The best 529 college savings plan is available in Maryland, and it can be utilized regardless of residency.

You may aspire as a parent to have your child secure a full-ride scholarship to their dream college.

According to Education Data Initiative, only about 7% of college students receive some kind of scholarship. Students receiving government grants and scholarships receive an average of just under $15,000, while private scholarships average under $5,000, Business Insider recently reported.

Saving early can help you cover the high annual cost of attendance at some colleges, which is over $90,000.

It may be beneficial for families to start contributing to a 529 savings plan if their student is still several years away from filling out applications. A 529 is a tax-advantaged investment account that helps families save for future education expenses. Contributions to a 529 are not tax-deductible, but investment growth within these accounts is tax-free. Withdrawals for qualified education expenses, such as kindergarten through 12th grade tuition, college or trade school tuition and supplies, and even student loans, are tax-free.

A 529 plan can be opened for any beneficiary chosen, not necessarily your own child, and it can even be yourself. However, once a beneficiary is named, the recipient can only be changed to a family member of the original beneficiary, such as a sibling, child, or first cousin, to avoid penalties.

While you can typically open and contribute to any 529 plan regardless of your location, there may be additional tax benefits if you choose a plan sponsored by your home state. For example, your contributions may be deductible on your state taxes if you contribute to your home state's plan.

Ranking 529 savings plans

An online resource, Saving for College, ranked state-sponsored 529 plans based on four factors: performance, ease of use, savings success, and program delivery, which takes into account fees and other features, as well as a plan's long-term viability.

Here are the 10 best 529 plans, according to Saving For College:

1. Smart529 WV Direct College Savings Plan (West Virginia)
2. Smart529 Select (West Virginia)
3. T. Rowe Price College Savings Plan (Alaska)
4. ScholarShare 529 (California)
5. NJBEST 529 College Savings Plan (New Jersey)
6. Path2College 529 Plan (Georgia)
7. Learning Quest 529 Education Savings Program (Kansas)
8. Edvest 529 (Wisconsin)

Saving for College evaluated each plan's resident benefits and rated them as "basic," "good," or "best," in addition to the rankings based on accessible factors.

The top-ranked Maryland College Investment Plan provides the best benefits to in-state residents, as account holders can receive a state tax deduction of up to $5,000 per beneficiary for joint filers, and some account holders are eligible for $250 or $500 contributions from the state.

To maximize the benefits you're eligible to receive, it's a good idea to check out your home state's offerings first, even though rankings can provide a sense of the best plans in terms of fees, management, and historical performance.

Is a 529 plan right for you?

Saving for education expenses with a 529 plan has many advantages, but it's crucial to fund the account with money you won't need for a while. This will allow your investment to grow and the funds can only be used tax-free for qualified education expenses, such as tuition, books, and other supplies.

Withdrawing funds from a 529 plan for non-qualifying expenses will result in a 10% penalty and potential income tax on investment gains. Additionally, funds in a 529 plan may impact your student's financial aid eligibility, although the impact is not significant.

If a student receives a full-ride scholarship, their 529 plan funds can still be useful for school supplies and other expenses, as well as being rolled into a Roth individual retirement account if the account is at least 15 years old.

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