Convincing parents to save for their children’s education can be very challenging, but helping families find the best 529 college-savings plans shouldn’t be.

A good starting point is Morningstar’s analyst ratings of 529 college-savings plans. The independent investment research firm has conducted qualitative research on 529 plans for more than a decade and began rating them on an annual basis in 2010.

In October, Morningstar released its ratings for 63 college-savings plans, which account for over 90 percent of the more than $200 billion in 529 plan assets, says Leo Acheson, an analyst covering multi-asset strategies for Morningstar and the head of its 529 effort this year. His five-person team identified 29 plans as medalists—gold, silver or bronze—that are likely to outperform their peers on a risk-adjusted basis over at least five years. It granted 32 neutral ratings and two negative ratings.

“Neutral means we don’t necessarily think there’s a flaw that we think will lead to underperformance but we also don’t think the plan is necessarily likely to outperform over the long term on a risk-adjusted basis,” Acheson said during a recent Morningstar webinar. Plans receiving negative ratings have flaws—such as high fees, recent management turnover or poor state oversight—that are likely to lead to underperformance over the long term, he noted.

Morningstar analysts evaluate five pillars for 529 plans: process, people, parent, performance and price.  “Process” concerns a plan’s glide path and investment options. “People” refers to the underlying money managers. “Parent” pertains to the stewardship and oversight practices of the program manager and the state running and governing a plan. “Performance” is a plan’s risk-adjusted track record and its forward-looking return expectations. “Price” is the cost of its investment options.

The pillars aren’t weighted equally and, Acheson told Financial Advisor, “There isn’t a simple formula.” For example, price is more important for plans that primarily use passive strategies; more weight is given to people and process when a plan has recently undergone a complete overhaul, he says.

The Morningstar team also looks at state-provided tax deductions. “It’s a major consideration,” said Acheson. “In some cases, that can completely change a plan’s rating.” In an extreme case, a strong state benefit boosted Indiana’s direct- and advisor-sold plans to a bronze rating, although he thinks they’re still too expensive for out-of-staters.

Morningstar rates direct- and advisor-sold plans separately. Direct-sold plans tend to perform better because they sport lower fees, said Acheson.

This year, Morningstar awarded gold medals to Alaska’s T. Rowe Price College Savings Plan, Maryland College Investment Plan (also managed by T. Rowe Price), Nevada’s Vanguard 529 College Savings Plan and Utah Educational Savings Plan. All are direct-sold plans.

The T. Rowe Price-led funds won accolades from the Morningstar team for their use of highly regarded strategies and asset-allocation glide paths that gradually reduce the equity stakes of their age-based tracks. This lowers the risks associated with a potential market sell-off.  The Nevada plan offers low-cost broad diversification. The Utah plan, which primarily offers Vanguard index funds, allows account holders to design customized portfolios.

The plans given negative ratings—for the second straight year—were South Dakota’s CollegeAccess 529 and Arizona’s Ivy Funds InvestEd 529 Plan. The South Dakota plan is very expensive for out-of-staters, who comprise the majority of its assets. Morningstar’s chief concern with the Arizona plan is oversight issues.

Acheson said Ohio, Utah, Massachusetts and Michigan are solid states from an oversight perspective, given their strong stewardship of 529 plans and greater insulation from political changes and turmoil. Positive trends in the 529-plan industry include continued reductions in fees, greater diversification of investments and efforts to rein in exposure to moves in interest rates, he said.

Mark Kantrowitz, a nationally recognized expert on financial aid, recommended relying on 529 plan ratings from Morningstar and SavingForCollege.com, an independent college-savings website. “There are no other reliable ratings sources for 529 plans,” he said.

SavingForCollege.com’s “5-cap Rating” system factors in performance, costs, features and reliability. The top-rated plans receive five caps (mortarboard icons). Unlike Morningstar, SavingForCollege.com also rates prepaid-tuition plans that, like college-savings plans, fall under Section 529 of the federal revenue code. SavingForCollege.com gives plans separate ratings for residents and non-residents.

Several years ago, Kantrowitz developed a rule of thumb to compare two 529 plans when one offers a state income tax benefit but has higher fees. “If the state's marginal income tax rate is less than the product of the difference in fees and the number of years until college enrollment, then the 529 plan with the lower fees will yield a greater net return on investment,” he said. “This is an approximation, but it works well in practice.”

Acheson encourages advisors to seek strong 529 plans for their clients’ needs. Still, he added, “What’s probably more important is how frequently and how much clients are saving for college.”