Actually, my last comment was perhaps a bit too simplistic. As I research it now, expenses paid with distributions from a 529 plan do not qualify for education tax credits and deductions, according to IRS guidelines. SO, when you scrap the 529 plan, and pay for college with taxable funds, you can qualify for tax deductions that would be around $2,500/yr or so, depending on your particular tax situation. Over a 4-year college career, that would offset $10,000 of the $16,000 in taxes that I mentioned in my previous comment.
Still, thats $6,000 in extra taxes. And yes, I am just a middle class engineer (not some wealthy 1%-er), and all my other middle class friends definitely stash away a couple hundred bucks per month in 529 plans for their kids. And right now, we are all pretty much asking "WTF, Obama???" Maybe engineers aren't part of the "middle class" anymore? Maybe we've risen to the status of CEOs and doctors? I don't know, haha.... =)