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College Savings

By: Associated Press
By: Associated Press

A fund rating agency has ranked Alabama's 529 college-savings plan as one of the worst in the nation.

The state's Higher Education 529 Plan was launched in 2002 to give parents another option in college savings.

The rating report by Morningstar says Alabama has a "subpar" plan and "no meaningful tax break" to give residents an incentive to invest in-state. It also says the Alabama plan's lineup of funds from Van Kampen, which invests for the state program, "is pricey and lackluster."

Arizona, Maine, Tennessee and Wyoming also are listed as having the worst 529 plans, a college-savings vehicle named after an Internal Revenue Service tax code. Morningstar rated Alaska, Michigan and Utah as having the best programs.

Some state lawmakers, including Representative Richard Lindsey and Senator Zeb Little, are pushing legislation that would provide investors in the Alabama 529 plan with the same tax-free treatment already extended to participants of Alabama's Prepaid Affordable College Tuition program.

On the Net: www.morningstar.com


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