Finding the lowest-cost 529 savings plans

Mark KantrowitzBy: Mark Kantrowitz | 

Savingforcollege.com's 529 Fee Study, updated as of July 23, 2018, showed that 529 fees continue to decline on average. When taking mean cost across the highest and lowest options, we found that mean fees fell 1.1% over the past six months, mostly due to a decline in the cost of the highest-cost options.

The study examines all direct-sold 529 plans, with data compiled from the fee tables that are part of the official program disclosures. (Advisor-sold plans generally have much more complex fee structures and are not included.) The study also excludes the 'no-fee' bank CD options and insurance-backed guaranteed options found in several of the plans. Costs include all account maintenance and investment management fees, including the expense ratios of the underlying investments in the plans' investment portfolios.

It is important to look not just at the highest- and lowest-cost options, however, but their spread and their average. Just because a plan has one or two inexpensive options does not mean that every option has the same cost nor does it mean that the right investment for you would be the least expensive. Looking at the cost outliers and their means together gives a better picture of which plans are providing the greatest value to their participants.

Fees and expenses can have a significant impact on a college-savings fund. If the annual return of the underlying investments in Plan A is 7 percent, and the plan manager charges a fee of 20 basis points, or 0.2 percent, an investment of $5,000 today will grow to be worth $16,340 in 18 years. If Plan B uses the same underlying investments, but charges a management fee of 40 basis points, that same $5,000 investment will grow to $15,798, or $542 (3.4 percent) less than Plan A. The difference can be even larger if Plan A uses less-expensive underlying investments (e.g., index funds) than Plan B.

However, fees should not be the only factor in selecting a 529 plan. The more important figure is the NET performance of your 529 account after all costs. Plan and individual investment selection will have the greatest impact on 529 participant returns. State tax and other benefits are also important factors.

Lowest-cost 529 plans

Taking the average cost of the investments used in the fee study, Sasvingforcollege.com found that average costs declined over the past six months by 1.1%. However, there are significant disparities in the costs of the plans. For example, three states have zero-cost investment options (excluding bank and non-market listed securities), typically cash equivalent or principal-protected options, in Florida, Louisiana, and Utah. The lowest average cost on a theoretical $10,000 investment was in the Louisiana START Saving Program, at $152 on average. None of the five lowest-cost plans – again, on average – charge an annual account fee by default. However, three of those plans are available exclusively to in-state residents.

Least expensive 529 savings plansAnnual account feeMean Cost
LA - START Saving Program†$0$152
SC - Future Scholar 529 College Savings Plan (Direct-sold)†$0$166
NY - New York's 529 College Savings Program - Direct Plan$0$192
WV - SMART529 WV Direct College Savings Plan†$0$211
MI - Michigan Education Savings Program$0$221

† Available to in-state residents only


At the opposite end of the spectrum, the Achieve Montana plan had, on average, the highest average costs for its investment options with a cost of $1,244 on a theoretical $10,000 investment. The USAA plan, a costly plan according to our study, was also rated the 2nd best performing plan over a 10-year period. So it is important to consider cost vs. performance when evaluating plans. With this in mind, the following were the highest-cost plans according to their, 'Approximate cost of $10,000 investment' table, on average.

Most expensive 529 savings plansAnnual account fee §Mean Cost
MT - Achieve Montana$25$1,244
HI - Hawaii's College Savings Program$20/$10$1,123

WV - SMART529 Select

$25$1,070

NE - TD Ameritrade 529 College Savings Plan

$0$1,051

NV - USAA 529 College Savings Plan

$0$1,022

§ - Annual fee may be waived under certain conditions (e.g. state residency)

Mark Kantrowitz

Mark Kantrowitz

Publisher and VP of Research

Mark Kantrowitz is a nationally-recognized expert on student financial aid, scholarships and student loans. His mission is to deliver practical information, advice and tools to students and their families so they can make informed decisions about planning and paying for college.