I'm looking at 529 plans. I'll be indexing and don't get a state tax deduction, so I'm primarily concerned with plan costs. What surprises me is that when rating low cost plans, magazines, books and web sites (ie Kiplinger's,
1) The funds or age brackets - Funds in most Vanguard plans seem similar, but perhaps there is something that I'm missing? Or perhaps the more expensive plans offer more flexibility (more funds or age-based options) that I just wouldn't use?
2) Convenience - it may be more difficult to use the cheaper funds. But from the outside, it doesn't seem that way to me. They all seem to have website-based administration and support EFTs. Maybe the cheaper ones don't have good phone support?
3) State negotiations - some states just don't take as much in fees, or did a better job in negotiating a 529 contract?
4) The solvency of the state - This is the most troubling to me. We know that investors don't directly own shares in a fund, instead they own part of the trust that gives a return based on the choice of investments. Is there a chance that a financially troubled state could decide to go into default on loans, then go into receivership and have the 529 trust fund liquidated? Given the risk, these states would need lower costs to attract investors.