Although President Obama says he wants to help middle class families he proposed in the State of the Union speech taking away (i.e. taxing them more) their incentive to build their own account to save for college--make them even more dependent on the federal government. After loud protests, even from his own party (who seem to be catching on), he has stopped eyeing the hard earned/saved college money. The 529 plan has become very popular and about 12 million American families rely on the accounts to help with college costs. Not to worry, I'm sure he'll start lusting for our IRAs and 401-k's since it's just not fair that some of us regularly saved and invested for our retirement years when others only have Social Security or food stamps.
Q. What is a 529 plan? (IRS.gov)
Answer. A plan operated by a state or educational institution, with tax advantages and potentially other incentives to make it easier to save for college and other post-secondary training for a designated beneficiary, such as a child or grandchild.
Q. What is the main advantage of a typical 529 plan?
A. Earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board. Contributions to a 529 plan, however, are not deductible.