Several recent developments make them more attractive than ever.

1. Beginning this year, Pennsylvania residents will be able to deduct up to $12,000 (or $24,000 per married couple) for contributions to a Section 529 Plan each year on their Pennsylvania personal income tax return. Pennsylvania is the first state to offer a state income tax deduction for contributions to all Section 529 plans, not just those sponsored by Pennsylvania.

2. UTMA (Custodian) Accounts are now less attractive for savings for college due to a change to an income tax provision known as the "kiddie tax." The kiddie tax provides that a child pays income tax on unearned income in excess of $1,600 in 2006 ($1,700 in 2007) at his or her parents' marginal (top) rate. Previously, the kiddie tax applied to a child who was under 14 years of age, so that after that the child's rate applied. The new law changes the applicable age to those under 18 - meaning there is no longer an income tax benefit to using an UTMA for college savings. All accounts held under UTMA will be subject to this new rule for 2006 and beyond.

3. New legislation provides that for federal financial aid purposes, Section 529 plan accounts owned by the student will not be considered for purposes of determining eligibility. Prior law had stated that 30% of a student's assets, including a student owned Section 529 plan was the expected amount to be paid by the student each year.

4. The Pension Protection Act of 2006 was signed by the President on August 17, 2006. The Act makes permanent the federal income tax exclusion for Section 529 account withdrawals used for qualified expenses, which was scheduled to expire in 2011.