Comparing 529 Ratings: Morningstar vs. Saving For College – Key Differences Explained

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Scott Morrison

By Scott Morrison

October 25, 2024

If you’ve been searching online for ratings of 529 plans, you’ve likely found the two major sources of plan ratings to be Morningstar and Saving For College. How are they different? Which one matches your criteria for selecting a 529 plan to cover your education expenses?

Here’s how each of these rating systems compares.

Morningstar 529 Ratings

Morningstar has been assigning ratings to various types of investments since 2011, with the most recent ratings released in October 2024. Currently, the Morningstar Medalist Ratings(™) classify 529s into one of five rating categories based on the four pillars of its research approach: People, Process, Parent, and Price.

To evaluate these aspects, Morningstar extensively evaluates the strategy’s management team, the parent firm, and the underlying investment process itself while weighing overall investment expenses. The final rating (Gold, Silver, Bronze, Neutral, or Negative) assesses the 529 plan’s future ability to generate a positive “alpha” net of investment fees. The most recent ratings awarded Gold to five plans and Silver to 14 plans.

Without getting too deep into investment jargon, “alpha” represents extra performance return over and above a similar average investment vehicle. So, quite simply, Morningstar is rating 529 plans on the ability to generate superior investment performance in the future.

Saving For College 529 Ratings

Since its launch in 1999, Saving For College has published ratings using a weighted multi-category approach. Recognizing that 529 buyers are often inexperienced investors, its rating categories reflect the consumer aspects of a 529 plan as well as the investment aspects. 

Saving For College evaluates plans based on four key categories: 

  1. Performance: Developed directly from the Saving For College quarterly 529 Performance Rankings, which uses age-based and year-of-enrollment portfolios to compare and analyze historic investment returns among 529 plans.
  2. Ease of Use: This includes the simplicity of enrolling in the plan, making contributions, and accessing and transacting from any online device.
  3. Savings Success: Evaluates how well a plan’s features and fee structure enable a 529 saver to maximize their education savings. Positive Savings Success factors include a robust gifting platform, and other plan features that promote savings. Negative Savings Success factors include annual or one-time fees that reduce the plan’s account balance.
  4. Program Delivery: This rating measures the likelihood that a 529 program will continue to deliver excellence. Among the factors considered here are program manager tenure, the impending risk of a management change, and the plan’s actions to measure customer service quality.

The final rating (a numerical 1 to 5 “cap” score, plus awards for Top of the Class, High Honors, and Honors) assesses the overall attractiveness of a 529 college savings plan to a potential saver compared to similar plans. (Advisor-sold plans are rated via different criteria than direct-to-consumer 529s.)

The ratings include a separate Resident Benefits assessment for 529 buyers considering their home state’s plan. You can view the 2024 529 Ratings here.

In summary, Saving For College provides a comprehensive rating of 529 plans, which recognizes the consumer aspects of enrolling in, contributing to, and successfully saving in a 529 plan in addition to the investment performance aspects.

Morningstar vs. Saving For College 529 Ratings: Side-by-Side Comparison

Ratings Aspect
Morningstar
Saving For College
Inception
2011
1999
Scale
Gold, Silver, Bronze, Neutral, Negative
Numerical 1 to 5 score, plus awards for Top of the Class, High Honors, Honors
Resident Benefits
Not assessed
Best, Good, Basic
Rating Categories
People, Process, Parent, Price
Performance, Ease of Use, Savings Success, Program Delivery
Number of plans rated
59, rated by a single set of criteria
85, different criteria/weighting for Direct-sold vs Advisor-sold 529s 
As of October 2024

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