Senator Kip Bateman (R-16) responded this morning to a new report by Morningstar that ranks New Jersey’s 529 college savings plan among the five worst in the nation. Morningstar, a highly respected investment research firm, based their ranking on New Jersey’s abnormally high fees, risky investment strategies and a lack of investment options in the New Jersey Best 529 College Savings Plan. The Morningstar report is available at www.senatenj.com/529.
“As one of the original sponsors of the legislation that created New Jersey’s 529 college savings plan, I am disappointed that a Wall Street veteran like Governor Corzine could be asleep at the switch,” Bateman said. “With his long experience as a Wall Street trader, Governor Corzine should have provided better fiscal oversight. Poor management of New Jersey’s 529 plan will only make it harder and more expensive for New Jersey’s middle-class families to send their children to college.”
As of March 2009, there were more than 276,000 accounts investing college savings through the New Jersey Best 529 College Savings Plan. Morningstar’s analysis cites major flaws with the current management of the 529 plan, including “its overly aggressive age-based option combined with a lack of flexibility” and “its above-average fees.”
“The Corzine Administration tolerates a management plan that is ‘overly aggressive’ with the college savings of more than a quarter-million New Jersey children,” said Bateman. “Wall Street managers have been allowed to charge New Jersey families extraordinarily high fees that far exceed those charged by the 529 programs of other states.”
Morningstar further states: “The terrible performance of some 529 plans in 2008 clearly illustrates that, now more than ever, investors can’t afford to invest in anything but best-of-breed college savings plans.”
“Following Morningstar’s recommendations, parents will likely think twice before they place their children’s college savings in New Jersey’s hands,” added Bateman. “While other states are managing their 529 plans well and providing a measure of investment security in this down economy, our plan continues to flounder. With so many New Jersey families depending on our 529 plan for college savings, Governor Corzine clearly needs to address these serious problems. New Jersey residents have shown their willingness to pick up and move to lower taxed states, so we shouldn’t be surprised when their college savings start to appear in the better-managed 529 plans of our neighbors.”