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Lowest-cost 529 plan? Try Alaska Most expensive? Clearly Wyoming

What's the best 529 plan? It's a question that has plagued investors in these tax-free college savings/investment accounts for years. They are run by the individual states, typically via contracts with mutual fund operators and other money managers, and sorting out the best investment options, fees and other considerations hasn't been easy. In fact, it has allowed some states to offer embarrassingly bad programs.

Recently, the mutual fund- and stock-research firm Morningstar Inc. has been looking over the field and rating offerings state by state. "The good news," the firm said recently, "is that the (recent) rise in assets" in 529 plans "was accompanied by a decline in costs."

Also, it said, "many states took steps to upgrade and improve choices for investors" after congressional hearings in 2004 that focused on high costs and poor disclosure by many programs.

So who's the best? Morningstar split the top performers into two categories: those sold directly by the programs and those sold through brokers. The winners -- measured by cost, quality of investment options, flexibility and other features -- are the Alaska T. Rowe Price College Plan, offering funds from Maryland mutual fund operator T. Rowe Price; the Nebraska College Savings plan, with a variety of options and money managers; and the Utah Educational Savings Plan Trust, offering Vanguard funds. Utah is the low-cost champ, using low-fee Vanguard funds and administering the program itself. The others cost a bit more but offer more investment flexibility.

Among broker-sold plans, Morningstar liked the Colorado Scholars Choice, with funds from Smith Barney, and Virginia's CollegeAmerica, which features American Funds offerings and was the only plan in Maryland, Virginia and the District of Columbia to be rated at the top or bottom. Morningstar also liked South Dakota's CollegeAccess 529, though out-of-state investors pay a 0.35 percent management fee that is waived for state residents.

At the other end of the scale, "for the third year running, outrageously priced Wyoming College Achievement Plan heads up our worst list," Morningstar said. "This plan (is) a no-brainer to avoid." Fortunately, it added, Wyoming is in talks to close its plan and merge it into Colorado's.

Other poor choices are the Alabama Higher Education 529 Fund ("a repeat offender"); the Arizona Pacific Funds 529 and Family College Savings plans; Nebraska's AIM College Savings Plan; North Carolina's National College Savings Plan; and North Dakota's College SAVE, according to Morningstar.

Note that many states offer a number of options, and they can range widely -- so widely, in fact, that Nebraska offerings ended up on both the "best" and "worst" lists. Also, a number of states charge out-of-state investors more than in-staters.

Finally, note that many states offer state income-tax deductions and some offer matching grants to residents, so it's always a good idea to check out your home state's plan, at least as a point of reference.

For more information, you can go to and click on the personal finance tab. Also, the College Savings Plans Network site at, an organization set up by state treasurers, has some information and links to states' sites.

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