Choosing 529 plans or qualified tuition programs as a savings strategy for the college-bound got more enticing in 2006 as the programs' tax-exempt status gained permanency, and student-owned accounts would no longer need to be reported on financial aid applications."New legislation in 2006 created a significant advantage in 529 plans," said Joe Hurley, CPA and founder of Savingforcollege.com. "Accounts owned by students or custodians by the Uniform Transfer to Minors Act are no longer reported on financial aid applications if the student files as a dependent student. Before, they were reported as student assets and assessed at a very high rate."

Those funds, Hurley added, need to be transferred into a 529 account before filing a Free Application for Federal Student Aid application.

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