Illinois 529 Plans Shine: Low Fees, Strong Returns Fuel College Savings

SPRINGFIELD, IL – As college costs continue to climb, families are increasingly turning to 529 plans to save for future education expenses. Illinois’ two state-sponsored 529 plans – Bright Start and Bright Directions – are consistently recognized as leaders in the nation, offering low fees, solid investment options, and a demonstrable impact on college enrollment. A recent independent analysis confirms their ongoing success and highlights the benefits for Illinois families.

Bright Start, a direct-sold plan, and Bright Directions, an advisor-guided option, have both received accolades for their performance. Bright Start recently earned its 7th consecutive Gold rating from Morningstar, an independent investment research firm, placing it among the top 529 plans nationwide. Notably, Bright Directions was the only plan to receive an upgrade in the most recent Morningstar assessment, moving up to a Bronze rating.

“The consistent high ratings demonstrate Illinois’ commitment to providing accessible and effective college savings tools for families,” said a spokesperson for the Illinois State Treasurer’s office.

A Competitive Landscape & Focus on Low Costs

Morningstar’s evaluation considers a variety of factors, including investment options, risk-adjusted returns, and – crucially – fees. The firm’s recent methodology update placed even greater emphasis on a plan’s overall cost structure. Illinois’ 529 plans consistently score well in this area. Bright Start is recognized as one of the lowest-cost plans in the country, with fees substantially lower than the national average. Bright Directions also offers competitive fee structures, particularly when considering the benefits of professional financial guidance.

“Low fees are critical,” explains an independent financial planner based in Chicago, who requested anonymity. “Even a small difference in fees can have a significant impact on long-term returns, particularly when compounded over many years. Illinois has clearly prioritized keeping costs down for its residents.”

Since 2015, the Illinois State Treasurer's office has implemented measures to reduce fees in both plans, totaling over $100 million in savings for Illinois families. These reductions included eliminating setup and maintenance fees and lowering management fees.

Beyond Cost: Investment Performance & Flexibility

While low fees are important, investment performance is also a key consideration. Both Bright Start and Bright Directions offer a range of investment options, including age-based portfolios, static allocation portfolios, and individual fund options. Age-based portfolios automatically adjust the asset allocation over time, becoming more conservative as the beneficiary approaches college age.

“The age-based portfolios are particularly appealing for families who are just starting to save,” says a parent from suburban Chicago. “It takes the guesswork out of investment decisions and provides a diversified portfolio that aligns with their child’s time horizon.”

Beyond investment options, both plans also offer flexibility in terms of how the funds can be used. 529 plan funds can be used to pay for tuition, fees, books, room and board, and other qualified education expenses at eligible institutions, including colleges, universities, and vocational schools. Funds can even be used for K-12 tuition expenses, up to a certain limit.

The Impact on College Enrollment: A Positive Correlation

Research increasingly supports the idea that 529 plans have a positive impact on college enrollment rates. A study conducted by the Center for Social Development at Washington University in St. Louis found that children with a dedicated 529 savings account are at least three times more likely to enroll in college compared to those without one.

“Having a 529 plan isn’t just about the money,” explains a financial aid officer at a state university. “It’s about signaling to a child that college is a priority and creating a culture of saving for education. That has a powerful effect.”

The study controlled for various factors, including family income, parental education, and student academic performance, demonstrating that the effect of a 529 plan is independent of these variables.

Looking Ahead: Continued Innovation and Accessibility

The Illinois State Treasurer’s office is committed to continuously improving the 529 plans and making them even more accessible to families. Recent initiatives include enhanced online tools, improved customer service, and partnerships with community organizations to promote financial literacy.

“We want to ensure that every Illinois family has the opportunity to save for college,” said the spokesperson. “We believe that investing in education is the best investment we can make in our future.”

Resources:

• Bright Start: https://www.brightstart529.com/
• Bright Directions: https://www.brightdirections529.com/
• Morningstar 529 Plan Ratings: https://www.morningstar.com/529-plans