Data: Half of Americans May Benefit From Using Out-of-State 529 Plans

College is expensive. Saving for it ahead of time doesn’t reduce the price, but it does make bearing the cost easier. Saving in a 529 plan, a tax-advantaged account earmarked for education expenses, is one way to make those savings go further.

Data compiled by the College Savings Plan Network (CSPN) sheds light on how Americans use these plans. There were about 17.7 million open 529 accounts at the beginning of 2026, or about one account for every six persons aged 24 and under, according to the CSPN data. There’s also a lot of money at stake. Americans have collectively saved more than $600 billion in these accounts.

The plan data reveals another, somewhat surprising fact: Some savers are opening 529 accounts in states outside their own. The CSPN doesn’t track why people choose out-of-state plans, but a look at 529 plan options across states reveals for as many as 56% of Americans, the best place to save may be somewhere other than home.

529 Data By State

The data shows that some state’s 529 plans are utilized at a much higher rate than others when adjusted for population.

New Hampshire, for example, has nearly 1.2 million active 529 accounts. That’s unusual because the Granite State only has about 370,000 people aged 24 and under, the ages during which people are most likely contributing to a 529 account or making withdrawals.

Or compare the $19.2 billion saved in California (12 million people 24 and under) to the $53.7 billion socked away in Nevada (947,000 people 24 and under). This could suggest that Nevadans are either better off, more generous or both, having saved about $56,677 per child under 24 compared to California’s $1,594.

The driver that’s likely behind the states with outsized 529 plans is this: Savers are free to open a 529 in any state they wish.

The ability to access plans in 49 states and Washington, D.C., (Wyoming doesn’t have a 529 plan) is more than trivial. For some, choosing another state’s 529 might be the smarter choice.

Having a 529 in another state does not mean the account beneficiary is committed to going to school in that state. On the contrary, savers may benefit from another state’s 529 plan without ever stepping foot in that state, especially if investment options or fees look better elsewhere. Note that in addition to 529 savings plans, a few states also have prepaid tuition plans, which are designated for in-state schools.

529 Basics

Before exploring the differences among state plans, it’s good to consider what they have in common.

A 529 plan is a tax-advantaged way to save for higher education. Investment growth in and withdrawals from these accounts aren’t taxed when the money is used for qualified expenses. Some states also offer tax benefits for 529 contributions.

College tuition is a common qualified expense, but K-12 education, trade schools, occupational licensing and textbooks may also qualify, depending on the state.

Managing a direct 529 plan or an advisor 529 plan — the two main types of 529 savings plans — is similar to managing an IRA or 401(k). Contributions are added to an account. From there, the account owner can choose from a variety of investments. Index funds and target-date funds are common options.

Why you might stay in state

Comparing 529 options in one state — your own — is much less labor intensive than comparing plans and benefits across multiple states. If your state offers compelling reasons to stay, you can eliminate some of the work.

Your state has tax benefits

Deductions: Many states let tax filers reduce their taxable income by the amount they contribute to a 529, similar to the tax treatment of 401k contributions. Keep in mind, states set different maximum contribution amounts, and these amounts can vary widely. And maxing out deductions in a year doesn’t lower your tax bill by that amount, only your taxable income.

Credits: Residents of Indiana, Minnesota, Oregon, Utah and Vermont can take advantage of their state’s tax credits (the “gold nuggets of the tax world”) instead of tax deductions.

Tax credits are generally considered even more valuable than deductions as they reduce your tax bill — not just your income — dollar for dollar. States cap the value of these tax credits, though. The maximum amount, which varies by state, is based on a fraction of overall contributions.

Your state’s 529 has the investments you want

Investment options vary by state. If the investments available at home are good, or even good enough, it’s an easier choice.

Additional benefits

State specifics vary widely, but other potential benefits include: matching grants, protection from creditors, and the potential to exempt your 529 account from financial aid calculations.

Be sure you have the fullest picture of what you’re giving up before you go elsewhere. The CSPN provides a tool to help you get started.

Why you might look at out-of-state plans

It may be more labor intensive, but millions of Americans might find that the best 529 plan lies beyond their state’s boundaries.

