16 Best & Worst 529 College Savings Plans of 2016: Morningstar

Slideshow November 02, 2016 at 12:04 PM
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Morningstar released its latest rating of 529 College Savings Plan, upgrading six, downgrading six, initiating coverage of two and dropping coverage of two others.

In all, Morningstar rates 63 of the country's largest 529 college savings plans, which represent 97% of the more than $240 billion in plan assets as of the end of the third quarter.

Currently just three plans merit a gold rating; last year four plans received a gold rating, and 10 plans are rated silver this year. In addition, 20 plans are rated bronze, 27 neutral and three negative. All three plans with negative ratings are advisor-sold.

Morningstar's ratings are based on five factors:

  1. the design of investment options, including the glide path of age-based portfolios
  2. the relative value of those investment options compared with those of the fund's  peers
  3. assessment of the underlying money managers
  4. the stewardship practices of plan administrators and parent firm
  5. risk-adjusted performance

"The 529 industry as a whole continues to improve as individual plans hone their strategies and reduce the fees levied on plan participants," said Leo Acheson, Morningstar's lead research analyst for 529 plans, in a statement. "We've upgraded a number of plans that have moved toward best practices and downgraded those that haven't kept pace."

Despite the downgrades and elimination of some plans, "the industry continues to take steps in the right direction, with a number of plans cutting fees, beefing up their asset-allocation resources and processes or improving the quality of their investment lineups," said Acheson.

That's good news for investors and advisors whose preferred means to save for college are 529 plans. Their earnings grow tax deferred and distributions are tax free so long as the funds are used for qualified college costs such as tuition, room and board, mandatory fees and books. In some states contributions are deductible from state income taxes.

Here's ThinkAdvisor's 16 Best and Worst 529 College Savings Plans based on Morningstar's List. Please note all AUM figures, provided by Morningstar, are as of September 30, 2016, unless otherwise noted.

Best Colleges Savings Plans 

 Vanguard conference sign (Photo: AP)

1. Vanguard 529 College Savings Plan

Rating: Gold

Issuing State: Nevada

Program Manager: Ascensus

Distribution: Direct

Total AUM: $13.36 billion

Downtown Salt Lake City.

2. Utah Education Savings Plan

Rating: Gold

Program Manager: Utah Educational Savings Plan

Distribution: Direct

Total AUM: $9.35 billion (as of Aug. 31, 2016)

Virginia Tech campus. (Photo: AP)

3. Virgina529 inVEST

Rating: Gold (upgraded from silver)

Program Manager: Virgina College Savings Plan

Distribution: Direct

AUM: $3.44 billion

Baltimore Inner Harbor.

4. Maryland College Investment Plan

Rating: Silver (downgraded from gold)

Program Manager: T. Rowe Price

Distribution: Direct

AUM: $4.59 billion

T. Rowe Price Sign

5. T. Rowe Price College Savings Plan

Rating: Silver (downgraded from gold)

Issuing State: Arkansas

Program Manager: T. Rowe Price

Distribution: Direct

AUM: $2.2 billion (as of June 30, 2016)

The Gateway Arch in St. Louis.

6. MOST Missouri's 529 Plan

Rating: Silver (upgraded from neutral)

Program Manager: Ascensus

Distribution: Direct

AUM: $2.58 billion

Bright Directions College Savings Program

7. Bright Directions College Savings Program

Rating: Silver

Issuing State: Illinois

Program Manager: Union Bank & Trust

Distribution: Advisor

AUM: $2.04 billion (as of August 31, 2016)

The Rock and Roll Hall of Fame and Museum in Cleveland. (Photo: AP)

8. CollegeAdvantage 529 Savings Plan

Rating: Silver

Issuing State: Ohio

Program Manager: Ohio Tuition Trust Authority

Distribution: Direct

AUM: $4.31 billion

College students at graduation.

9. CollegeAmerica

Rating: Silver

Issuing State: Virginia

Program Manager: American Funds

Distribution: Advisor

AUM: $52.02 billion

University of Michigan campus in Ann Arbor. (Photo: AP)

10. Michigan Education Savings Program

Rating: Silver

Program Manager: TIAA Tuition

Distribution: Direct

AUM: $4.49 billion

The statue of Alma Mater on the campus of Columbia University in New York. (Photo: AP)

11: New York's 529 Program (Direct)

Rating: Silver

Program Manager: Ascensus

Distribution: Direct

AUM: $19.09 billion

(Note: The advisor-sold version of this program is rated bronze)

Sproul Hall at the University of California Berkeley (Photo: AP)

12. ScholarShare College Savings Plan

Rating: Silver

Issuing State: California

Program Manager: TIAA Tuition

Distribution: Direct

AUM: $6.93 billion

CollegeBound Saver (Direct)

13. CollegeBound Saver (Direct)

Rating: Silver (newly covered)

Issuing State: Rhode Island

Program Manager: Ascensus

Distribution: Direct

AUM: $200.57 million (as of October 25, 2016)

(Note: the advisor-sold version of this plan, called CollegeBound 529 is rated bronze)

 Worst Colleges Savings Plans

 Mount Rushmore in Keystone, South Dakota. (Photo: AP)

14. College Access 529

Rating: Negative

Issuing State: South Dakota

Program Manager: Allianz Global

Distribution: Advisor

AUM: $1.04 billion (as of 10/28/2016)

Solieri Bridge in Downtown Scottsdale, Arizona.

15. Ivy Funds InvestEd 529 Plan

Rating: Negative

Issuing State: Arizona

Program Manager: Waddell & Reed

Distribution: Advisor

AUM: $449.52 million (as of January 1, 2013)

Yale Coat of Arms on Yale campus in New Haven, Connecticut.

16. The Hartford SMART 529

Rating: Negative

Issuing State: West Virgina

Program Manager: Hartford Life

Distribution: Advisor

AUM: $1.58 billion 

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