The U.Fund College Investing Plan is a Fidelity-managed program for families based in Massachusetts. It’s worth noting upfront that U.Fund has higher investment fees and expense ratios than many competing plans because of its robust lineup of actively managed funds. But it’s possible to find lower-cost investment options too, with age- and risk-based portfolios composed entirely of index funds.
For starters, U.Fund has other advantages that easily push it into the 529 elite: low account minimums and a relatively high aggregate contribution limit. And though the in-state tax benefits aren’t amazing, the peace of mind that comes with professional management by a top investment house certainly counts for something.
Final Word
There are other 529 college savings plans available to U.S. parents and students right now, but these are the best of the best. They offer the best combination of low fees and expenses, generous in-state tax benefits, and favorable balance and contribution limits.
Any of these plans can help your family on its college savings journey. But don’t feel your choices are limited to the ones on this list. If the promise of in-state tax benefits wins out over other considerations, stick with your home-state plan. Or start with another education savings option, like a Coverdell ESA. Or research other ways to save or invest for your child’s college education.
As long as you start saving early and choose a vehicle that combines risk-appropriate growth potential with state or federal tax benefits and know how much to invest based on your child’s age, you’re on the right track.
