This fall, Morningstar analyzed 61 plans, representing 97% of the more than $363 billion invested in 529s, and found that only three were worthy of it’s gold medal designation, because they offered: “a well-researched asset-allocation approach, a robust process for selecting underlying investments, an appropriate set of options to meet investor needs, strong oversight from the state and investment manager, and low fees.” (State tax benefits were not considered.)
The highest ranked plans? Illinois' Bright Start College Savings, Utah's my529, and Michigan's Education Savings Program, which charges 0.10% for its target-enrollment portfolios — the cheapest Morningstar rated.
California's ScholarShare College Savings Plan and Virginia's Invest529 were former gold winners, who this year received silver medal designations, but came in right behind the top three. Nine other states received a silver, including: Pennsylvania 529 Investment Plan, New York’s 529 Program, Oregon College Savings Plan, and Ohio’s CollegeAdvantage 529 Savings Plan. (All gold and silver plans were direct-sold options.)
Only eight plans received the failing grade of negative, but all charged high fees and should be avoided, even by in-state college savers hoping to hook a tax benefit, Morningstar concluded.
Six of the negative-rated plans were advisor-sold and include: Colorado’s Scholar’s Choice College Savings Program, Indiana’s CollegeChoice Advisor 529 Savings Plan, Maine’s NextGen College Investing Plan Select, New Jersey’s Franklin Templeton College Savings Plan, South Dakota’s CollegeAccess 529 Plan, and Wisconsin’s Tomorrow’s Scholar 529 plan. The final two were direct-sold plans: New Jersey’s NJBEST 529 College Savings Plan and Nevada’s USAA College Savings Plan.