The Best 529 Plan for Maryland Residents in 2025

A solid tax deduction and well-regarded investment manager are good reasons to start saving for college with a Maryland 529 plan

Even if you make a very good salary, paying for college is intimidating. And that’s no different if you’re considering the Maryland 529 plan or a similar account in Alaska.

2025 Update: What’s New With the Maryland 529 Plan

The Maryland 529 plan has endured a rocky few years.

As the Washington Post reported earlier this year, “Maryland 529, the agency charged with running the state’s two college savings plans, suspended earnings on 31,000 prepaid tuition accounts in 2022, saying a calculation error incorrectly inflated balances.”

The IRS later agreed not levy any tax penalties on families who wanted to roll over funds from their Maryland prepaid college savings plan accounts. With this news, Maryland parents may feel hopeful that they can renew their focus on what matters: actually saving and investing for college with confidence.

The Maryland College Investment Plan took a positive step in this direction when online resource Saving For College named Maryland the top 529 plan in the U.S. in late 2024. CNBC noted:

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

Such a review is likely welcome news for many Maryland families.

The College Savings Outlook for Maryland Parents

Maryland college costs can feel expensive for almost everyone.

In 2024, the average tuition and fees of Maryland colleges is $12,948 for Maryland residents. That amount rises to $30,304 for out-of-state students.

Let’s assume, for example, that your child manages to get into Johns Hopkins. You would be spending $58,720 per year if you don’t qualify for financial aid. That’s almost $5,000 a month.

And what if your child is only a baby? The above numbers likely will increase by the time he or she is ready to attend college. As you may have heard, in-state tuition at public universities rose 175% over the past 20 years.

You may be wondering, “What’s the point in saving at all? I’ll never save enough. And even if I do, can I trust the state to manage the money I do save?”

The recent situation with the Maryland Prepaid College Trust is rare.

Additionally, the Maryland Legislative Guarantee covers the Maryland Prepaid College Trust. This law spells out what happens if the Trust ever experiences a financial shortfall. In that case, the law requires the Governor to include funds in the state budget to pay your full benefit.

Most importantly, remember to weigh any risks with the benefits. The tax breaks and potential investment growth in a Maryland 529 plan can be significant. They outweigh the risks of an unlikely account error or other issue.

Here’s a truth – what happened with the Maryland Prepaid College Trust is exceedingly rare. Additionally, the Maryland Prepaid College Trust is covered by the Maryland Legislative Guarantee. This law states that if the Trust ever experiences a financial shortfall, the Governor is required to include funds in the state budget to pay your full benefit.

Moreover, the tax benefits and return rate of investing in a 529 plan far outweigh the risk of an accounting error, or any other sort of issue with the account. To learn why, read on below.

How Does a 529 Plan Help With College Savings?

First, let’s start with the basics. Here are the top things that you should know about 529 college savings plans:

1. A 529 savings plan is a tax-advantaged investment account. It encourages participants to save for future educational costs. This can include tuition and fees, along with room, board, books, technology and other educational costs.

2. 529 plans can be used for up to $10,000 in K-12 tuition payments. And some of the funds also can be used for student loan repayment.

3. Money invested in a 529 plan grows tax free if the withdrawals are used for educational expenses.

4. 529 plans, such as Maryland 529, are generally sponsored by states. This means that the state chooses a plan manager and establishes the rules and limits for its plan. Maryland 529, for example, is managed by T. Rowe Price, a Baltimore-based global investment firm that was established in 1937, and manages a total of $1.27 trillion assets.

5. Most 529 plans offer two different options. The first is a 529 college savings plan, which can be used for most educational expenses. The second is a 529 prepaid plan. This locks in a tuition rate regardless of inflation, and can only be used for in-state public tuition.

6. The only state that does not currently sponsor a 529 plan is Wyoming.

7. As a United States resident, you can invest in any state’s 529 plan. But keep in mind that the majority of states offer tax deductions and benefits to residents who contribute to their state-sponsored plan.

How Does the Maryland 529 Plan Work?

