Best College Savings Plans

What is a 529 college savings plan? Can you afford it? Learn more.

Choosing the best college for you is one of the most important decisions to make in your life. Financial aid through various sources is available, but what if you are unable to qualify? College savings plans are available to help pay for the rising costs of a higher education in modern times. What is a college savings plan? Are there costs to open one?

Multiple top-tier college savings plans are available to help start your 529 plan today. Read ahead for an informative guide on the best college savings plans available for you in 2021.

College Savings Plans 101

A college savings plan is usually opened by the parents and/or grandparents of young children who are about to enter schooling years. These plans, also referred to as 529 plans, are tax-beneficial savings plans created to help pay for education-based expenses at all levels. While college savings plans were previously only allowed for higher education purposes beyond the secondary level, the programs were recently expanded to include K-12 education (2017) and qualified apprenticeships (2019) as well.

College savings plans are tax-beneficial because contributions made to them are tax-free both when making the contributions and also when withdrawing it. Certain conditions apply. For example, the money must be used for education-based purposes as required by U.S. Internal Revenue Service (IRS) tax laws to qualify for exemption. 

College savings plans are offered by U.S. states and private colleges even though the plans are subject to U.S. federal tax codes. Two types of 529/college savings plans exist. A 529 savings plan is available in all U.S. states and Washington D.C. alike. 519 prepaid tuition plans are only available in twelve U.S. states. These states, in alphabetical order are: Florida, Illinois, Maryland, Massachusetts, Michigan, Mississippi, Nevada, Pennsylvania, Tennessee, Texas, Virginia and Washington. 250+ private colleges also offer prepaid tuition plans. 519 prepaid tuition plans allow you to lock in tuition rates years before a beneficiary student begins college. States laws all vary regarding both types of 529 plans. For example, some states grant tax-deductible status to the person or persons funding the contributions, while others do not. 

College Savings Plans – Why They’re Important

College savings plans are important for a number of reasons. The cost of education in the U.S. is on the rise. Inflation is also both a constant and future concern pursuant to tuition rates and other education-based expenses. When using a 529 prepaid tuition plan you are able to pay in advance for college tuition without fear of rates and expenses going up.

The tax breaks on 529 savings plans are also significantly advantageous. These advantages grow the longer you hold your account provided investments made through the accounts do not depreciate instead of appreciate in value over time. If you are good with saving money and use a 529 plan to properly invest in your child or grandchild’s future education, it is possible to pay off all or most of the applicable expenses by the time he or she enrolls or earlier.

Costs for College Savings Plans

While 529 college savings and prepaid tuition plans have significant benefits, they also have certain costs. Plans sold through brokerage firms and direct through state/college programs all have proprietary fee structures. The type of plan and its underlying investment also each has associated fees. Consult the offering circular provided with your plan to get more details on all applicable fees to avoid unexpected charges later.

Prepaid tuition plans might charge perpetual administration fees and enrollment or application fees. Education savings plans might also charge enrollment or application fees, annual account maintenance fees and perpetual (albeit separate) program & asset management fees. Fee waivers are sometimes granted based on qualifying conditions, however, and lower fee prices might be avilable by choosing in or out-of state plans.

Comparing Plans & Fees

No limits are imposed on annual contribution amounts until or unless they reach the maximum deposit amount allowed for the account. Currently the maximum amount of contributions allowed for college savings plans is in excess of $500,000. Tax-free withdrawals are capped at $10,000 per year when used for K-12 tuition/education expenses.

It is not required to open a 529 plan in the state where you live. Depending on your state and situation it might benefit you to purchase in state, however, especially if it allows your contributions to be tax deductible. Conversely, it is possible a 529 plan in another state charges lower fees, allowing you to save more money in the end. Use this link to compare 529 plans and fees by state. 


Certain tips help you make the most out of your 529 savings or prepaid tuition plan. Start by researching your own state’s plan. Find out if your contributions are tax-deductible or not. Next, compare plan fees to find the best deal for your plan. Additional tips to help make the most out of your 529 savings or prepaid tuition plan include:

  • Choose your investments wisely.

  • Consider a target-date fund to put your investment on autopilot.

  • Start investing early & continue investing frequently to maximize your returns.

  • 529 plans are transferable to qualified relatives or other individuals provided the beneficiary remains the same.

Top 2021 College Savings Plans Providers

Finding the best 2021 college savings plans and providers is easy to do in 2021 using the tips & information provided above. It is also possible to discover additional information and resources from various college savings plans providers. The top 2021 college savings plans providers include: