There's time to recover and grow,''' said Joseph Hurley, a certified public accountant from Pittsford, N.Y. and author of a book on Section 529 plans. The plans, offered by nearly every state, allow parents and grandparents to invest in mutual funds that grow tax-free until the money is withdrawn, and then it is taxed at the student's rate. Some states let investors deduct all or part of the contributions from state taxes. Besides tuition, Section 529 money can be used for room and board and other college costs. The money can be used at any school in the country.
Contributors qualify for state income tax deductions.
Although some states only offer Section 529 plans to residents or those who work in the state, others have opened their plans to investors nationwide. Last November, Rhode Island set off a boom when it relaunched its college savings program and began marketing it nationally. The plans usually offer tax advantages as well as peace of mind, which is one reason they're recommended so highly by accountant Hurley, who also runs a Web site tracking and explaining Section 529 plans nationwide. The interest keeps accelerating as new programs go online and they get the word out there about them,'' Hurley said. But money is still flooding in, said Dale Hatch, the plan's deputy administrator.