Should My Family Use the PA 529?

If you are a Pennsylvania resident, you might automatically think of the PA 529 plan. But is that really the best option for you? In this article, we do a tear-down of Pennsylvania’s offerings and highlight what you need to know about tax deductions, fees, usability, and other considerations.

THE VERDICT: Pennsylvania residents should consider out-of-state options. You could be paying double the fees by choosing PA 529, and the 529 state income tax deduction is available for any 529 (not just the PA 529). Tell us more about you to get a free recommendation from CollegeBacker.


  • Our Focus: This article focuses on the Pennsylvania 529 Investment Plan, with only brief discussion of the Pennsylvania 529 Guaranteed Savings Plan (GSP).
  • Fees: Expense ratios range from 0.33-0.46%, which is more expensive than best-in-class 529s.
  • Taxes: There is no special tax treatment for using the PA in-state plan. PA offers a generous tax deduction of $14,000 for single (or $28,000 for married), but this is available for any 529 plan.
  • Usability: Basic. You can perform basic account functions online (e.g., opening account, making a contribution), but you must use separate services or physical paperwork to send/receive gifts, request rollovers, and other advanced functions.
  • Financial Aid: If your child plans to attend an in-state public school, note that there is special financial aid treatment for money saved in PA’s 529 plan.


1) Our Focus

In this review, we focus on the Pennsylvania 529 Investment Plan, or the PA 529 for short. This is a 529 College Savings Plan, which is a tax-advantaged investment account specifically designed for higher education.

Pennsylvania offers another plan called the Pennsylvania 529 Guaranteed Savings Plan (GSP). The mechanics of how it works are a little complex, so we won’t go into the details here, but in short, you pay today’s tuition prices with a “guarantee” it will pay for future tuition. However, this is not backed the Commonwealth of Pennsylvania. Before choosing this plan, we recommend fully understanding the risks involved with these guarantees.

2) Fees

When choosing a financial product, especially a long-term product like a 529 College Savings Plan, it pays to watch out for your fees. Even small fees can add up (and compound) over years.

Usually, 529 plans charge an “AUM fee,” or a percentage fee on your total assets under management. In other words, the amount you pay depends on the total amount that you have saved. If you save more, or if the value increases due to investment growth, you will pay more.

With the PA 529, you will pay 0.33% - 0.46% on your assets under management per year. (There is a range because your fee depends on the investment portfolio you choose.) In comparison, the best-in-class 529 plans out there typically charge ~0.20%.

What does this mean for you? Let’s say you save $1,000 this year for your child, and you keep the money in the plan for 18 years. In the first year, you would pay $3.30 to $4.60. Over 18 years, the money is likely to grow (and therefore so is your fee in dollars) – but for the sake of simplicity, if your investment stays constant, this would equate to $59.40 to $82.80 in fees. If you continue saving beyond $1,000, or if your investment grows, the fees will increase further.

In contrast, if you save $1,000 in a best-in-class plan for 18 years, the story is a little different. In the first year, you would pay about $2.00. Over 18 years assuming your savings remains at $1,000, the best-in-class plan comes out to $36.00 – cutting your fees in half and saving you $23.40 to $46.80. Again, if you keep saving or if your investment grows, the savings on fees will increase too.

While $2 versus $4 per year might not seem like a big difference at first, remember that you will keep paying this year after year, and it adds up!

3) Taxes

Every 529 College Savings Plan comes with some pretty phenomenal tax advantages. After you contribute post-tax dollars, the growth is entirely tax-free, and the withdrawals are also tax-free as long as you spend it on higher education.

However, some states – including Pennsylvania – offer an additional tax deductions on your state income tax. In Pennsylvania, you can deduct contributions up to $14,000, or $28,000 for married filing jointly. In other words, if you contributed $1,000 to a 529 College Savings Plan this year, you could reduce your state income taxes by about $30.

For some states offering a tax deduction, you are required to use the in-state plan to qualify for the deduction, but the Pennsylvania state tax deduction applies to any 529 College Savings – not just the PA 529.

In other words, there is no specific tax advantage for choosing PA 529. Choose any 529 plan you like!

4) Usability

Overall, the PA 529 has only basic usability. While it generally gets the job done, you may encounter stumbling blocks when getting others involved, deciphering investment portfolio options, or performing more advanced actions like rollovers.

Like most 529 College Savings Plans, the PA 529 has a website that allows you to perform basic account activities online, such as enrolling in the plan, making contributions, setting up automatic contributions or payroll deductions, making withdrawals, or changing basic account information (e.g., updating account owner, beneficiary, successor owner).

If you want to send or receive gifts from family and friends, you can activate a separate service called Ugift to accept gifts online. If you do not add this service, you will need to either ask givers to mail paper checks to the PA 529 directly (with your account information). Alternatively, using CollegeBacker can make this experience much easier.

Lastly, for some advanced functions, such as requesting a rollover into a different 529 College Savings Plan, will require submitting a paper form.

5) Financial Aid

When it comes to federal financial student aid, 529 plans are counted as a parental asset (instead of a student asset) and therefore minimize the impact on financial aid. Parental assets increase expected family contribution (EFC) by up to 5.64%, whereas student assets can be as high as 20%.

For state financial aid, however, Pennsylvania offers an additional perk that is specific to the PA 529 plan. Any assets in a PA 529 are not counted in the state financial aid formula. However, note that this is generally only applicable for in-state schools. For example, the Pennsylvania State Grant program has specific limitations related to colleges and universities located in Pennsylvania.

In other words, there is a small potential financial benefit to using the PA 529 if your child is planning to attend an in-state school. However, you should weigh this against the higher fees and other factors we described above.

Need help choosing which plan is right for you? Visit

For more information about the PA 529, visit the Pennsylvania 529 Investment Plan website.

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