Best & Worst 529 Plans: Morningstar

As if finding the right school wasn’t hard enough, finding the right 529 plan might even be harder. After the hit the plans took in 2008, many proud parents of the country’s best and brightest soured on the 529 story. But the plans are making a comeback, and Morningstar helpfully points to the best, as well as those still in need of work.

“As the industry has improved, none of the 529 plans that Morningstar reviewed warranted an Analyst Rating of Bottom, leaving 58 plans rated Top, Above Average, Average, and Below Average,” writes Morningstar’s Laura Pavlenko Lutton. “Six 529 plans represented the industry’s highest standards, earning Top Analyst Ratings from Morningstar. Five of the six plans were also rated Top in 2010, with Utah Educational Savings Plan the only newcomer.”

Here are the top plans and what made them stand out, followed by the not-so-top plans:

6 Top Plans:

1 & 2)  T. Rowe Price College Savings Plan and Maryland College Investment Plan

T. Rowe-run plans are built upon a chassis of well-executed funds, according to Lutton.

“The age-based options’ asset allocation is more equity-heavy than the norm and the expense ratios are higher than other direct-sold plans’, most of which contain indexed funds. But college savers are getting an excellent set of actively managed funds run by a very strong, tested team.”

3)  Ohio’s CollegeAdvantage 529 Savings Plan

Lutton writes there’s something for everyone in this direct-sold plan from the Ohio Tuition Trust Authority. The plan, she says mixes managers from various firms including Vanguard, PIMCO, Oppenheimer, and GE. That variety is becoming more common among 529 plans, but what’s notable here are the plan’s low fees.

4)  Nevada’s Vanguard 529 College Savings Plan

High praise from Lutton for this plan means you won’t be gambling with your kid’s future:

“This Nevada-based plan features a suite of Vanguard’s renowned, well-diversified index funds at some of the industry’s lowest prices. To be sure, the plan requires $3,000 to open an account, which is a deal-killer for most college savers. Utah Educational Savings Plan, a Top-rated peer plan, has similar investments without the high minimum contribution.”

5)  Utah Educational Savings Plan