For millions of parents focusing on their college-bound kids, it was the biggest disappointment from the stock market crash of 2008: the discovery that the primary tool for saving for college, the 529 plan, was far from a sure thing. Now, as college acceptance letters hit mailboxes across the country with stark reminders of the increasing cost of a higher education many parents are skipping the history lesson and forging back into these same plans.

Indeed, the plans may be among the hottest sellers in the investment community. The state-sponsored vehicles took in nearly $9 billion more than they paid out in 2010, a 75 percent increase in assets from 2008, according to Financial Research Corp. The number of options keeps growing too, with 96 state plans (some states have more than one) and some 4,000-plus investment options (each plan has its own mix of everything from certificates of deposit to stock-and-bond portfolios). Fees have dropped as well, in some cases by as much as 20 percent.

Not long ago parents were realizing that college-savings plans carried a host of risks the average 529 investment option lost 24 percent in 2008 just as their kids were nearing or attending college. But considering the alternatives (near-zero interest rates from banks, a volatile stock market), many financial advisers are nudging the nation's 24 million plus parents currently saving for college toward 529s and pointing to a newly revised rating system to help guide them. "This is not a simple choice," says Laura Pavlenko Lutton, editorial director for mutual fund research at Morningstar, which recently expanded its rankings.

Buying a home-state plan, of course, can offer some tax advantages, but other states may still be more attractive. Morningstar, for its part, assesses 53 of the nation's largest or most noteworthy plans and assigns ratings of "top," "above average," "average," "below average" or "bottom" to each. Under that system, based on criteria that range from performance to plan managers, the best include ones from Alaska, Nevada, Ohio, Maryland and Virginia, according to Morningstar.

Advisers caution against an overreliance on ratings, whether they're from Morningstar or Savingforcollege.com, which rates plans solely on performance. The ratings sometimes change dramatically from year to year. The results can also be very different depending on who is crunching the numbers. For example, Savingforcollege.com ranks Rhode Island's CollegeBoundfund plan 30th in the nation, based on its performance over the past five years. Under Morningstar's more complex system, which also examines fees and tax incentives, the same plan is the only one with a "bottom" ranking. AllianceBernstein, which manages the Ocean State's plan, takes issue with the idea that its plan is subpar. "We've got a well-respected program by all measures," says Patricia Roberts, the investment firm's senior 529 product manager.

Many financial advisers say a big consideration in selecting a 529 plan should still be the home-state advantage in states that offer tax breaks, since the savings can reach several hundred dollars a year. In New York, for example, a married couple filing jointly can deduct up to $10,000 annually from their state taxable income for contributions to the state's 529 plan. And that's on top of the federal benefits: Assets in all 529 plans grow tax-free, and withdrawals used for educational purposes are also exempt from federal taxes. Parents should also take into account the basics, such as a plan's past performance and costs, and whether the plan has investment options that meet their needs and tolerance for risk. A growing number of 529s feature federally insured choices essentially, certificates of deposit or savings accounts backed by the FDIC for account holders still skittish about the markets.

No matter what choice a parent makes when it comes to picking a 529 plan or other college-savings vehicle, experts say, it beats doing nothing and hoping that junior lands a four-year football scholarship. With college expenses increasing nearly 6 percent annually above the rate of inflation, inaction could be the costliest alternative of all.

Corrections & Amplifications
The version of this story that ran in SmartMoney magazine incorrectly listed the top five plans' assets in millions; they should be in billions. Also, Fidelity has plans in just five states.