It is allowed to grow tax-deferred until it is used for college. When funds are withdrawn from the account, it is taxed to the student, in the student's tax bracket. The benefit is that you get the tax advantage, and the parent maintains control of the account until the student goes to college. The downside is that once you choose an investment track up front, you have to stick with it for the duration. So this type of investment might not be a good choice for aggressive investors who want a lot of control over the funds.
Parents can also save college money under their own names or in the child's name.
While there are some tax advantages in putting it under the child's name, if you have a modest family income and your child would qualify for significant financial aid, having assets under the child's name will reduce that eligibility. In such a case it would be better to keep the money under the parent's name. If you are investing money for your child's college education, consider keeping most of the investment in stocks until the child reaches high school age. At that time, look for opportunities to transition your money into bonds, which will provide lower interest but significantly more stability and security. That way, you'll be sure the money is there when your child goes to college.