Best 529 Savings Plans by State — Find Your Match

Paying for college is expensive, which is why it’s common for parents or other loved ones to help contribute to a child’s college tuition. One great way to help with education expenses is with a 529 college savings plan. These plans provide tax breaks on the federal and state level for investing in college expenses.

Plan rules will vary by state, but as long students use the funds for qualified educational expenses (QHEEs) — including tuition and mandatory fees — everyone who invests in a 529 college savings plan can make withdrawals without owing federal taxes.

Parents or someone other than the student can also own 529 plans, so the accounts won’t impact financial aid eligibility much. That’s because parents are expected to contribute just a small percentage of their financial accounts to school costs, while students are expected to use around 20% of their assets to pay for school.

This guide to the best 529 plans by state will help you find your ideal college savings match and make informed choices about investing for the future.

Types of 529 plans

There are two types of 529 plans:

• Prepaid tuition plans allow you to buy tuition credits at today’s rates for participating schools, which are usually state or public colleges and universities. Students must attend one of the schools that accepts the tuition credits to get the full value of the invested money. The invested funds can only be used for tuition, and not room and board.
• Education savings plans, on the other hand, are accounts opened at financial institutions. Contributed money is invested in assets, such as ETFs or mutual funds. Many investors choose target-date funds that automatically put money into a mix of appropriate investments based on when funds are needed. Money can be withdrawn tax-free for QHEEs including tuition, room and board, and mandatory fees paid to any educational institution. Money can even be used to pay for primary and secondary schools, as well as for higher education.

Both plans come with risks. Unless guaranteed by the state, prepaid tuition credits could lose value if the sponsoring institution has financial trouble, while investments in an education savings plan could perform poorly. However, state and federal tax breaks make both plans a good way for families to get a little help in saving for college costs.

How to select the best 529 plan

When shopping around for the best 529 plans, it’s important to decide first whether you want a prepaid tuition plan or education savings plan. You’ll also need to find out which plans and benefits are available in your state.

You want your invested funds to go toward college costs, not high plan fees, so comparing expenses is important when considering which 529 college savings plan is right for you. Common fees include:

• Prepaid tuition plans: Enrollment fees, application fees and administrative fees
• Education savings plans: Enrollment, application, account maintenance and management fees
• Education savings plan: Investment fees, which vary depending on selected investments

Finally, you’ll need to look at residency requirements and eligibility rules to make sure the plan you’re interested in is one you can open and invest in, while also receiving tax breaks for investing.

Best 529 college savings plans by state

Best 529 prepaid tuition plans by state
Not all states have prepaid tuition plans. The following states offer prepaid tuition plans:

Bottom line

Finding the best 529 plan is important to ensure the children you love can afford to attend college. By researching plans in your state and understanding the rules where you live, you can make the most informed choice about which 529 college savings plan is right for you.