Is the NC 529 Plan Right for Me?

A 529 plan offers an easy and affordable way to save for college with some built in tax advantages, but is the North Carolina 529 plan right for your family and needs? If you live in North Carolina, you might automatically think of this plan, but it is it truly your best option? We’re taking a look at 529 plans in North Carolina and giving you the details you need to know to make an informed decision. We’ve assessed the plan options, potential tax deductions, fees, usability and more so you have everything you need to know in one place.

THE VERDICT: North Carolina residents should consider out-of-state options. Choosing an NC 529 plan does not offer any additional state advantages at tax time, and the fees are almost double those charged by best-in-class plans. Not sure which plan is right for your needs? Tell us more about you to receive a customized recommendation from CollegeBacker!


  • Our Focus: This piece takes a comprehensive look at the North Carolina 529 Plan to determine if an in-state plan is right for North Carolina residents.
  • Fees: Expense ratios range for the NC 529 range from 0.25-0.40%, which is more expensive than best-in-class 529s.
  • Taxes: There is no special tax treatment or benefit to choosing the NC 529 plan, so it is worth shopping around to find the best possible plan for your family.
  • Usability: Basic. The official North Carolina 529 site is relatively easy to use, but finding details on fees and other fine print details can be challenging.
  • Financial Aid: There are no special provisions for financial aid for 529 savings in North Carolina. Assets saved in a 529 plan are considered parental assets, minimizing financial aid impact, and the standard FAFSA application is used for all financial aid, including funds offered by the State Education Lottery System (ELS).


1) Our Focus

In this review, we cover North Carolina’s National College Savings Program, also called the NC 529. This investment account offers tax advantages and is specifically designed to be used to pay for college.

The North Carolina 529 is accessible to everyone, you do not have to be a resident to apply or open an account. Funds invested can be used at any qualifying institution, so you do not have to choose a college in North Carolina for your child to use the funds you’ve saved in an NC 529 account.

2) Fees

You’re choosing an investment account for a reason -- to save money for the future. Learning about the costs involved can help you avoid any unwanted surprises and allow you to make the most of the funds you set aside for your child’s education.

529 plans typically charge Assets Under Management or AUM fees; these are a percentage of the total amount you have invested in a fund. The more you save in your 529 (or the more it grows), the higher your fees will be. The best-in-class 529 plans usually charge about 0.20%; some state fees are higher and some are lower.

Using the NC 529 plan, your annual AUM fees would range between 0.25% and 0.40%, depending on which of the investment portfolio options you choose.

How could the fees associated with an NC 529 plan impact your savings? Here is a typical scenario:

You saved $1,000 this year for your child’s 529 account, so this year, your AUM fees would be only $2.50 to $4.00. Over 18 years, you’ll pay $45 to $72 with NC 529, just for fees. As time goes on, though, your account will grow – and so will your fees.

If you chose a best-in-class 529 plan and used the same figures, your first-year costs would be about $2.00 for that same $1,000 investment. Over time, saving at the same level, your total fees with a best-in-class alternative would be only about $36, saving you anywhere from $9 to $36.

The differences may not seem like a big deal now, but as your investment grows, they do add up and can nibble away at the savings you are accruing for college.

3) Taxes

529 College Savings Plans were designed with tax advantages in mind With a 529 Plan, your post-tax contributions grow tax-free and your eventual withdrawals are also not taxable, provided you use the savings for college and higher education expenses.

While the State of North Carolina did once offer additional deductions on your state tax return for your 529 contributions, they discontinued this practice in 2014. You will no longer be able to deduct contributions made to your NC 529 account.

Since North Carolina does not offer state deductions or any other benefit for using their in-state 529 plan, there are no specific tax advantages; any 529 plan would work for you if you live in the state.

4) Usability

The NC 529 plan is a basic program without a lot of frills; accounts are easy to set up, but you may run into trouble if you want to allow others to help fund your plan, want to fully understand fees and options or if you need help with more advanced functions and options.

NC 529 has a website that allows you to enroll, set up contributions (either automatically or on a one-time basis) and perform basic functions. More advanced functions will require additional steps or paperwork and could be more time consuming.

One of the best benefits of the 529 plan in general is it provides a way for your family to contribute directly to your children’s education funds in a meaningful way. The NC 529 plan does not work well for gifting. It is possible to send and receive contributions, but the process is not easy or intuitive. Gifting would need to be done manually and may be difficult for the giver, particularly if they are not used to using technology or very investment-savvy.

For a simpler alternative to gifting especially, check out our tools at CollegeBacker.

5) Financial Aid

North Carolina uses the Free Application for Federal Student Aid (FAFSA) to determine how much financial aid a student is eligible for, which means that there is no special treatment for the NC 529. A 529 plan is counted as an asset when it is time to calculate your Expected Family Contribution (EFC). The actual dollar amount used for this calculation varies, and depends on the actual ownership of the 529 account.

If the parent is the owner of the 529 account, any money you save counts as a parental asset, not a student asset. This distinction is important; parental assets impact your overall expected contribution by only 5.64%. If your child is the owner of the account, then her assets would be counted at 20%; this would impact the amount of financial aid your child would receive. For most 529 accounts, including those established in North Carolina, your best bet is to have all assets listed in the parent’s name.

Get the information you need to make informed choices about your child’s college savings. Visit for personalized guidance or the North Carolina 529 Investment Plan website for more information about this specific 529 plan.

Disclosure: The author of this article was compensated by CollegeBacker. Currently, CollegeBacker does not advise on the NC 529 Plan.