Thankfully, securities regulators have been examining more closely the sales of 529 plans, an increasingly popular way for families to save for college.
But even as those overseers are doing their part to ensure 529 plans are properly sold, we investors still bear most of the burden of finding independent research on one of the best ways to save for college.
And I have just the resource: "The Best Way to Save for College: A Complete Guide to 529 Plans" by Joseph Hurley (Savingforcollege.com, $22.95).
Hurley, who is a certified public accountant, is the founder and chief executive officer of Savingforcollege .com.
"Section 529 plans provide some powerful and unique tax advantages not available with other college-saving options," Hurley writes.
There are two types of 529 plans: prepaid tuition plans and savings plans. A prepaid tuition plan allows people to pay a child's tuition in advance. The more popular savings plan allows people to invest in a tax-free investment account. Money withdrawn from a 529 investment is free from federal tax (and in most cases free from state and local taxes as well) when used for qualifying college costs. Additionally, many states offer a deduction for state residents who make contributions to a 529 plan.
Although the 529 plans are state-sponsored, you can invest in any plan regardless of where you live. And money invested in a 529 plan can be used for a state or private institution. Every state and the District of Columbia now are offering at least one 529 plan.
The plans remain one of the top ways to save for college. Why? Hurley sums it up nicely. Everyone can participate in a 529 plan regardless of age or income. You can accumulate more than $250,000 in these tax-shelter accounts for just one child's future college expenses.
In addition to the tax advantages, contributions to a 529 plan can be treated as if they were made over a five-year period. As Hurley explains, this means that $60,000 can be contributed to a 529-plan account without trigging a gift tax.
Thanks to another recent change, a 529 plan - whether it's prepaid or a savings plan - is considered a parental asset in the determination of federal financial aid. That change became effective July 1.
Best of all, there is an extremely useful state-by-state comparison of all available 529 plans - prepaid and savings. Because there are constant changes to these programs, you should verify the details with the plan's sponsors. You can also check for updates at www.savingforcollege.com.
When it comes to 529 plans, Hurley's book is where you should start your own investigation.