Two Virginia college savings plans rank near top

By TAMMIE SMITH
RICHMOND TIMES-DISPATCH
Published: April 17, 2008

Two Virginia college savings plans are ranked as among the best in the nation.

Morningstar, an investment research firm, annually ranks the best and worst college savings plans.

Among the top five plans this year are two Virginia offerings: Virginia Education Savings Trust and Virginia College America, a broker-sold plan administered by American Funds.

“We are thrilled with all of this,“ said Mary G. Morris, executive director of the Virginia College Savings Plan, an independent state agency that manages college savings plans.

Morningstar evaluated and ranked plans based on investment options, fees, flexibility and overall fund performance.

“We have relatively low fees,“ Morris said. “Our programs have already been marked by flexibility, and then the underlying fund. We had excellent performance. We have some wonderful funds and excellent options across all that range.“

The college savings plans, called 529 plans, allow families to save after-tax dollars to pay college expenses. With the right choices, earnings on the investments can grow significantly over time. The money can be withdrawn tax-free as long as it’s used to pay for higher-education expenses.

Virginia residents who put money into the plans also can take a $2,000 deduction on their state taxes. That deduction rises to $4,000 next year.

Virginia has four college savings plans. The others are the Virginia Prepaid Education Program and CollegeWealth.

“CollegeWealth is our newest program. It just opened last November,“ Morris said. “We are really still gearing up with that.“

Morris said a lot of families invest in more than one option because some of the plans allow the money to be used for tuition and fees, while others also cover computers and other educational expenses.

Morningstar identified plans in Ohio, Mississippi, New York and Nebraska as the poorest-performing.

Contact Tammie Smith at (804) 649-6572 or .