These 4 States Have the Worst-Rated 529 Plans

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Mother and daughter saving for college
Prostock-studio /

Stuffing money into a 529 savings plan can be a great way to save for college. However, in a handful of states, the programs are so shaky that you might want to consider alternative ways to save.

Recently, the investment research firm Morningstar looked at and rated 54 of the nation’s biggest 529 plans. Taken together, the plans represent about 93% of the $386 billion in this type of tax-advantaged account nationwide as of the end of August 2022.

Among those plans were four that Morningstar rated as Negative. They are:

  • Maine: NextGen College Investing Plan Select
  • New Jersey: Franklin Templeton 529 College Savings Plan
  • South Dakota: CollegeAccess 529 Plan
  • Wisconsin: Tomorrow’s Scholar 529 Plan

Morningstar says plans that get a Negative rating “may exhibit a subpar asset-allocation approach, an unattractive lineup of underlying funds, and/or high fees that reduce the odds of investor success.”

Fortunately, the majority of plans Morningstar surveyed were strong enough to earn either a Gold, Silver or Bronze rating, although 16 plans earned a Neutral rating.

Plans rated Gold, Silver or Bronze give account holders investment options that “should outperform,” Morningstar says.

In addition, they exhibit a combination of the following factors:

  • “A well-researched asset-allocation approach
  • A robust process for selecting underlying investments
  • A well-resourced and experienced investment team
  • Strong, stable, and engaged oversight from the state
  • Low fees”

Two plans earned the top rating of Gold: Michigan’s Michigan Education Savings Program and Utah’s my529 plan. Morningstar says the two plans have “well-designed, low-cost offerings.”

Michigan’s plan earned praise for shifting to a target-enrollment structure that automatically moves money from stocks to bonds as college enrollment approaches.

Meanwhile, the Utah plan — which switched from an age-based to a target enrollment structure last year — is the only plan to earn a Gold rating every year since Morningstar’s 529 plan ratings began in 2012.

For more about saving for college, check out “15 States That Will Pay You to Open a 529 Account.”

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