BY THE NUMBERS DO YOUR RESEARCH BEFORE COMMITTING TO ANY SCHOOL-TUITION SAVINGS PLAN.

Byline: Evan Pondel Staff Writer

Diane Ryan is all too familiar with the cost of college - her vision grows blurry at the end of each day from crunching numbers as the director of financial aid at California State University, Northridge.

But the final days of summer are the equivalent of tax season for Ryan. And a steady stream of students are pouring into her office, hoping to qualify for a break in tuition, or better yet, a break for their parents' bankroll.

``We are a financially needy campus,'' said Ryan, noting that CSUN students have a greater need for financial assistance than other students in the state university system. ``And the whole notion of saving to have better control over things like tuition doesn't exist. There's an information gap.''

With tuition on the rise and other costs keeping a lid on extraneous spending, more families are considering 529 college-savings plans as an alternative to run-of-the-mill investments. Functioning like a 401(k) plan, perhaps the greatest advantage of a 529 is that it provides discipline. But the plans also offer a relatively safe haven for a few extra dollars that might be destined for the coffers of academia.

In the 2004-05 academic year, tuition at four-year public colleges rose about 10 percent, according to College Board, a New York-based not-for-profit organization. The increase was below the prior year's 14 percent rise, yet still on par with a record-setting pace.

Such a surge may be unnerving to parents with college-bound kids, but participation in 529 plans has also increased. In the first quarter of 2005, the combined assets of 529 plans grew by 4.7 percent to $67.7 billion when compared with the same period a year ago, according to Investment Company Institute, a national association of mutual funds.

Aiding the increase is a greater push among states to bolster participation in 529 plans - called such because of their tax code number. Every state began sponsoring plans after the first Bush tax law went into effect in 2002. California's 529 plan is known as ScholarShare and is administered by TIAA-CREF, one of the nation's largest retirement systems. Beginning this month, state Treasurer Phil Angelides will visit elementary schools throughout California to tout the importance of ScholarShare.

``It is unfortunate that community and state college tuition has been raised so drastically in the last few years,'' Angelides said. ``And for families, it's never too early to start planning and putting away money.''

But 529 experts say ScholarShare's weakness is that it doesn't offer tax deductions when a family makes a contribution. Other states do, which begs the question: How does a California family select the right 529 plan when there are more than 80 options offered through other states and investment companies?

``One of the first things to consider is that your state's plan may not be the best choice,'' said Arman Rousta, founder and chief executive officer of 401kid Inc., a New York-based company that offers independent research on 529s. ``So it's important to look at what the state has to offer and the relationship they have with a brokerage firm.''

Relationships usually take the form of fees that are passed along to the customer. In the case of ScholarShare, the plan offers a relatively low flat fee to its investors. The flat fee arrangement, typical of plans managed by TIAA-CREF, allows an investor to easily calculate how much they are paying in fees to a plan manager.

But when it comes to the diversity of investment options offered by ScholarShare, the program ``ranks in the bottom tier among all plans (a minus),'' Arbab Hassan, a 401kid research analyst, said in an e-mail.

ScholarShare as an investment has also performed average to less than average when compared with other plans. ``Having said that, a lot of plans have performed a lot worse than the ScholarShare's investment options,'' Hassan said.

Aside from different product offerings, performance is also based on how soon a family begins investing in a 529 plan. Most financial advisers would say it's never too late to start investing. But they also recommend getting started as soon as possible.

David Adishian, a first vice president with Merrill Lynch in Los Angeles, has a 3-month-old and is already thinking about firing up a 529 plan. Granted, his line of work is certainly an influence. ``But I've always been a big proponent of this type of investment vehicle,'' he said.

From Adishian's perspective, investors should look at retirement planning in concert with college savings. To help rationalize contributions to a 401(k) and 529, parents and grandparents should think of the latter as offering tax-deferred growth and tax-free withdrawals (when used for educational purposes).

``Even if you're only contributing $50 a month (to your 529), it's worth it,'' Adishian said.

Of course, the new maximum account balance limit for ScholarShare beneficiaries stands at $285,000. And while it might be difficult to determine whether a young child is Harvard-bound, the money can also be used to fund a parent's educational endeavors.

For starters, parents or grandparents should figure out what the financial need is for four years of school. ``Whether it's a Stanford, a Harvard, or a Yale, planning depends on the nature of the cost,'' said Paul Nevens, senior vice president, at U.S. Trust in Los Angeles.

That means the limit on a 529 plan is among the most important variables to consider, so important that some plans are factoring the cost of tuition into the plan itself. For example, Independent 529 plans essentially allow investors to buy prepaid college tuition certificates. About 240 private colleges and universities participate in the indie plan, including Pomona College, University of Redlands, Pepperdine University and Stanford University.

The certificates appreciate in value as tuition rises at the participating schools. And because the schools are private, ``we don't have to worry about legislators,'' said Phillip Doolittle, senior vice president of finance and administration at the University of Redlands.

But 529 plans shouldn't only be considered for private schools. Tax-free money is tax-free money, and that's an ideal prospect for families that can use a break.

``Especially since we are a nation of consumers that tends not to worry so much about planning when a child is born,'' said Richard Runyon, professor of finance at California State University, Long Beach. ``And what's good about a 529 is that it helps a family get used to the idea of setting money aside.''

That's the message Jose Mireles is trying to spread. The Pasadena-based representative of TIAA-CREF is meeting with local companies to set up contribution programs for 529 plans. So far, The Walt Disney Co. is among the participants. ``It's all about starting small,'' Mireles said. ``It doesn't need to be painful.''

Evan Pondel, [phone]

evan.pondel(at)dailynews.com

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(color) EDUCATION SAVINGS CALCULATOR

Warren Huskey/Staff Artist