With college tuition costs still shooting into the stratosphere, why are so few American families taking advantage of college savings plans?

Though they were created to help middle-class families pay for ever-rising college tuition costs, 529 college savings plans haven’t been embraced by the middle-income American households they were designed to help, according to a recent government report. 

The U.S. Government Accountability Office’s “Survey of Consumer Finances” found that only about 3% of households with children under 18 years old put aside money in a 529 plan or a Coverdell Education Savings Account—a similar but less-used college savings plan.

The GAO report, released in December, said the main beneficiaries of 529 plans tend to be U.S. families in the upper middle class—or higher—who better benefit from the plans’ tax breaks than families with smaller incomes.

“Although 529 plans do help some families save for college, families with less income and who are uncertain about whether their children will attend college may have less incentive to invest resources in 529 plans than in other forms of savings,” says the report’s summary. “In addition, the tax benefits attractive to a higher-income family don’t offer as much (financial) benefit with a lower tax.”

A report from Boston-based Financial Research Corp. last month indicated that investments in the overall college savings market will hit nearly $847 million by year-end 2013, and 529 plans will account for $211 million of that figure. The remaining estimated $636 billion will be divided among a variety of other college savings instruments, including state college prepaid tuition plans, Coverdell education savings accounts and custodian accounts, as well as families’ private savings accounts.

Chip Roame, a managing partner at Tiburon Strategic Advisors in Tiburon, Calif., says the growth in these products has been much smaller than it is in investments such as mutual funds, which have an estimated $10 trillion; 401(k) plans, which have $2 trillion; exchange-traded funds, which have $1 trillion; and annuities, which have more than $2 trillion.

“Part of the reason for the low 529 account assets is their super-small balances,” says Roame. “And remember, between 25% to 50% of kids will never go to college, so the total ceiling is not 100% of the available households, but maybe between 50% to 75% of the eligible households.”

Roame attributes the low number of middle-income households that have opened a 529 plan to reasons ranging from consumers’ lack of disposable income and their lack of awareness of 529 plans to parents’ procrastination and their use of alternative college savings vehicles. Rather than saving for college, he notes, many parents are counting on financial aid or loans to help pick up some of the tab.

And some families simply don’t need to fiddle with 529 plans. “Wealthy people self-fund and have the money ahead of time,” Roame says.

But for those less fortunate, it could be a simple matter of not having the cash to stash into a college savings vehicle  in the first place. A college savings study released last August by Fidelity Investments found that parents on average said they plan to pay for roughly 57% of their children’s college costs. Yet the typical family is currently on track to cover just 30% of the costs.

Ultimately, though, 529 plans simply don’t appear to be on many people’s radar. An estimated three-quarters of consumer households lack basic knowledge of 529 plans, according to College Savings Plan Market: The Increasing Dominance of 529 Plans, a report released by Tiburon Strategic Advisors last March.

“529 plans still suffer from a lack of awareness,” Roame says.