New Study Identifies Lowest-Cost 529 Plans

The least-expensive 529 plans available nationwide are offered by Ohio, Illinois, and North Carolina, according to’s 529 Fee Comparison Study.

The study, recently updated for 2008, examined direct-sold 529 college-savings plans from 49 states and the District of Columbia. The comparisons are based on the 10-year projected costs of a $10,000 investment, as reported by each 529 plan in its official program offering materials. The report also identifies those states where residents have even lower costs in the home-state 529 plan due to the waiver of annual account fees for state residents.

Due to their more complicated fee structures, the company explained, plans sold through financial advisers were not included in the study.

Examination of Fees

“There’s been a huge effort on the part of the states and their outside vendors to bring down investor costs in 529 plans,’ remarked 529 “guru’ Joseph Hurley, founder of, in a company release. showed the effect fees and expenses can have on a college-savings fund:

  • Plan A has underlying investments with an annual return of 7% and the plan manager charges a fee of 20 basis points. Therefore, an investment of $5,000 today will grow to be worth $16,340 in 18 years.
  • Plan B uses the same underlying investments, but charges a management fee of 40 basis points. In Plan B, that same $5,000 investment will grow to $15,798, or $542 (3.4%) less than Plan A.

However, despite the research about fees, they should not be the only consideration in selecting a particular 529 plan, the company said. “The more important figure is the net performance of your 529 account after all costs. I might pay more if I felt I could get better net returns without taking on more investment risk,’ stated Hurley. State tax and other benefits are also important factors.

The report can be accessed at is an independent research, consulting, and publishing company providing financial professionals and consumers with comprehensive and objective information about Section 529 plans, Coverdell education savings plans, and other college investing strategies. In December 2007, was acquired by Bankrate, Inc., a personal finance Web site.