Ohio’s 529 Plan Recognized Among Nation’s Best College Savings Programs by Morningstar
Every year, trusted financial industry investment research and management company, Morningstar, reviews the nation’s 529 college savings programs. Once its analysis is complete, Morningstar ranks the 529 plans in a report released at the end of each October.
Ohio’s 529 Plan is pleased to announce that the CollegeAdvantage Direct 529 Plan maintained its silver rating for the ninth year in a row. In addition, BlackRock CollegeAdvantage, Ohio’s Advisor 529 Plan retained its bronze ranking. This makes Ohio one of only two state programs that have both their Direct and Advisor 529 Plans ranked as medal-class college savings programs by Morningstar. The high ranking for both CollegeAdvantage 529 Plans highlights the strength of these two college savings plans as well as the industry’s regard for Ohio’s 529 Plan as one of the best in the nation.
According to the 2021 Morningstar report by Adam Millson and Hyunmin Kim, “Morningstar Medalist plans offer investment options that we expect will collectively outperform and exhibit some combination of the following attractive features: A well-researched asset-allocation approach; a robust process for selecting underlying investments; an appropriate menu of options to meet investor needs; strong oversight from the state and investment manager; and minimal fees. Families invested in these 529 plans should be well-positioned for the future.”
According to Bobby Blue, an analysist for Morningstar who reviewed Ohio’s Direct 529 Plan, “The Ohio CollegeAdvantage 529 Savings Plan benefits from a strong investment team, low fees, and a state partner willing to go to bat for participants. It retains its Morningstar Analyst Rating of Silver, making it an excellent choice for Buckeyes and out-of-staters alike.”
Blue continues, “The Ohio Tuition Trust Authority (the state agency that administers Ohio’s 529 program) provides commendable oversight and earns an Above Average Parent rating. Longtime CIO Trisha Good (1996) and CEO Tim Gorrell (2015) are stabilizing leaders on the team and have pushed Wilshire to include lower-fee products in the age-based portfolios in order to pass savings on to investors. The team maintains frequent communication with investors, including around its upcoming transition to Vanguard's progressive glide path.”
For the BlackRock CollegeAdvantage 529 Plan, Blue says that Ohio BlackRock CollegeAdvantage 529 Plan’s “benefits from a seasoned asset-allocation team that plies a proven approach to tactical allocation. It earns a Morningstar Analyst Rating of Bronze, solidifying it as a solid choice for college savers.”
Morningstar research process to determine the ranking of a 529 plan, is based in four pillars. Ohio’s Direct 529 Plan ranked positive in all four pillars, making it one of only eight plans nationwide to do so. The pillars are:
- Process — Did the plan hire an experienced asset allocator to design a thoughtful, well-diversified glide path for age-based portfolios? What suite of investment options are offered?
- People — What is Morningstar’s assessment of the underlying money managers’ talent, tenure, and resources?
- Parent — Are the program manager and investment manager good caretakers of college savings capital? Is the state managing the plan professionally?
- Price — Are the investment options a good value?
Other honors for Ohio’s Direct 529 Plan
Savingforcollege.com is a trusted and independent college-savings industry resource. In its most recent quarterly analysis of 529 plan investment performances, Ohio’s 529 Plan has topped three out of four of the long-term performance charts.
Nationwide, 49 states and the District of Columbia offer 529 plans. As of Aug. 29, 2021, CollegeAdvantage Direct 529 Plan ranks first in the nation for the best investment performance in two different categories: three year and ten year. Ohio’s Direct 529 also ranked sixth in the nation for five-year investment performance.
Savingforcollege.com determines a 529 plan’s performance score by comparing seven similar asset-allocation categories between all the nation’s 529 plans, the historical performance of each selected portfolio category, and then averaging the score of all the groupings.
Savingforcollege.com consistently recognizes Ohio’s Direct 529 Plan as one of the best plans in the nation for both Ohio residents and non-Ohio residents.
Ohio’s Direct 529 Plan is the only plan in the nation to receive positive ratings from Morningstar in all four ranking pillars as well as earn the five-cap rating from SavingforCollege.com for residents and non-residents.
In addition to performance rankings, Savingforcollege.com also uses a 5-Cap Ranking for the nation’s college savings programs. A 5-Cap designation is dependent on criteria that shows the college savings plan “offers outstanding flexibility, attractive investment, and additional economic benefits (such as generous state tax incentives) that for some people, at least, will provide a substantial boost to their savings. There are few, if any, weaknesses noted in the program.”
