Then select the best plan for your needs.
While it makes sense to look at what your state is offering first, you may prefer to shop around for a 529 with lower fees or better returns. Visit savingforcollege.com to compare the many options. Double-check that any out-of-state plan you're considering allows nonresidents to join (most do). Look at the range of investments, note the management fee (look for a number below .42 percent, the industry average). Go to morningstar.com/529 to see how the funds have performed relative to their peers. And stick with plans that are sold directly so you don't have to pay a broker. Confused? This should help: We've highlighted four of the best (see page 6 of this story).
Prepaid tuition plans, which let you contribute toward your child's public in-state education in today's dollars, are another 529 option. However, they've become problematic in recent years, as states have faced rising tuition costs and deficits. "Most prepaid plans have stopped accepting enrollment, or increased their prices well beyond current tuition costs," says Hurley. One exception: The Independent 529 Plan (independent529plan.org) welcomes new participants and lets you prepay toward 274 participating colleges. Admission, alas, isn't guaranteed.