The Best 529 Plans in 2021

Saving for future college expenses gets a little easier thanks to the tax and financial benefits of state-sponsored 529 plans. 529 plans are individual to each state, but you can take advantage of plans across state lines if you’re more interested in what another option has to offer.


529 plans come in two main types — prepaid tuition plans and college savings plans. Prepaid tuition plans allow parents, guardians or relatives to prepay for all or part of in-state tuition costs. These plans can be more restrictive as the plans allow for funds to be used for room and board. Additionally, the plans have limitations on which colleges you can use them.

The second type of 529 plan is a college savings plans. These accounts hold funds typically invested in mutual funds that can grow with the market. Contrary to prepaid tuition, college savings plans can be utilized by the student for a wide array of educational expenses. Both plans offer advantages and disadvantages interested college-savers need to know.

Read more: 529 vs Roth IRAs. Which is right for you?

In this article

    Best 529 Plans

    Your first stop in shopping for a 529 plan is to look at what your state has to offer. Many states offer tax benefits to residents who invest in local plans. If your state does not offer tax breaks or you’re interested in better options, you can start looking at some of the best 529 plans elsewhere in the country.

    The best 529 college savings plans all have some of the same characteristics. The plans have thoroughly researched and well-allocated assets, low fees, adequate oversight and management of the plan and options to meet the needs of different investors.

    California’s ScholarShare College Savings Plan

    The 529 college savings plan offered in California is one of the top-performing options in the country. The plan comes with no application fees, no cancellation fees and no change in beneficiary fees. You just pay the standard program management and mutual fund fees. According to Morningstar, the plan’s board voted to shift from age-based portfolios to progressive glide path in February 2020 — an industry best practice for an upgrade to the plan’s rating.

    Illinois’ BrightStart Direct-Sold College Savings program

    This 529 college savings plan from the state of Illinois has earned Morningstar’s Elite Gold rating three years in a row. Illinois residents who invest in this plan can deduct up to $10,000 per Illinois taxpayer and double for married taxpayers filing jointly. The account has adequate oversight through regular audits by third-party accountants, the Treasurer and State.

    Utah’s my529 plan

    The my529 plan from Utah offers several investment portfolio options for investors to choose from. Current 10-year average annualized returns on investment options available through this plan span from the low 1%s up to the mid 12%s. The plan was created in 1996 and is the state’s only 529 college savings plan option. Utah taxpayers and corporations that invest in 529 plans may take an income tax credit up to the current allowable threshold.

    Michigan Education Savings Program (MESP)

    Investment options through Michigan’s Education Savings Program include age-based investments, guaranteed investments, multi-fund investments and single-fund investment options. Distributions from the MESP plan used by residents to pay for qualified higher education expenses are free from federal and Michigan state income taxes.

    529 plans with tax benefits

    The aforementioned 529 plans are not the only options that offer tax benefits to investors. 30+ different state plans allow for tax benefits to residents and, in some cases, investors from out of state.

    StateTax deduction
    Tax benefits for
    out-of-state plans?
    Alabamaup to $5,000/$10,000No
    Arizonaup to $2,000/$4,000Yes
    Arkansasup to $5,000/$10,000No
    Coloradofull contribution amountNo
    Connecticutup to $5,000/$10,000No
    Georgiaup to $2,000/$4,000No
    Idahoup to $6,000/$12,000No
    Illinoisup to $10,000/$20,000No
    Iowaup to $3,098/$6,196No
    Kansasup to $3,000/$6,000Yes
    Louisianaup to $2,400/$4,800No
    Marylandup to $2,500/$2,500No
    Massachusettsup to $1,000/$2,000No
    Marylandup to $2,500/$5,000No
    Michiganup to $5,000/$10,000No
    Minnesotaup to $1,500/$3,000Yes
    Mississippiup to $10,000/$20,000No
    Missouriup to $8,000/$16,000Yes
    Montanaup to $3,000/$6,000Yes
    Nebraskaup to $10,000/$10,000No
    New Mexicofull contribution amountNo
    New Yorkup to $5,000/$10,000No
    North Dakotaup to $5,000/$10,000No
    Ohioup to $4,000/$4,000No
    Oklahomaup to $10,000/$20,000No
    Oregonup to $2,375/$4,750No
    Pennsylvaniaup to $15,000/$30,000Yes
    Rhode Islandup to $500/$1,000No
    South Carolinafull contribution amountNo
    Utahup to $2,000/$4,000No
    Vermontup to $2,500/$5,000No
    Virginiaup to $4,000/$4,000No
    Washington, D.C.up to $4,000/$8,000No
    West Virginiafull contribution amountNo
    Wisconsinup to $3,050/$6,100No

    529 Plan Pros

    • Most 529 plans are flexible. There are few limitations to who can invest in a 529 plan for future higher education expenses. It’s not required that the investor be a parent or legal guardian opening the door for other family members to make tax-advantaged contributions. Additionally, plan beneficiaries can be changed at any time if the need arises. Many plans, like the California ScholarShare plan, don’t even charge a fee for beneficiary changes.
    • These investment savings plans have a minimal impact on financial aid. While the beneficiary of a 529 plan is the child, the asset is classified as a parental asset for financial aid purposes. This may seem like a small detail, but it can play a role in acceptance for financial aid. 529 plans are not included in the Free Application for Federal Student Aid (FAFSA) forms.
    • Many states offer tax benefits to 529 plan investors. The tax benefits of 529 college savings plans are deferred like a Roth IRA plan. Funding of the account is done through after-tax dollars but can be withdrawn tax-free when it’s used to pay for higher education expenses.

    Cons of 529 Plans

    • There are some limitations on what you can invest in. When you invest in a 529 plan to save for college, there are limited investment choices. Typically, your options are limited to mutual funds that meet a certain risk threshold. While this might not be ideal for more aggressive investors, it can offer an added layer of oversight for funds that you will need to be there down the road.
    • 529 plans don’t guarantee returns. College savings plans are invested in the market, just like any other investment account you might have. Because of this, the accounts are subject to the ebb and flow of the market. With some 529 plans, you can invest in guaranteed investments (like the Michigan Education Savings Program), but you may not see as high of returns as you’d like.
    • You may be limited in how you can spend the money. Prepaid tuition 529 plans do give you the ability to lock in your state tuition rate as of today. However, these plans don’t allow you to save for other expenses like room and board, supplies, computers, etc., that may be very costly. The good news, though, is the other variant of 529 plans, the college savings plan, does allow you to save for expenses outside of just tuition.

    We welcome your feedback on this article and would love to hear about your experience with the 529 plans we recommend. Contact us at with comments or questions.

    Jason Lee

    Contributing Writer

    Jason Lee is a U.S.-based freelance writer with a passion for writing about dating, banking, tech, personal growth, food and personal finance. As a business owner, relationship strategist, and officer in the U.S. military, Jason enjoys sharing his unique knowledge base and skill sets with the rest of the world. Follow Jason on Facebook here

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    • Brittney Lundager
      Brittney Lundager
      Loans Editor

      Brittney Lundager is an editor at Info Readers USA who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to,, and elsewhere.