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MEFA’s U.Fund 529 College Investing Plan Earns a Morningstar Rating of Gold for 2024

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MEFA’s U.Fund 529 College Investing Plan Earns a Morningstar Rating of Gold
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Resource Center Best College Savings Plans
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Resource Center Best College Savings Plans
Saving for College

Best College Savings Plans

Savings plan options include the U.Plan Prepaid Tuition Program, the U.Fund 529 College Investing Plan, UGMA/UTMA, Coverdell Education Savings Account, & Taxable Accounts.

4-min
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Saving for College

Best College Savings Plans

Savings plan options include the U.Plan Prepaid Tuition Program, the U.Fund 529 College Investing Plan, UGMA/UTMA, Coverdell Education Savings Account, & Taxable Accounts.

4-min

Looking for different ways to save for college? This chart shows how the U.Plan and the U.Fund stack up against other popular options, including those specifically designed for college savings and other more general accounts. Compare the best college savings plans below.

College Savings Comparison Chart

 U.Plan Prepaid Tuition ProgramU.Fund 529 College Investing PlanCustodial Accounts (UGMA/UTMA)Coverdell Education Savings AccountTaxable Account
Ownership / Control of AccountInvestorInvestorCustodian, until beneficiary reaches age of majorityParent or legal guardianInvestor
Guidelines for UseCovers a fixed percentage of tuition and mandatory fees for undergraduate students at over 70 public and private colleges and universities in MAUtilize the funds for a wide range of college expenses at accredited schools nationwide, in addition to tuition expenses for K-12, certain apprenticeship costs, and student loan repayments.
  • If used before age of majority, must be used for child’s benefit
  • No restrictions when under the control of the beneficiary
Qualified expenses (tuition, food, housing, books, required supplies) at any accredited post-secondary school, or primary or secondary education expenses, until beneficiary turns 30None
Adjusted Gross Income LimitNoneNoneNone
  • Single filer: $95–$110k
  • Joint filers: $190–$220k (phased out)
None
Annual Contribution LimitNone
  • None
  • Cumulative limit = $500k
  • Annual gift limit = $85k ($170k per couple) per beneficiary without incurring federal gift tax treatment allowed once every 5 years; otherwise $18k ($36k per couple) annually
  • None
  • Annual gift limit = $18k ($36k per couple) without incurring federal gift tax treatment
  • $2k per beneficiary under 18
  • Multiple taxpayers who meet AGI limits can make contributions to a single account
None
Tax Benefits
  • Earnings are federal and MA tax free, with some limitations2
  • If used for tuition and mandatory fees at participating school, withdrawals are federal and MA tax free
  • Account owners are eligible to claim a Massachusetts state income tax deduction for contributions to the U.Plan made in the applicable tax year. Single persons may claim up to a $1,000 deduction, and married persons filing jointly may claim up to a $2,000 state income tax deduction.
  • Withdrawals are federal and MA tax free if used for qualified expenses.
  • If not, earnings are taxed as ordinary income and subject to 10% federal penalty
  • No 10% penalty in the event of scholarship, death/disability of the beneficiary, or rollover to another 529 plan
  • Account owners are eligible to claim a Massachusetts state income tax deduction for contributions to the U.Fund made in the applicable tax year. Single persons may claim up to a $1,000 deduction, and married persons filing jointly may claim up to a $2,000 state income tax deduction.
May be federal tax free or taxed at the beneficiary’s potentially lower rate
  • If used for qualified expenses, then earnings are federal and MA tax free
  • If not, then taxed at account owner’s tax rate and subject to 10% federal penalty
Taxable in the year earned
Change of BeneficiaryPermitted, to a member of the designated beneficiary’s family, tax free and penalty freePermitted, to a member of the designated beneficiary’s family, tax free and penalty freeNot permittedPermitted, to a member of the designated beneficiary’s family, tax free and penalty freeNA
Effect on Financial AidTreated as account owner’s asset (up to 5.6% of parental assets factored into federal financial aid formula)Treated as account owner’s asset (up to 5.6% of parental assets factored into federal financial aid formula)Treated as beneficiary’s asset (20% factored into federal financial aid formula)Treated as account owner’s asset (up to 5.6% of parental assets factored into federal financial aid formula)Treated as account owner’s asset (up to 5.6% of parental assets, or 20% of child’s assets, factored into federal financial aid formula)

Generally, higher return potential involves more risk, so be sure to consider risk when comparing different options.

  1. In addition to these savings options, several states have established tax-advantaged prepaid tuition programs under Section 529 of the Internal Revenue Code. Those programs generally provide tuition lock-in features at state colleges and universities located within the sponsoring state.
  2. See the Tax Matters section of the Program Description and Offering Statement for more information.
  3. Must be prorated over five years to avoid Federal gift tax treatment.