Morningstar 529 Ratings: The Best Plans of 2023

Morningstar’s manager research analysts annually assign forward-looking, qualitative ratings to a majority of the 529 education savings plan universe based on our assessment of each plan’s investment merits relative to its peers.

This year, our analysts reviewed 54 plans, representing more than 90% of the industry’s approximately $415 billion in assets as of August 2023. Of this subset, 34 plans earned Morningstar Medalist Ratings of Gold, Silver, or Bronze, and 17 plans received either a ratings upgrade or downgrade.

Using a 529 college savings plan when saving for future education expenses can be an attractive option, as investments in the plan grow tax-free. You can learn more about 529 college savings plans and how to start saving in our 529 guide.

Morningstar’s 2023 529 Ratings: Key Takeaways

• 10 plans were upgraded and seven were downgraded.
• Utah’s my529 plan continues to earn a Gold Medalist Rating, a designation it has held since we debuted our ratings in 2012.
• Increased confidence in the investment teams overseeing Pennsylvania’s 529 Investment Plan drove an upgrade of the plan to Gold from Silver.
• Michigan’s Education Savings Program was downgraded to Silver from Gold because its Process lost some of its edge as peers have closed the gap.
• Fidelity-managed plans offered by Arizona, Delaware, and Massachusetts were upgraded to Silver from Bronze because of a combination of increased confidence in Fidelity’s team and state oversight that exceeds industry standards.
• Although plans continue their efforts to lower fees, Price ratings have remained mostly stable and did not drive any rating changes this year.

The Best 529 Plans

The 529 industry has made commendable improvements on all fronts, including more sophisticated investment approaches, increased state oversight, and lower fees since we debuted our ratings in 2012.

But there are still some plans that stand out above the rest, and we are committed to steering educational savers to the best 529 plan options available. The 34 plans earning Gold, Silver, or Bronze Medalist Ratings exhibit some combination of the following attractive features:

• A well-researched asset-allocation approach
• A robust process for selecting and monitoring underlying investments
• A well-resourced and experienced investment team
• Stable and engaged oversight from the state
• Low fees

Investors in what Morningstar analysts consider the best 529 plans should be well-positioned for the future.

It’s important to note that many states provide income tax benefits to education savers. And depending on a saver’s place of residency and unique tax profile (which we do not factor into our ratings), those benefits might be generous enough to make investing in their home state’s plan a worthy choice even if it’s not one we recommend.

Gold 529 Ratings: The Valedictorians

Two plans earn Medalist Ratings of Gold and stand out as the best 529 plans among those Morningstar covers. The excellent stewardship of state sponsors in Pennsylvania and Utah drive material improvements to their plans, resulting in well-designed, low-cost offerings.

Gold-Rated 529 Plans

Utah’s my529 plan has received a Gold medal every year since we debuted our ratings, but it does not rest on its laurels. Its target enrollment portfolios reflect insights from participant data and asset-allocation research, and its investment menu strikes a balance between convenience and optionality. The plan also continues to offer its unique, custom age-based portfolios that allow investors to build their own glide paths using Vanguard and DFA funds. State oversight continues to be topnotch. Instead of hiring an investment manager for the plan, the state employs its own well-resourced and experienced investment team and draws upon a network of experts, including its board, an investment advisory committee comprising institutional investors and advisors, and external consultants.

The Pennsylvania Treasury team boasts experienced and knowledgeable investment personnel and a track record of proactive and effective oversight. Its well-defined plans for career development and succession planning help future-proof the oversight process and ensure continuity. Examples of effective oversight abound in Pennsylvania. Recently, the team concluded a successful negotiation with its investment manager and program manager that will lead to accelerated fee reductions as the plan’s assets grow. Additional investment expertise from Pennsylvania’s Treasury Department and its consultant Marquette positively influences the 529 plan, driving a People Pillar upgrade to High as well.

Silver 529 Ratings: The Dean’s List

Almost all Silver-rated plans have an Above Average or High rating for both People and Process, reflecting a superior investment team and/or investment process that should benefit the participants.

Six plans received an upgrade to Silver this year.

Silver-Rated 529 Plans

Three Fidelity-managed plans (Massachusetts U.Fund, Arizona’s Education Savings Plan, and Delaware’s Education Savings Plan) received an upgrade to a High People Pillar, driven by the firm’s experienced management team, robust asset-allocation resources, and stable of well-regarded underlying funds.

Virginia’s Invest529 and CollegeAmerica plans received People and Process upgrades, respectively. Virginia’s in-house team manages the Invest529 plan, and its upgrade to Above Average acknowledges the growth and stability of the team under its new investment director, as well as its investment expertise and collaborative decision-making process. The CollegeAmerica plan’s thoughtful incorporation of participant research and improved asset-allocation capabilities were some of the positive attributes that resulted in a Process Pillar upgrade to High.

The upgrade to New York’s direct-sold 529 Program reflects improvements to the plan’s process, including a switch to a smoother glide path supported by its investment manager’s latest research.

On the other hand, the Michigan Education Savings Program’s Silver rating is a notch below last year’s Gold, driven by a Process Pillar downgrade. The downgrade reflects other peers catching up to the plan’s straightforward and low-cost approach that made it a top pick in previous years.

Bronze 529 Ratings: High Honors

Bronze-rated plans tend to carry a mix of Average and Above Average ratings across the People, Process, Parent, and Price Pillars. They can still help investors meet their goals, but they may not quite match higher-rated peers when it comes to investment options or have as competitive fees.

Bronze-Rated 529 Plans

529 Plans Continue to Raise the Bar

The 2023 ratings revealed the continually rising standards across the industry. Since Morningstar began rating 529 education savings plans in 2012, an increasing number of plans have adopted some or more of the positive attributes described in our rating methodology. Asset managers no longer consider education savings plans as an afterthought to their existing multi-asset offerings; instead, we see increasing dedication of research and resources to specifically helping education savers. Stewardship standards continue to rise as well. Robust interaction between the state and its investment entity forms a baseline now, with more engaged state entities aggressively negotiating with external managers and advocating for its accountholders.

Our analysts remain focused on guiding investors to the best options available. As education costs continue to rise, it behooves investors to hold 529 plans to high standards. With the right 529 plan, a family can effectively save for the future so that money is less of an obstacle in the beneficiary’s education journey. Moreover, with the ability to convert long-term 529 balances to Roth IRAs starting in 2024, education savings plans have become an even more powerful tool to not only fund beneficiaries’ education but also to potentially kick-start their retirement plans.