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Morningstar’s Best and Worst 529 Plans
By JLP | April 18, 2008
Here’s a look at Morningstar’s recently published list of the best and worst 529 plans:
The Best
Illinois Bright Start College Savings Program – OppenheimerFunds Inc.
Maryland College Inv Plan – T. Rowe Price
Virginia CollegeAmerica* – Virginia (American Funds)
Virginia Education Savings Trust – Virginia
Colorado Scholars Choice College Savings Program* – Legg Mason, Inc.
The Worst
Ohio Putnam CollegeAdvantage* – Putnam Investment Management
Mississippi Affordable College Savings Program – TIAA-CREF
Mississippi Affordable College Savings Program* – TIAA-CREF
New York 529 College Savings Program – Upromise
Nebraska AIM College Savings Plan* – Union Bank (AIM)
* denotes advisor-sold plans.
You’ll have to read Marta Norton’s Morningstar piece to find out why these plans were on the best and worst list. I will say that fund performance, expenses, and investment choice were the main deciding factors.
As a side note, while putting his post together I decided to check out Saving for College’s 5-Cap ratings for each of these plans. One thing that troubles me is NEARLY EVERY PLAN has an above average 5-Cap rating (the ratings are lower for out-of-state residents). I realize that rating these plans is somewhat subjective. However, it seems as though Saving for College may be a little too generous with their ratings, which almost makes them worthless. I would only use Saving for College as a starting point for 529 plan research.
Topics: College Funding, Investing | 6 Comments »
April 18th, 2008 at 1:34 pm
I’m shocked that the Ohio plan isn’t on the best list! Vanguard index funds with low expenses… what could be better?
April 18th, 2008 at 3:45 pm
I believe they are talking about the advisor/broker plan, not the direct plan.
April 18th, 2008 at 7:16 pm
I agree with Theo. There is no way the NY plan is in the bottom five as it uses Vanguard funds. Remember, Morningstar is the guru of active mutual funds. They don’t make the big bucks by parsing index funds. They need to keep the discussion on active funds, which is why we probably see plans by Oppenheimer, Legg Mason and American funds at the top.
April 20th, 2008 at 11:53 am
The ratings also don’t take into account annual maintenance fees–something that almost all their top performers have and NY does not. While they claim to look at fees and expenses–an annual maintenance fee can really add up.
May 25th, 2008 at 7:59 am
NY plan sux – no exposure to international markets.
July 15th, 2008 at 7:25 am
Remember that even though the NY plan may be rated a bit lower than other states, the benefit of up to a $10,000 deduction on your NYS tax return if you are a NYS resident is definitely still worth it.