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529 plans

According to Bureau of Labor Statistics data, the price of college tuition increased by 63% from 2006 to 2016. Over that same time period, the median household income in the United States increased by only 19%. This makes college more expensive than ever for the average family. However, there are efficient ways that you can save for your children’s education. One example is through 529 plans. These are tax-advantaged savings plans designed to help people save money for schooling. Every state has its own plan or set of plans, but they are all a little different and vary in popularity. For example, some are actively managed, utilizing a financial advisor’s technical skills, while others have lower fees and are passively managed.
Below we look at data on state 529 plans to find which states utilize their 529 plans the most. To do this, we compare the number of 529 plans to the local population and the average account value to the average household income. Check out our data and methodology section below to see where we got our data and how we put it together to create the final rankings.

Key Findings

  • Wide range in 529 plan utilization – Some states have very popular 529 plans. Others do not. For example, New Hampshire has 2.2 open accounts for every resident under the age of 20. Illinois 529 plans are used with less frequency. There are only 0.12 accounts for every resident under the age of 20 in Illinois.
  • Investment levels are similar – While the number of accounts differs widely by state, the level of investment is fairly consistent. Across all 50 states and D.C., the average 529 account balance is worth nearly 37% of the local household income.

529 plans

1. Maine

Maine takes the top spot as the state making the most out of their 529 plans. The 529 plans in Maine are called the NextGen College Investing Plans. The NextGen College Investing Plan – Select is more popular than the NextGen College Investing Plan – Direct, with 252,929 open accounts for the Select plan compared to 101,880 open accounts for the Direct plan. Across the two plans, the average account has a value of less than $28,000. That is nearly half of the annual income for the average Maine household. In total, Maine ranks in the top five for both of our metrics.

2. Nevada

Nevada also ranks in the top five for both of our metrics but falls just short of the top spot. There are more open 529 accounts in Nevada than there are residents under age 20 . Only four other states can make that claim. Nevada 529 plans also stand out for their variety. There are five different 529 college savings plans available. Most states have two. The value of the average 529 account in Nevada is equal to more than six months’ worth of income for the average Nevada household. That’s the fourth-highest value in our study.

3. Utah

When we control for household income, Utah ranks second for average 529 account value. Only South Dakota invests as much as Utah residents. The average 529 account in Utah has $34,700 under management. However, given that Utah also has a pretty high median household income, it’s not surprising that residents can invest in their 529 plans.

4. West Virginia

West Virginia takes fourth. This state has one 529 account for every 3.5 students, the ninth-highest rate in our study. In terms of value, the average 529 account balance in West Virginia equals just under six months’ worth of income for the average West Virginia household. That is the sixth most in our study.

5. Rhode Island

Coming in fifth is Rhode Island. The Ocean State offers two Rhode Island College Bound plans. Across the two options, there are around 338,000 open accounts, with a combined $7.9 billion in assets. Comparing those two figures to local data, we see that there is about one open 529 account per resident under age 20. The average account has a value equal to 42% of the median Rhode Island household income.

6. (tie) New Hampshire

New Hampshire comes in tied with three other states for sixth in our ranking. The Granite State is one of the most popular states in which to open a 529 account. According to our research, there are more than 2.2 accounts per resident under 20 years old. New Hampshire ranks first in our study for that metric. However, the state falls a bit short on our other metric. The average 529 account has a value equal to just 36% of the median household income in New Hampshire.

6. (tie) New York

New York offers two different 529 plans: a direct plan and an advisor plan. There are about one million New York 529 plan accounts in total. Those accounts have a total value estimated at $28.2 billion. Dividing account value by the number of accounts, we see that the average 529 account has an estimated value of $28,180. That is roughly 44% of the New York median household income.

6. (tie) Virginia

Virginia is the third of the three states tied for sixth. Our data suggests that most parents invest with Virginia’s 529 college savings plans. The state has 1.24 accounts open per resident under age 20. That’s a top-three rate. However, judging by household income data, Virginia parents still don’t save as much as parents in other states. Virginia ranks 19th in the average value of 529 accounts.

9. South Dakota

The Mount Rushmore State takes ninth. The 529 plans in South Dakota are simply not as popular as in other states. Our data shows that there are 29,337 accounts in the South Dakota College Access 529 Plan. Those accounts are worth a combined $1.1 billion. That means the average 529 plan has a value of $37,500, one of the highest values in our study. In fact, when you control for household income, South Dakota ranks first in average value of 529 accounts.

10. (tie) Alaska

Alaska comes in tied for 10th with New Mexico. The state has three different 529 plan types with the John Hancock Freedom 529 plan being the most popular. Between the three plans, Alaska has about 306,700 accounts with combined assets of $8.3 billion. Overall, Alaska ranks second in the number of accounts per resident under the age of 20. The state ranks 23rd for average 529 account value as a percent of household income.

10. (tie) New Mexico

Rounding out our list is New Mexico. New Mexico has two 529 plans: the Scholar’s Edge and The Education Plan. Between the two plans, Scholar’s Edge is more popular with around four times as many accounts and total assets. Overall, New Mexico ranks in the top 15 in both of our metrics. The state has one 529 account open for every four residents under age 20. The average account value is 41% of the state’s median household income.

529 plans

Data and Methodology

In order to find the states which use their 529 plans the most, we looked at data for 49 states and Washington D.C. (Wyoming doesn’t sponsor any 529 plans.) Specifically, we ranked them across the following two metrics:

  • 529 Accounts per Resident Under Age 20. This is the number of open 529 accounts in each state divided by the number of residents under the age of 20. Data on 529 plans comes from the College Savings Plan Network and is for 2017. The number of under-20 residents comes from the Census Bureau 2016 1-year American Community Survey.
  • Average 529 Account Value Relative to Income. This is the average value of 529 plans divided by the median household income in each state. Data on the average value of 529 plans comes from the College Savings Plan Network and is for 2017. Median household income comes from the Census Bureau 2016 1-year American Community Survey.

To create our final rankings, we first ranked each state in each metric. We then averaged the two rankings for each state, giving equal weight to each metric. Using that average ranking, we created our final score. The state with the best average ranking received a score of 100. The state with the worst average ranking received a score of 0.

Tips for Saving for College

  • Check out your states 529 plan – Like saving for retirement, there are tax-advantaged mechanisms for saving for education. For example, many states allow you to deduct contributions to a 529 plan from your state income taxes. Contribution limits vary by state so make sure to check the 529 contribution limits for your state. Limits generally range from $235,000 up to $500,000.
  • Get an expert’s opinion – When you make a big life decision like buying a home or saving money for your kid’s college, make sure you have the best information and advice at your disposal. A financial advisor can help you navigate life’s big decisions and balance college, home ownership and retirement. If you are not sure how to find an advisor, check out SmartAsset’s financial advisor matching tool. It will match you with up to three local financial advisors who fit your specific requirements.

Questions about our study? Contact us at press@smartasset.com.

Photo credit: ©iStock.com/Tashi-Delek

Derek Miller, CEPF® Derek Miller is a graduate of the University of Edinburgh where he studied economics. He is passionate about using data to help people make better financial decisions. Derek is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society for Advancing Business Editing and Writing. He is a data journalist whose expertise is in finding the stories within the numbers. Derek's writing has been featured on Yahoo, AOL, and Huffington Post. He believes the biggest financial mistake people make is waiting too late to save for retirement and missing out on the wonders of compounding interest. Derek lives in Brooklyn.
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