The economic stimulus refunds already in the mail to millions of Americans aren’t big enough to last long, but there is a way to stretch their value: invest them in tax-advantaged 529 college savings plans.

The College Savings Plans Network (CSPN), an affiliate of the National Association of State Treasurers (NAST), is urging parents and grandparents to invest at least part of their economic stimulus check in the higher education of their children and grandchildren.

The Internal Revenue Service (IRS) has begun sending economic stimulus payments to more than 130 million U.S. households. The payments are part of the Economic Stimulus Act of 2008, which was designed to stimulate the U.S. economy by putting money back into the hands of taxpayers.

"We understand that many families will use the money to pay off debt or take care of other household necessities," said Jackie Williams, past chairwoman of the CSPN and executive director of the Ohio Tuition Trust Authority. "But it's also important to take a serious look at important financial priorities and, specifically for families with young children, what it will take to pay for college.”

Mary G. Morris, executive director of the Virginia College Savings Plan, emphasizes that having a plan to pay for higher education – and acting on it by saving regularly in tax-free 529 accounts – is critical in meeting college goals.

Added Williams, “For a child born today, the cost of college could easily exceed $100,000. In order to avoid huge student loans – and the ensuing debt placed on new college graduates – parents need to have a plan to overcome this financial hurdle. The first step is investing in a 529 college savings plan."

Potential financial gains in 529 plans are exempt from federal taxes upon withdrawal, as long as the money is used for qualified higher education expenses. Virginia 529 plan owners who file Virginia income taxes also can deduct up to $2,000 a year for each account. Contributions over that amount may be carried forward on an unlimited basis until all contributions have been fully deducted. Account owners age 70 and over are not subject to the $2,000 annual limit.

The state deduction – only available to owners of Virginia 529 accounts – will get even better beginning Jan. 1, 2009, when the Virginia income tax deduction will double to $4,000 a year per account.