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Vanguard 529: Reducing college saving costs again

October 29, 2013

To help put more of your college saving dollars to work for you, Vanguard is lowering the expense ratios for investment options in The Vanguard 529 College Savings Plan, effective October 31, 2013.

We're reducing the expense ratio for the plan's three age-based options to 0.21% (from 0.25%). The individual portfolios will also have reduced fees of 0.21%–0.50% (from 0.25%–0.55%). The change will save the Plan's nearly 140,000 investors an estimated $3.5 million annually.

"As tuition prices continue to rise, Vanguard believes investors should have access to low-cost college savings plans," said John Heywood, who leads Vanguard's Education Savings Group. "The robust growth in the Vanguard 529 College Savings Plan has permitted us to further reduce the cost of saving for college."

It's the sixth time we've been able to reduce costs for investors in the $8.6 billion education savings plan since it was introduced in 2002.

Why costs matter

When choosing a college savings plan, it's a good idea to consider the "all in" costs of investing. Along with annual asset-based fees, these costs can include enrollment, annual maintenance, and transfer fees—plus loads or commissions paid to financial advisors.

The Vanguard 529 College Savings Plan has no enrollment fees, transfer fees, or commissions, making it among the lowest-cost plans in the industry. Every dollar saved in expenses is another dollar you have to cover tuition and other college costs.

Gold-rated by Morningstar

Last week, Morningstar, an independent firm that provides fund information and analysis for investors, awarded the Vanguard 529 College Savings Plan its highest Gold Analyst Rating.

Of the 64 plans the firm's analysts evaluated for 2013, which account for 98% of the $181 billion held in all 529 savings plans, only four received the Gold rating that signals Morningstar's "highest conviction in the plans' ability to serve college savers well over the long term," as the firm noted in its announcement. Analysts evaluating 529 plans consider five factors—people, process, parent, performance, and price—to arrive at their ratings.

More about the cost reductions, Vanguard 529, and college saving resources

If you're a current Vanguard 529 Plan investor, you'll get more details about the upcoming changes soon. You can view the information securely online as soon as it becomes available if you've opted to receive notices electronically; just log on to your account at vanguard.com. (If you still need to register for online access, it's easy to sign up.) If you prefer to receive notices by mail, you should receive a letter with details in the next several weeks.

The plan is sponsored by the state of Nevada and administered by program manager Upromise Investments, Inc. However, the Vanguard 529 College Savings Plan is open to all investors; you don't have to live in Nevada to invest in it. You may also qualify for some additional state tax benefits when you use a 529 savings plan to save for higher education expenses, depending on where you live, so consider checking your home state's policies.

To learn more about 529 plans, along with other college savings options Vanguard offers, visit our College Savings Center. You'll find information about college costs, along with a range of interactive tools to help you decide which option best fits your needs.

Notes:

  • All investing is subject to risk, including the possible loss of the money you invest.
  • For more information about any 529 college savings plan, contact the plan provider to obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. If you are not a taxpayer of the state offering the plan, consider before investing whether your or the designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program. Vanguard Marketing Corporation serves as distributor and underwriter for some 529 plans.
  • The Vanguard 529 College Savings Plan is a Nevada Trust administered by the Board of Trustees of the College Savings Plans of Nevada. The plan is chaired by State Treasurer Kate Marshall. The Vanguard Group, Inc., serves as the Investment Manager and through its affiliate, Vanguard Marketing Corporation, markets and distributes the Plan. Upromise Investments, Inc., serves as Program Manager and has overall responsibility for the day-to-day operations, including effecting transactions. The Plan's portfolios, although they invest in Vanguard mutual funds, are not mutual funds. Investment returns are not guaranteed and you could lose money by investing in the plan.
  • Investment returns are not guaranteed, and you could lose money by investing in the plan. Account owners assume all investment risks, including the potential for loss of principal, as well as responsibility for any federal and state tax consequences. Diversification does not ensure a profit or protect against a loss in a declining market.
  • The Morningstar Analyst Rating® for 529 College-Savings Plans is the subjective summary expression of the firm's forward-looking quantitative and qualitative analysis of a 529 college savings plan. These ratings are not credit or risk ratings. Analyst Ratings are assigned on a five-tier scale running from Gold to Negative. The top three ratings (Gold, Silver, and Bronze) indicate that Morningstar's analysts think highly of a 529 plan; the differences correspond to the level of analyst conviction in the ability a plan's investment options have to collectively outperform their respective benchmarks and peers through time, within the context of the level of risk taken. The Analyst Rating seeks to evaluate each plan's investment options within the context of its objectives, appropriate benchmarks, and peer groups. Usually annually (although subject to change), Morningstar evaluates 529 plans in five different areas—process, performance, price, parent, and people—and assigns an Analyst Rating for more than 50 529 plans. Gold plans are the analysts' highest-conviction recommendations. By giving a plan a Gold rating, Morningstar analysts are expressing an expectation that the plan's investment options collectively will outperform their relevant performance benchmarks and/or peer groups within the context of the level of risk taken over the long term (defined as a full market cycle or at least five years). Plans earning Silver or Bronze medalist ratings are also viewed positively by Morningstar analysts, have notable advantages, and are likely to outperform their peers. A Neutral rating indicates plans that are not likely to deliver standout returns, but are also unlikely to significantly underperform. A Negative rating indicates, in Morningstar’s view, that a plan’s investment options have at least one major flaw likely to significantly hinder future performance. While these ratings can help with the selection process, they should not be the only factor used to choose the investment. For more information about the Analyst Ratings, as well as other Morningstar ratings and fund rankings, please visit Morningstar.com.
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