Margin squeeze rolls on, as Nevada drastically reduces 529 fees

Nevada residents who invest in one of their state’s Section 529 college savings plans are about to see their fees cut nearly in half — thanks to The Vanguard Group Inc. Effective Oct. 15, Vanguard is cutting the fees on its age-based portfolios from 0.44% to 0.25, and the expenses for the plan’s 19 other portfolios are being reduced. Total operating expenses for the Vanguard 529 College Savings Plan will range from 0.25% to 0.55%, depending on the portfolio, down from between 0.44% and 0.66%, making the plan one of the lowest-cost in the country, according to The Vanguard Group.
For Nevada, the move is the second significant change to its 529 plans announced this month. On Sept. 16, Nevada announced that it had hired Putnam Investments to provide a new adviser-sold 529 plan. “Our state treasurer, Kate Marshall has been working with a lot of our plans this past year to figure out how we can help families save more and get more kids going to college,” said state senior deputy treasurer Karen Duddlesten. The direct-sold plan has $4.5 billion in assets.
Vanguard announced similar fee reductions for its New York plan in August. With those changes, total annual asset-based fees declined to 0.25%, from 0.49%. Account fees for age-based options generally range from 0.2% to 2.27%, according to Morningstar Inc.
With the fee reductions, Vanguard’s 529 College Savings Plan has the third-lowest fees for age-based options, up from fourth place, according to Financial Research Corp. The plan is tied with New York’s 529 College Savings Program Direct Plan.
“The significance of the announcement is that fees for 529 plans continue on their downward trajectory which should help families save for higher education expenses,” Mr. Curley said. “This will also put added pressure on future request for proposals within the 529 space which may cause consolidation in plan providers as profitability on smaller plans continue to diminish.”