As of 2025, Maryland 529 now only sponsors one type of 529 plan.

The one available option is called the Maryland College Investment Plan. These funds can be used at nearly any public, private, or technical college nationwide. The Maryland College Investment Plan requires a minimum investment of $25 and caps at a maximum balance of $500,000.

The Maryland Prepaid College Trust previously locked in today’s tuition costs at the 12 public institutions operated under the University System of Maryland. The tuition costs then would remain the same even if your child attends college in 30 years.

But as of June 1, 2023, the Maryland Prepaid College Trust no longer accepts new enrollments. Please note, though, that this article will continue to discuss the trust, since some families still hold these college savings accounts.

Why We Should Start By Acknowledging The Stress of Saving for College

You’re a busy parent. How can you possibly have the time and energy to research college savings options?

It’s not easy. First, you don’t even know what type of college your children might attend. Sure, they may have mastered their ABCs before anyone else in their class. But when college arrives, will they attend a service academy? Or prefer to start a company instead? It is easy to worry that you will “waste” your college savings efforts.

This is stressful. These decisions are full of uncertainty. Let’s acknowledge those facts, and then figure out how to work with what we do know.

The Role of a Maryland 529 Plan in Your Financial Life

And if you’ve invested in the Maryland Prepaid College Trust, will you be limiting your child’s options in the future? You’ve read articles that state that private college educations could cost as much as $500,000 by the year 2040, and while you make a pretty good income, it’s not that good, especially not if you have more than one kid. But is it really fair to assume that due to your own financial limitations, your kid should attend the University of Maryland rather than the college of their dreams?

Not to mention that as a parent, it can be hard to prioritize. Should you forgo a spring break vacation to put extra money away for college? How about letting one parent suffering from burnout take a sabbatical, even if it means less money left over for investment accounts, including your 529 plan? How about skipping extracurriculars or holiday presents in favor of more money for college in the future?

Let’s make this decision a little simpler by reviewing some of the basic components of the Maryland 529 plan.

Investing for College 101: Tax Breaks and Costs

For many Millennials parents in Maryland, the 529 plan decision will come down to two main considerations.

The Tax Advantages of the Maryland 529 Plan

Both the Maryland 529 Investment Plan and the Maryland Prepaid College Trust have the same tax benefits for Maryland residents.

• Any money contributed to the account will grow state and federal tax-free
• Withdrawals from the plan are federal and state tax exempt as long as they are used for the educational purposes for which they are intended
• Additionally, Maryland residents can deduct $2,500 from their total taxable income for each child — $5,000 for two children, $7,500 for three children, etc.
• Payments in excess of $2,500 can be deducted up to the next ten years after the initial payment was made. In layman’s terms, if you contribute $3,500 one year, and $1,500 the next, you can roll over the excess $1,000 from the first year to receive the bull tax benefit the second.

As in the case with other 529 plans, if you withdraw money from the account for anything besides the beneficiary’s educational expenses, you will be subject to federal and state income taxes, as well as a penalty of up to 10% of the fund’s earnings.

Investment Costs Within the Maryland 529 Plan

Maryland’s 529 plan has competitive investment fees when compared to plans offered by other states. On average, you can expect to pay between 0.13% and 0.64% in fees depending on what type of portfolio you choose. According to SavingForCollege.com, an investment of $10,000 in the plan will cost, at the highest end, roughly $822 over the course of 10 years.

As a point of comparison, mutual fund expense ratios average around 0.5% and 401k participants pay between 0.2% and 5% investment fees on their portfolios. In that light, investments in the Maryland 529 plan look like a good deal.

The Maryland 529 offers two different types of investment portfolios. You can choose to invest in enrollment-based portfolios, which will switch from investments in stocks (more risky) to investments in bonds (more conservative) as your child’s target date of enrollment approaches.

Or you can choose from ten different fixed portfolios that invest in stock, bond and/or money market portfolios according to your preferences.

How Much Can You Contribute to a Maryland 529 Plan?

There are limits to how much you can contribute to a Maryland 529 plan.

