Peter, you wrote:
"If that was the intent, they should have billed it as a college savings plan for the very wealthy only. And if this interpretation is correct, we are going to see some very angry middle class and working people who sacrificed to put money they couldn't really afford into these plans (because that is what we do for our kids) only to find that we would have been better off not to do anything."
I couldn't agree more. I even run a radio ad in town that says something along the same lines as your first sentence. I do believe that 529 plans are for those of higher means (at least for now). As Texas said, it at least gives them the possibility of some sort of help since they won't be getting any aid.
Bwilk--I too would not be so quick to dismiss need-based aid--especially if your child is considering a private school. Too many parents that I work with won't even consider the 30K private school because of cost when, in reality, that school could end up costing them less than the 15K UC school--even at a middle class income. Best thing is to apply to ALL potential schools and see who gives you the best deal (heck, given a low EFC the school that would cost you the least out of pocket would be Princeton--at 35K+ school--they have NO loan program at all and meet all of the remaining need, minus a small work study, with grant money).
Joe--I read your post about DOE being unsure how they're handling 529 distributions--if that's the case, someone better tell their agents--I've gotten the same answer on four separate occasions (that being that it's all counted as income to the child).
SK