Americans' retirement plans haveĀ­n't been the only thing ruined by the financial and market crisis. College savings plans have also been shattered, and it's caused parents-as well as the burgeoning 529 plan industry built around them-to reassess their strategies.

It may be due to a lack of faith in long-term equity investing. Or it could be that investors feel a secure retirement is more important than building a college nest egg. But what is clear is that Americans have pulled back somewhat in putting away money for college, as indicated by data that shows 529 plan sales and assets have declined since the bottom fell out of the market in the fall of 2008.

Average 529 plan contributions have also decreased and according to some 529 program managers have been weighted more toward conservative investment options.

At the same time, 529 plan providers have quickly adjusted to the changing market and attitudes-offering guaranteed, FDIC-insured bank accounts, for instance-while also fending off criticisms that their investment options were too risky going into the crisis. Of particular concern has been the industry's age-based account, which is by far the most popular 529 plan option in the nation. These accounts work much like target-date mutual funds and are designed to get more conservative as the child gets closer to graduating high school and going to college. Some analysts contend these plans took on too much equity risk even at late stages and that account holders suffered the consequences-losing, in some cases, 20% or more just a year or two before they needed the money.

"I think they got too aggressive," says Fred Amrein, principal of Amrein Financial in Wynnewood, Pa. "Everyone just got greedy."

These are setbacks for an investment product that many advisors considered underused before the crisis. The 529 industry has struggled to win wider acceptance for the plans for more than a decade.

"I think in general [the crisis] has slowed up contributions going into 529 plans," says Joseph Hurley, founder of, a 529 plan information clearing house. "I think the impact is more from families that just don't have the confidence and cash flow they had before."

The sales drops in the fourth quarter of 2008 and the first quarter of 2009 were telling because those are the times of year when 529 plan sales usually peak. In the fourth quarter, at the height of the financial crisis, 529 plan gross sales were down 10% from the previous quarter, according to Financial Research Corp. Assets in 529 plans dropped 21% from a year earlier, going from $111.9 billion to $88.5 billion.

Gross sales were down 1% in the first quarter, while assets were down 22% from a year earlier, to $85.9 billion.

Investors in 529 plan accounts, meanwhile, have been throwing risk to the wind and moving money to the relative safety of CDs and other bank accounts. The programs themselves, meanwhile, have ramped up the number of low-risk options available to account holders, either in the form of FDIC-insured accounts or other forms of principal protection.

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