With the Maryland College Investment Plan, you can invest a maximum of $500,000 into a single beneficiary’s account. It’s worth noting that you can open multiple 529 plans for a single beneficiary – for example, a grandparent and a parent may have their own 529 plans for a single child. As is the case with all 529 plans, the maximum annual gift tax exclusion amount is $17,000 per individual, or $85,000 over 5 years.

And with the Maryland Prepaid College Trust, you can purchase up to seven years at a four-year college per beneficiary. You can also purchase much less expensive educational plans, including one or two years at a community college, or even just a semester at a four-year college.

College Savings Considerations: In-State vs. Out-of-State and One Child vs. Multiple Children

Choosing which plan is right for your family may feel virtually impossible. If you are not sure where you’ll live when your child is college-aged, or further, if they’ll want to attend a Maryland state school, then it makes sense to invest most, if not all, of your 529 plan dollars in the Maryland College Investment Plan.

But if you have multiple children, or even family members, living and attending school in Maryland, it might make sense for you to lock in a tuition rate right now. If the account holder of a Maryland Prepaid College Trust does not go to a state school, you can transfer the account to a relative of the child. For example, a younger sibling or even a cousin. Someone, in the end, will benefit from the much reduced price they’ll pay for their education.

And the good news is that as a Maryland resident, they’ll get a good education, especially if they attend the University of Maryland. In its 2025 rankings, U.S. News & World Report ranked the University of Maryland College Park the 44^th best national university.It’s also worth noting that you can use the Maryland Prepaid College Trust to pay for out-of-state or private tuition. However, the trust will only pay one half of the weighted annual tuition that you locked in when you first bought into the plan or your minimum benefit – whichever is greater. In essence, the money you invest in the account will not be wasted, but it might be better invested in a Roth IRA or another type of investment account with similar fees and more flexibility unless you are sure you will use it at a Maryland educational institution.

Is the Maryland 529 Plan a Good Option for Millennial Parents?

Despite the recent controversy regarding account balances and payments disbursed from the Maryland Prepaid College Trust, the Maryland 529 still gets a silver rating from Morningstar. The analyst team states that this is because of the stellar investment practices of T. Rowe Price, which manages the program.

For many Maryland parents, the $2,500 (per child) tax deduction offers a strong enough reason to stick with a Maryland 529 plan. To maximize your investment, pick a low-cost investment option.

But When Should You Start Saving for College?

By 2030, the U.S. Department of Education estimates, the total cost for a four-year degree will be more than $205,000.

So, the answer to when you should start saving is now.

But even if you have zero dollars saved, you don’t need to panic. First of all, you’ve likely done the best you can, and you should be proud of the work that you’ve done for your family. But if you can, set up an automatic transfer – however small – into a 529 plan account for your child.

Like many Millennial parents, you may never be able to save enough for your child’s entire education. But that’s normal. As any good financial advisor will tell you, you just want to focus on what you can control. And this includes saving and investing consistently.

And if you still feel uncertain about whether a 529 plan is right for your family, keep in mind that you always can invest in a basic investment account, known as a taxable brokerage account.

Your Questions About the Maryland 529 Plan

What questions do you still have about 529 plans, in Maryland or elsewhere? I encourage you to send me an e-mail at kevin@illumintfc.com with anything else you would like to know. You also can subscribe to my finance podcast for Millennials to learn more how you can invest in your family’s future.

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Recommended Reading

If you found value in this article, you may also enjoy reading:

• Millennials, Here’s What To Do With an Inheritance in 2024
• The Best Ways to Take Advantage of Government TSP Matching

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About Kevin Mahoney, CFP®

Hi, I’m Kevin. I’m the founder of Illumint and a financial advisor in Washington, DC. I specialize in financial planning for Millennials like you. As a Millennial father and Certified Financial Planner™, I empower our peers to invest with confidence and flexibility. If you’re new to Illumint, I’m glad you’re here – you now have access to the leading college finance blog for Millennial parents. I encourage you to read, watch, or listen to the ideas I share about exchanging your money for memories with your kids. And then when you’re ready, please send me your thoughts & questions!