Ohio’s Direct 529 Plan is one of only two 529 college savings plans nationwide to earn a 5-Cap rating for both residents and non-residents, as of June 30, 2021. Ohio’s Direct 529 Saving Plan has received this recognition multiple times for the plan’s attractiveness for Ohioans and across the nation.
Ohio’s 529 Plan tax advantages
Why save in Ohio’s 529 Plan? CollegeAdvantage helps families across the nation save money for their children’s future costs associated with college, vocational, trade, or technical school, as well as apprenticeships, while offering tax-advantaged benefits.
First, contributions and earnings grow tax free in a 529 plan, so all investment growth is yours to use to cover college costs. Second, a 529 withdrawal is tax free when used to pay qualified higher education expenses — those costs that are mandatory to attend the federally accredited school or program. Third, an Ohio resident who contributes to a CollegeAdvantage 529 account – whether as the account owner or making a monetary gift – can deduct their 529 contributions from their Ohio taxable income. The deduction is now $4,000 per year, per beneficiary, with unlimited carry forward. This means that $4,000 per year is not a contribution cap. If an Ohio taxpayer contributes $12,000 in one tax year, they will continue to subtract $4,000 per year, per beneficiary, from their State of Ohio taxable income until all the 529 contributions have been deducted.
Not Just For Four-Year Programs
529 plans can be used for whatever comes after high school, as higher education takes many forms. This list includes not just four-year universities and colleges, but also community colleges, trade and specialty schools, certificate programs, graduate school, law school, medical school and apprenticeships.
Simply put, you can use the funds in your Ohio 529 Plan almost anywhere you are comfortable sending your child and your money. 529 plans can be used at any post-secondary school that accepts federal financial aid. If you want to confirm that the schools your child wants to attend — whether four-year, two-year, graduate, or vocational — accepts federal aid, then do a search to see if the institutions have a Federal School Code on the Free Application for Federal Student Aid (FAFSA). If the schools do, then you can use your 529 funds there.
Use Ohio’s 529 Plan Nationwide
While you may have saved in Ohio’s 529 Plan, you can use your funds at both Ohio schools and schools nationwide. 529 plans can be used across the United States at any accredited post-secondary school that accepts federal financial aid. To confirm the school’s eligibility, a search to for a Federal School Code on FAFSA.
What Costs Do 529 Plans Cover?
What can you pay for tax-free with a 529 plan? Many qualified higher education expenses, which are the required costs to attend an accredited education institute to earn a two-year, four-year, graduate or professional degree.
- room and board during any academic period in which the 529 beneficiary is enrolled for at least half of the full-time academic workload according to the eligible education institution;
- mandatory fees;
- computer equipment and related technology as well as internet services;
- books, supplies and equipment related to enrollment and class schedule; and
- certain expenses for a special-needs student;
- Qualified apprenticeships costs such as fees, textbooks, supplies, and equipment like required trade tools. The apprenticeship program must be registered with the Secretary of Labor’s National Apprenticeships Act in order to use a 529 plan withdrawal. Interested parties can check the U.S. Labor Department’s search tool to confirm that a program is registered, and therefore, eligible for a 529 withdrawal; and
- Payment of the principal and interest on qualified education loans for the 529 beneficiary or the beneficiary’s siblings. The loan repayment provision applies to repayments up to $10,000 per beneficiary. The $10,000 is a lifetime amount, not an annual limit.
Tools and calculators
Ohio’s 529 Plan has calculators and tools to shape the 529 plan to best fit your family’s needs. Would you like to receive an estimate on your child’s projected college costs and what monthly 529 plan contribution can help you reach a saving goal? Then use the college savings planner. The cost of waiting tool can approximate how much more money will need to be saved if you get a late start on saving for higher education costs. The tax benefit tool shows the long-term advantages of tax-free growth in a 529 plan compared to a taxable savings account.
If you haven’t started saving, visit Ohio’s 529 Plan online to start saving today for your child’s future education. Every dollar saved today in a 529 plan is a dollar that doesn’t have to be borrowed later. A 529 account can be used for whatever comes after high school.
Learn, plan and start an Ohio 529 Plan today at CollegeAdvantage.com.
Posted on November 17, 2021