Do the homework on college savings

It's the time of year for "tough love" on college investing.

To ensure that your child is progressing financially toward some future fall semester, face reality and save early — just as Lauren Volk's parents are doing.

"Lauren is 1 week old and we'd like her to have the chance to go to any college she wants," said mom Katherine Volk, of Marietta, Ga. "We'll put a small amount each month into a 529 college savings plan, as we already do for our 2-year-old, Andrew."

State-managed 529 plans, despite a slowing of contributions in recent quarters, hold $55 billion in assets. With minimum contributions as low as $25, they permit tax-free distributions for qualified higher-education expenses. You can invest in any state's plan.

But they aren't a snap: Plans vary from state to state in terms of fees and expenses, which sometimes run quite high. Some are sold directly and some through brokers. There are differences in performance and the number of investment options.

The recent mutual fund scandal and the firing of Utah's 529 director for alleged financial improprieties last year threw a scare into these plans. Saber-rattling by regulators has pushed them toward greater standardization and cost disclosure.

"Look at your own state's program first, then shop around," said Joseph Hurley, founder of Web site company Savingforcollege.com in Pittsford, N.Y., and author of "The Best Way to Save for College: A Complete Guide to 529 Plans" (Bonacom Publications). "Some states now have matching contributions for low-income families, and some have special asset protection for state residents."

Sixty-nine percent of 529 plan assets are now in age-based portfolios that automatically adjust assets to a more conservative investment mix as a child nears college. You can compare various state plans at Hurley's Web site or at the College Savings Plans Network's collegesavings.org.

"Diversifying investment options is an important 529 trend," said Diana Cantor, executive director of the Virginia College Savings Plan, in Richmond. "In July, we added five new index funds that include REITs (real estate investment trusts) and TIPS (Treasury Inflation-Protected Securities)."

Although some plans have reduced their fees and expenses, this isn't universal. In fact, the board of TIAA-CREF, traditionally one of the lowest-cost mutual fund providers, votes Aug. 31 on whether to increase its current charges.