College grad, back

Savingforcollege.com has just released its Annual Fee Study on 529 plans, identifying the 15 lowest cost funds. All are funds sold directly to investors as opposed to the more expensive advisor-sold funds, but they are popular among fee-based advisors who are acting as fiduciaries.

Savingforcollege developed the list by comparing the lowest and highest 10-year expense totals for a $10,000 investment in all direct-sold 529 college savings plans, based on the cheapest and most expensive investment options in each.

The plans have traditionally been used to save for college on a tax-free basis, but starting this year they can also be used to finance private education from K-12. Earnings grow tax-free and distributions are tax free so long as they’re used for qualified educational expenses. In some states, contributions are deductible from state income taxes, often even if the 529 fund receiving the contributions is based out of state.

The 15 plans highlighted by Savingforcollege.com are located across the country and offer an array of investment options, including portfolios based on a student’s age that adjust accordingly as college enrollment looms closer, on risk appetite and on individual fund choices.

Most plans don’t charge fees other than expense ratios for the funds or portfolios, which range from low single-digit basis points to as much as 1.2%, though most funds have expense ratios well below 50 basis points. In some cases, there is also a small program or account maintenance fee.

The following list includes the cost of a $10,000 investment over 10 years. Of the 15 plans, only three from Louisiana, South Carolina and West Virginia restrict contributions to state residents. Four from New Hampshire, Massachusetts, Delaware and Arizona are tied in their scores because their plans, all run by Fidelity Investments, charge identical fees.

15. Wisconsin | Edvest | 10-year costs on a $10,000 investment: $167 for lowest cost options; $518 for highest cost option.

14. Virginia | Invest529 | 10-year costs on a $10,000 investment: $155 for lowest cost options; $959 for highest cost option.

13. Michigan | Michigan Education Savings Program | 10-year costs on a $10,000 investment: $154 for lowest cost options; $306 for highest cost options. (Photo: AP)

12. New Hampshire - UNIQUE College Investing Plan (tie). 10-year costs on a $10,000 investment: $135 for lowest cost options; $1,459 for highest cost options.

11. Massachusetts | U. Fund College Investing Plan (tie) | 10-year costs on a $10,000 investment: $135 for lowest cost options; $1,459 for highest cost options.

10. Delaware | Delaware College Investment Plan (tie) | 10-year cost on a $10,000 investment: $135 for lowest cost options; $1,459 for highest cost options.

9. Arizona | Fidelity Arizona College Savings Plan (tie) | 10-year cost on a $10,000 investment: $135 for lowest cost options; $1,459 for highest cost options. (Photo: AP)

8. Illinois | Bright Start College Savings Program | Direct-sold plan | 10-year cost on a $10,000 investment: $128 for lowest cost options; $1,029 for highest cost options. (Photo: AP)

7. California | The ScholarShare College Savings Plan | 10-year cost on a $10,000 investment: $103 for lowest cost options; $715 for highest cost options.

6. West Virginia | SMART529 WV Direct College Savings Plan | 10-year cost on a $10,000 investment: $90 for lowest cost options; $331 for highest cost options.

5. Texas | Texas College Savings Plan | 10-year cost on a $10,000 investment: $51 for lowest cost options; $1,211 for highest cost options.

4. South Carolina | Future Scholar 529 College Savings Plan (Direct-sold) | 10-year cost on a $10,000 investment: $26 for lowest cost options; $318 for highest cost option.

3. Florida | Florida 529 Savings Plan | 10-year cost on a $10,000 investment: no cost for lowest cost option (money market); $928 for highest cost options.

2. Utah | my529 | 10-year cost on a $10,000 investment: zero for cost of low cost option (available only to Utah residents); $744 for highest cost option.

1. Louisiana | START Saving Program | 10-year cost on a $10,000 investment: no cost for lowest cost options (principal protection); $389 for highest cost options.

 

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