Your state doesn’t offer tax benefits

All 529 plans shelter investment growth and qualified withdrawals from federal taxes. But only some 529 plans may lower your state income tax bill. Residents of states that don’t have income taxes or tax breaks associated with 529 contributions have the clearest reason to shop around for 529 accounts in other states.

One in five Americans (21%) live in a state without income tax. And residents of California, Hawaii, Kentucky and North Carolina — which do have income tax — don’t get any tax deductions or credits for 529 contributions.

People living in these states are free from tax-deduction FOMO and may have less incentive to default to their home state’s 529.

Your state’s tax benefits don’t require you to invest there

Some residents can claim tax benefits for contributions made to a 529 plan regardless of which state runs the plan. For instance, an Arizona resident who wants to open a 529 plan in another state can do so and still claim tax benefits at home. Nine states offer this benefit, called “tax parity":

• Arizona

• Arkansas

• Kansas

• Maine

• Minnesota

• Missouri

• Montana

• Ohio

• Pennsylvania 

When you add up states without income tax, states with tax parity and states that don’t offer any tax incentives, more than half (56%) of Americans live in a state where there isn’t a clear tax advantage to sticking with an in-state 529 plan.

Your state’s 529 has relatively high fees

As with any financial product, fees are a drag on returns. Depending on the details, a person facing high in-state fees may be better off investing in another state’s 529, even if that means giving up a tax deduction.

Only 16 out of more than 100 529 plans have at least one investment option with fees under 0.1% (this figure excludes capital preservation funds, money market funds and similar investment options). There are nearly twice as many plans where the lowest fee is at least 0.25%, according to the College Savings Plan Network.

You like a particular financial services company

While 529 plans are technically offshoots of state governments, much of the investment and administrative tasks are handled by financial firms. For example, someone who opens a 529 plan through Vanguard is technically opening a Nevada 529 plan while Fidelity’s 529 plans are technically New Hampshire 529 plans. For some, a strong preference for a particular financial company may be the deciding factor.

How to decide

Everyone likes saving money, but the prospect of sorting through 100 plans to find the ideal match may not be worth the effort.

Stay focused on the ultimate goal — saving for a child’s education — instead of worrying about finding the perfect account. Here’s how:

1. Speed matters. Most people have about 18 years to save for higher education. Someone who opens an account when their child is a month old but pays investment fees of 1.0% will fare better than someone whose fees are 0.05% but who doesn’t get around to opening an account until their child is five, assuming the same monthly contribution amounts. In short, starting to save as early as possible is the best hack to juicing the final balance.

2. Use helpful tools. Narrow your options quickly using the College Savings Plans Network’s comparison tool. Filter plans based on fees, investment managers and more.

3. Keep your effort proportional to the benefits. Potential savings — whether tax benefits or fee avoidance — are directly related to the balance of the account. Someone who plans to max out contributions should probably spend more time comparing 529 accounts than someone who plans to contribute $20 per month.  

4. Remember what really moves the account balance. Choosing a 529 account that has low expense ratios is a plus. But increasing your monthly contribution amount may make an even bigger difference in the long run. If your state does offer tax savings, consider re-routing the amount saved on taxes back into the 529 account. 

5. Shop shrewdly. You’re unlikely to be swindled when shopping for 529 plans, which are highly regulated and overseen by governmental bodies. But you’re still being sold a product. Keep that in mind. Some states offer 529 plans that financial advisors can sell directly, which come with higher fees, alongside plans you can access directly with the state, which tend to have lower fees. Nationwide, there are nearly twice as many direct-sold plans than there are advisor-sold plans (61 and 31, respectively), according to the College Savings Plans Network. Yet, of the 25 plans with the highest minimum fees, more than three in five (64%) were advisor sold plans. A financial advisor’s services may be worth the cost for some, but beware of signing up for the costlier plan if you’d prefer a self-directed account. 

6. Follow through. Whether or not you want to spend the effort comparing 529 plans, at least do these three things: Automate your contributions, set a calendar reminder to increase your contributions once a year and periodically review your investment options.