Parents faced with the daunting task of paying for their children’s college education continued to put cash in 529 college savings plans, as assets rose to $45.1 billion in the third quarter, according to data released Tuesday by the College Savings Foundation.

That represents a 55% spike from the year-ago quarter, when assets stood at $29.1 billion and a 5% increase from an estimated $43 billion at the end of the previous quarter. The state-sponsored investment vehicles offer tax exemptions to earnings and distributions made from plan accounts when used for qualified expenditures covering college costs.

"The latest data on cost trends across the nation’s higher education institutions continue to document the ongoing and critical need for a focused, tax-efficient vehicle for education savings," said CSF Chairman Chuck Toth, in a prepared statement.

The College Board reports that the average college tuition increase, while smaller than last year’s, remains at an historically high level. Four-year private institutions are charging an average of $27,516 a year, up 5.6% from the $26,057 imposed on students last year. Despite efforts to provide more financial aid to students, loans are outpacing grant aid for the second year in a row, the College Board noted.

Toth said he is hopeful that Congress will support the 529 movement by making the tax-free treatment of qualified distributions from 529 plans a "permanent" feature. At present, the tax-free treatment provision of Section 529 college savings plans is scheduled to expire at the end of 2010.

Net sales of 529s for the third quarter were $2.2 billion, compared with $2.9 billion in the second quarter and $2.9 billion in 2003’s third quarter, according to Financial Research Corp. In the first three quarters of 2004, net sales totaled $9.2 billion, up 21% from the first three quarters of 2003.

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