"They may be used for any post-secondary institution that accepts financial aid, including some schools abroad," she says. "Parents can select a new beneficiary, even themselves, if the original plan beneficiary decides to forgo college."

In addition to traditional 529 college plans, there are state and private prepaid tuition plans. Both 529 and prepaid tuition plans are offered by most states. Families can also set up a private prepaid tuition fund through a consortium of some 275 private colleges and universities. The private prepaid plan allows family investors to apply that money for tuition at any of the participating schools.

Prepaid plans allow parents to make payments today for future tuition credit that their children can use at present-day dollars when they enroll in college in the future. Prepaid program assets rose an estimated 28% for two years through the end of 2011, according to FRC.

"Prepaid plans have been growing over the last two years due to more advisors guiding their clients with a holistic approach," Curley says. There has also been "an increase in investor awareness of college debt and product providers implementing new structures to improve investor interest in the product."

While prepaid tuition accounts are also projected to post steady growth in the next two to five years, only an estimated 10% of financial advisors use prepaid college savings plans for their clients while an estimated 92% of advisors use 529 plans, according to an FRC survey of 375 financial advisors conducted last July.

Financial advisors say 529 plans are more reliable investments that don't depend on the stability of a state's tuition pool, which in the past could not keep pace with the faster increase of college costs. 

Tom Bullitt, senior investment advisor for Waltham, Mass.-based Mill Street Investment Management, a division of Ballentine Partners, says 529 plans make a lot of sense, "especially if you have a monthly program of investing in them, or you are able to put in a sum of money initially when the child is born. College expenses are real and they're big, and it's a real good idea to put some money away for them."

Also fueling the increase in 529 college savings and prepaid tuition plans is the nation's sizable student loan debt, which passed the $1 trillion mark last year. Tuition and fees at U.S. public universities also rose last year to 8.3%, twice the rate of inflation according to a College Board report.

Escalating college costs have even begun to concern mass affluent investors. In a survey conducted by Bank of America's Merrill Edge group, published in April, an estimated 64% of survey respondents indicated that their children's college or university costs were more expensive than they had anticipated.

"College tuition is astronomically high, rising at double the cost of inflation," says Vijay Marolia, chief investment officer at Lake Mary, Fla.-based Private Wealth Management. "It's tax-free growth for college, so why wouldn't you use [a 529 plan]?"