Morningstar Inc. recently released its 2016 ratings of the country’s 529 college savings education plans. It upgraded six plans, downgraded another six, began covering two new plans and dropped two others. It rated 63 plans overall, which hold a combined 97% of all 529 plan assets in the country. 529 plans now hold more than $240 billion in assets as of the end of the third quarter of 2016.

College savers can find the best plans to use by reviewing this report, and get the most bang for the buck with the dollars that they sock away in them. (For more, see: 5 Secrets You Didn't Know About a 529 Plan.)

Ratings Criteria

Morningstar rates 529 plans based on the following five characteristics:

  1. How the investment choices are designed, as well as the glide path of portfolios that are based on the student’s age
  2. The value of each of the investment options compared with other similar funds
  3. An evaluation of each of the money managers that guide the funds
  4. How well the plan administrators and custodial firms act as stewards for the plans
  5. The risk-adjusted performance of the investment options and overall plan

Morningstar has five rating categories into which it classifies the plans: gold, silver, bronze, neutral and negative. Only three plans made the gold category in 2016, down from four in 2015, while 10 plans are rated silver, 20 plans are bronze, 27 are neutral and three landed in the basement with a negative rating. All three of these plans are only sold by advisors. (For more, see: 529 Risks to Take (or Not).)

“The 529 industry as a whole continues to improve as individual plans hone their strategies and reduce the fees levied on plan participants. We’ve upgraded a number of plans that have moved toward best practices and downgraded those that haven’t kept pace. The industry continues to take steps in the right direction, with a number of plans cutting fees, beefing up their asset-allocation resources and processes or improving the quality of their investment lineups,” Leo Acheson, Morningstar’s lead research analyst for 529 plans said in a statement."

The Best and Worst

A list of the best and worst 529 in America for 2016 includes:

Best (Gold)

  1. Vanguard 529 College Savings Plan – Issued in Nevada, managed by Ascensus, direct distribution, $13.36 billion in assets under management (AUM)
  2. Utah Education Savings Plan – Direct distribution, $9.35 billion in AUM
  3. Virginia529 inVEST – Direct distribution, $3.44 billion in AUM

Best (Silver)

  1. Maryland College Investment Plan – Downgraded from gold, managed by T. Rowe Price, direct distribution, $4.5 billion in AUM
  2. T. Rowe Price College Savings Plan – Downgraded from gold, issued in Arkansas, direct distribution, $2.2 billion in AUM
  3. MOST Missouri's 529 Plan – Upgraded from neutral, managed by Ascensus, direct distribution, $2.58 billion in AUM

Worst (Negative)

  1. College Access 529 – Issued in South Dakota, managed by Allianz Global, distributed by advisors, $1.04 billion in AUM
  2. Ivy Funds InvestEd 529 Plan – Issued in Arizona, managed by Waddell & Reed, distributed by advisors, $449.52 million in AUM
  3. The Hartford SMART 529 – Issued in West Virginia, managed by Hartford Life, distributed through advisors, $1.58 billion in AUM

The Bottom Line

529 plans have grown to become one of the most popular forms of college savings accounts because the money that grows in them can be withdrawn tax free as long as it is used to pay for qualified higher education expenses such as tuition, fees, books and room and board. Many financial planners recommend these accounts for parents and grandparents who wish to begin saving for their budding students. (For more, see: Top Companies That Manage 529 Plans.)

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.