Top 529 Education Savings Plans of the Year 2025

Michigan offers the Michigan Education Savings Program (MET), a contract-based plan with a strong state guarantee, as one option for saving for college expenses. Another popular choice is a 529 prepaid tuition plan, which allows savers to prepay tuition at today's rates for eligible public and private colleges or universities.

529 plans are tax-advantaged tools designed to help families save for future education costs. These plans come in two varieties: direct-sold and advisor-sold. Direct-sold plans are issued directly from a state financial institution and tend to be cheaper than advisor-sold plans, which are available through an investment firm and typically charge a higher fee.

Direct-sold 529 plans have gained recognition for their performance. According to Saving for College, the top 10 highest-ranked direct-sold plans include the T. Rowe Price College Savings Plan (Alaska), Bright Start Direct-Sold College Savings Program (Illinois), and U.Fund College Investing Plan (Massachusetts), among others.

Prepaid tuition plans, on the other hand, are designed to cover only tuition expenses, unlike 529 plans, which can be used for other qualified expenses such as room and board, books, and supplies. Some states offer prepaid plans, such as Texas' Texas Tuition Promise Fund, Ohio's College Advantage Prepaid, and Florida's Florida Prepaid College Plan.

Investing in a 529 plan can provide numerous benefits. By helping college students graduate with lower or no student debt, you'll give your kids a leg up when it comes to starting their careers. Additionally, investing in a 529 plan is a great way for parents or grandparents to pass down wealth to the next generation.

Some savers prefer advisor-sold 529 plans due to the access to professional investment advice, actively managed investments, and flexible portfolios they offer, despite the higher fees. However, it's important to note that these plans must be used within 10 years, or the interest on initial contributions could be lost.

With the SECURE 2.0 Act, signed into law in December 2022, savers now have the opportunity to roll over tax-free and penalty-free up to a lifetime limit of $35,000 in a 529 to a Roth IRA opened by the 529 beneficiary for more than 15 years, provided certain conditions are met. This provision will take effect from January 1, 2024.

Most states guarantee that the funds you put into a prepaid plan will keep pace with tuition. However, some prepaid plans, such as Maryland's Maryland Prepaid College Trust and South Carolina's Future Scholar Prepaid, have been closed or are no longer accepting new enrollees.

In conclusion, 529 college savings plans and prepaid tuition plans offer families a way to save for future education costs while enjoying tax advantages. Whether you prefer direct-sold or advisor-sold plans, or prepaid tuition plans, there are options available to suit your needs. It's essential to research and understand the features and benefits of each plan before making a decision.