This month, Morningstar released its review of 529 plans. Since all states offer the college funding plans, parents should look at their own state plans first to take advantage of the tax breaks for residents, said Kerry O'Boyle, fund analyst and author of the study.

But the offerings of some states, such as Alabama, Arizona, Maine, Tennessee, and Wyoming, are so poor, according to the ranking, residents should look out of state, starting with the Morningstar's top rankings among broker-sold and direct-sold plans.

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