529 College Savings Plans: Complete Comparison
Making college affordable is a key priority for many families, and 529 college savings plans are among the most effective ways to reach that goal. This guide provides a comprehensive comparison of 529 college savings plans, covering their benefits, plan comparisons, recent updates, and answers to top questions.
What Is a 529 College Savings Plan?
A 529 college savings plan is a tax-advantaged investment account designed to help families save for education expenses. Contributions grow tax-free, and withdrawals are also tax-free when used for qualifying education costs such as tuition, fees, books, and room and board.
Key Features of 529 College Savings Plans
- Tax Advantages: Earnings grow free from federal tax, and many states offer tax deductions or credits for contributions.
- High Contribution Limits: Most 529 plans have much higher contribution limits than alternatives like Coverdell ESAs.
- Account Owner Control: The owner controls the account, not the student, throughout its life.
- Coverage of Multiple Education Costs: Plans can be used for K-12 tuition and qualified apprenticeship programs, not just college.
- Flexibility: Funds can be transferred to other eligible beneficiaries if the original beneficiary does not need the money for education.
529 Plan Types: Direct-Sold vs. Advisor-Sold
Direct-Sold 529 Plans
- Opened and managed directly with a state financial institution.
- Lower fees.
- Investors manage their own portfolios online.
Advisor-Sold 529 Plans
- Purchased through a financial advisor or investment firm.
- Fees are typically higher to cover professional management.
- Offer guidance and access to more investment options for those wanting expert assistance.
Top 529 College Savings Plans in 2025
According to multiple expert reviews, these are some of the highest-rated options for 2025:
Best Direct-Sold 529 Plans
- Maryland College Investment Plan
- Alaska – T. Rowe Price College Savings Plan
- Massachusetts U.Fund College Investing Plan
- Illinois Bright Start Direct-Sold Plan
- California ScholarShare 529
These plans stand out thanks to their strong investment choices, low fees, and solid tax benefits for residents.
Best Advisor-Sold 529 Plans
- BlackRock CollegeAdvantage Advisor
- John Hancock Freedom 529
- The Hartford SMART529
- Putnam 529 for America
- Franklin Templeton 529 College Savings Plan
While they typically cost more, these plans are appreciated for their range of investment options and personalized advice.
State Benefits: Should You Use Your State’s 529 Plan?
While you are not limited to your own state’s 529 plan, many states offer unique perks for residents, including tax deductions, matching grants, or contribution incentives. Compare in-state benefits carefully. If your state offers incentives, those can enhance your savings substantially. However, some top-ranked plans from other states may still cost less overall even after factoring in in-state benefits.
529 Plans vs. Other College Savings Accounts
| Feature | 529 Plan | Coverdell ESA | UGMA/UTMA Custodial Account |
|---|---|---|---|
| Account Control | Owner retains control | Custodian until age of majority | Custodian until age of majority |
| Annual Contribution Limit | $235,000–$529,000 (varies by state) | $2,000 per beneficiary | No specific limit |
| Income Eligibility | None | Phases out at certain incomes | None |
| Qualified Expenses | K-12 & college education costs | K-12 & college education | No restriction (counted as student's asset for FAFSA) |
Recently Trending: New Secure 2.0 Act Provisions for 529 Plans
A significant change driving interest in 529 plans is the Secure 2.0 Act, which now allows unused 529 funds (up to $35,000 under specific conditions) to be rolled into a Roth IRA for the beneficiary. This provision addresses one of the most common concerns: what happens if a child does not use all the money for education. Parents and savers now have added flexibility, making 529 plans even more attractive for long-term wealth and retirement planning.
Key Points:
- Must have held the 529 account for at least 15 years.
- Rollovers are subject to yearly Roth IRA contribution limits.
- Helps minimize risk of overfunding a 529 plan.
How to Choose the Right 529 Plan
Consider these factors when comparing plans:
- Fees: Lower fees mean more of your money goes toward growth.
- Investment Options: Quality and variety of investment portfolios.
- State tax incentives: Check possible deductions or credits.
- Performance History: Consider long-term returns, not just recent performance.
- Ease of Use: Online access, tools, and customer service.
Frequently Asked Questions (FAQ)
Who can open a 529 plan?
Any adult can open a 529 plan for a beneficiary, including parents, grandparents, or other relatives.
What if my child doesn’t use the funds for college?
You can change the beneficiary to another eligible family member or, thanks to the new rules, potentially roll over up to $35,000 into a Roth IRA.
Can I use a 529 plan for K-12 expenses?
Yes, up to $10,000 per year can be used for K–12 tuition at private, public, or religious schools.
Are there limits on how much I can contribute?
Yes, though they are high: most plans allow over $300,000 in lifetime contributions per beneficiary, with some ranging up to $500,000+.
What expenses qualify for tax-free withdrawals?
Qualified education expenses include tuition, fees, required books, supplies, equipment, and in some cases room and board.
Can non-residents invest in another state’s 529 plan?
Yes, you can choose any state’s 529 plan, but review all fees, investment options, and state tax benefits before selecting.
529 college savings plans continue to be one of the most effective ways to prepare for educational costs. With the latest updates enhancing flexibility and benefits, these plans remain a top choice for building education savings. Always compare your options carefully to maximize your family’s college savings success.