Which 529 savings plans set the gold standard in 2025?

A new Morningstar assessment of 529 college savings plans has spotlighted five state-sponsored programs for their exceptional stewardship and investment quality, while industry assets continue to climb to record levels.

The results released this week draws from an analysis of 59 plans representing more than 90% of the 529 market. Among those, 31 made the grade for Morningstar’s Gold, Silver, or Bronze, reflecting a combination of strong investment processes, experienced management, and effective state oversight.

Five states earn gold

Five states – Alaska, Illinois, Massachusetts, Pennsylvania, and Utah – earned Gold Medalist Ratings for one of their 529 plans, maintaining their top-tier status from the previous year. According to Morningstar’s analysis, these plans “offer exceptional state stewardship of investor capital and well-constructed portfolios managed by competent investment teams.”

Alaska’s T. Rowe Price College Savings Plan was recognized for its robust, research-driven approach and the strength of the multi-asset investment team it tapped from the retirement plan giant, which entered into a strategic partnership with Goldman Sachs announced in September. Illinois’ Bright Start Direct-Sold College Savings Plan, managed by TIAA-CREF, stood out for its cost-effective and compelling investment options.

Massachusetts’ U.Fund College Investing Plan, run by a team from Fidelity, was noted for its thoughtful portfolio construction and strong state engagement. Pennsylvania’s 529 Investment Plan benefited from what Morningstar called “topnotch state oversight,” and Utah’s my529 plan was praised for its customizable, low-cost portfolios featuring Vanguard and Dimensional Fund Advisor funds, along with strong investor safeguards and “behavioral nudges to steer investors away from overly expensive or niche portfolios.”

Industry assets and trends

The 529 industry has seen significant growth in recent years. According to the Investment Company Institute, total assets in 529 plans reached $525.1 billion at the end of December 2024, up 11.45% from the previous year. Of that total, $500.6 billion was held in savings plans, while prepaid plans accounted for $24.5 billion. The number of Section 529 plan accounts also rose to 17 million, a 3.24% increase over the prior year.

Of course, that’s just a fraction of a fraction of the retirement plan market, which the ICI says has ballooned to $45.8 trillion at the end of June. At least part of that may be due to lack of education, with one Edward Jones survey revealing more than half of American adults aren’t familiar with 529 plans.

Morningstar’s most recent 529 savings landscape report also found that direct-sold plans remain the preferred choice for most 529 plan investors, accounting for 64% of assets at the end of 2024 – substantially up from 43% a decade earlier. These plans, which are available to do-it-yourself investors and those without access to a financial advisor, tend to be more affordable than advisor-sold options.

“Direct-sold plans are available to do-it-yourself investors and those who do not have access to a financial advisor,” Morningstar said. “They also tend to be cheaper than advisor-sold plans, effectively increasing the chance of meeting one’s savings targets.”

Advisor-sold plans, while less popular, still play a significant role in the market. Virginia’s CollegeAmerica, managed by Capital Group, remains the largest 529 plan in the country, with assets exceeding $95 billion – more than double its nearest competitor. Morningstar attributes this to Capital Group’s “high-quality funds, strong reputation, and distribution capabilities.”

Advisor-sold plans getting cheaper, but still losing on fees

Fees for age-based and target-enrollment 529 portfolios have remained steady, with average costs at 0.46% in 2024. Advisor-sold plans continued their multiyear cost decline, reaching a record low of 0.80%, while direct-sold plans held at 0.31%.

The broad 529 plan industry remains concentrated, according to Morningstar’s landscape report, with the 10 largest plans accounting for 58% of total assets. The imbalance is more pronounced for advisor-sold plans, where the top 10 represent roughly 88% of assets.

The medalist assessment this week also highlighted ongoing improvements in the 529 space, including more sophisticated investment approaches, increased state oversight, and lower fees since the ratings debuted in 2012. While state tax benefits remain a key consideration for many investors, it emphasizes that a growing number of plans now combine attractive features such as robust asset allocation, experienced teams, and low fees.

“Asset managers no longer consider education savings plans as an afterthought to their existing multi-asset offerings; instead, we see an increasing dedication of research and resources to specifically help education savers,” the report stated.