529 College Savings Plans: Complete Comparison
Saving for future college expenses is a top priority for many families. One of the most popular and tax-advantaged options is the 529 college savings plan. This guide provides an in-depth comparison of leading 529 plans, explores their advantages, and addresses common questions — all tailored for the Personal Finance community.
What Is a 529 College Savings Plan?
A 529 college savings plan is a state-sponsored, tax-advantaged account designed specifically to help families save for education costs. These plans offer a variety of investment portfolios and significant tax benefits, making them an attractive option for long-term savers.
Key Features of 529 Plans
- Tax Advantages: Contributions grow tax-free, and withdrawals for qualified expenses are federal tax-free. Many states offer tax deductions or credits for contributions.
- High Contribution Limits: Most states allow large annual and lifetime contributions, significantly higher than many other education-focused accounts.
- Flexibility: Funds can be used at nearly any accredited college, university, or eligible trade school in the U.S., and even some international institutions.
- Control: Account owners (usually parents or grandparents) retain control over the funds, including the ability to change beneficiaries.
Types of 529 Plans
Direct-Sold 529 Plans
- Purchased directly from the state or plan administrator.
- Generally have lower fees as they are self-managed.
- Top direct-sold plans include:
- Maryland College Investment Plan
- Alaska's T. Rowe Price College Savings Plan
- California's ScholarShare 529
- Georgia's Path2College 529 Plan
- Kansas Learning Quest 529
Advisor-Sold 529 Plans
- Available through financial advisors.
- Typically carry higher fees, but offer professional management and personalized investment advice.
- Leading advisor-sold plans:
- BlackRock CollegeAdvantage Advisor
- John Hancock Freedom 529
- Putnam 529 for America
- CollegeAmerica (American Funds)
- Franklin Templeton 529 College Savings Plan
Comparing 529 Plans to Other College Savings Accounts
| Feature | 529 Plan | Coverdell ESA | UGMA/UTMA |
|---|---|---|---|
| Account control | Owner maintains control | Trustee/custodian | Custodian, then child |
| Contribution limit | Up to $589,650+ | $2,000 per year | Unlimited |
| Income eligibility | No restriction | Phased out at $95–$220k | No restriction |
| Qualified expenses | Wide (incl. K-12, college) | Wide | No restrictions (taxed if not for education) |
| Tax treatment | Tax-free growth/withdrawal | Tax-free for qualified | Taxes apply |
529 plans stand out for their high contribution limits, no income restrictions, and wide range of qualified expenses, including K-12 tuition and apprenticeships.
How to Choose the Best 529 College Savings Plan
Important Criteria
- Tax Benefits: Some states offer in-state tax deductions or credits, making their own plan especially attractive.
- Investment Options: Look for diverse investment portfolios, including age-based, index, and target-date funds.
- Fees: Lower expenses mean more of your savings goes toward college.
- Performance: Check the historical returns of the plan’s investment options.
- Customer Experience: Consider account management tools, customer service, and ease of use.
Can You Choose Another State’s Plan?
Yes, you are not limited to your home state’s 529 plan. If another state's plan offers better investment options, lower fees, or greater flexibility, you can open a 529 plan in any state.
Top 529 College Savings Plans in 2025
Among the best-rated plans, according to leading financial analysts and recent methodologies, are:
Direct-Sold Plans:
- Alaska’s T. Rowe Price College Savings Plan
- Illinois Bright Start Direct-Sold Plan
- Massachusetts U.Fund College Investing Plan
Advisor-Sold Plans:
- CollegeAmerica (American Funds)
- BlackRock CollegeAdvantage Advisor
- John Hancock Freedom 529
These plans stand out for their robust investment options, low fees, and consistent performance.
Latest News: The Secure 2.0 Act and 529 Plans
A major trend in 2025 is the shift in federal rules from the Secure 2.0 Act, which now allows unused 529 plan funds (up to a lifetime limit) to be rolled over into a Roth IRA for the same beneficiary. This new flexibility means families can invest confidently, knowing any unspent savings have additional uses for the beneficiary’s future financial security, not just education. This update is driving increased interest and search volume for 529 plans in 2025.
FAQs: 529 College Savings Plans
What expenses qualify for tax-free withdrawals from a 529 plan?
Qualified expenses include tuition, fees, books, supplies, equipment, computer technology, room and board (for at least half-time students), and certain K-12 expenses.
Can I change the beneficiary of my 529 plan?
Yes, you can change the beneficiary to another family member without tax penalties.
What happens to unused funds in a 529 plan?
Unused funds can be withdrawn, but earnings are subject to income tax and a 10% penalty unless used for a qualified reason, such as transferring to another beneficiary or, under the new Secure 2.0 Act, rolling over to a Roth IRA up to permitted limits.
Are there any income limits to open or contribute to a 529 plan?
No. Anyone, regardless of income, can open and contribute to a 529 college savings plan.
How often can I change investment options in my 529 plan?
You may change investment options up to twice per calendar year or when you change the beneficiary.
A well-chosen 529 college savings plan can be a core building block in your long-term personal finance strategy, delivering tax advantages, flexibility, and peace of mind as you plan for education costs. Researching and comparing top plans ensures you maximize the potential of your college savings.