The April 4 Wall Street Journal explains some of the finer points of the best way to use the money in 529 college savings plans. If, for example, tuition is $10,000 and you are eligible for the $2,500 American Opportunity tax credit (applies to the first $4,000 in tuition), don't withdraw more than $6,000. Who should the check go to? Checks from 529 accounts can be written to the student, the account owner (typically a parent) or the school. The article warns that some schools may reduce financial aid if a student receives funds from a 529 account (according to Joseph Hurley, http://www.savingforcollege.com/. For spring tuition be sure to pay the expenses in the same tax year as the funds are withdrawn (generally not a problem for fall semester). If someone other than a parent owns the 529 account, and if your child is eligible for financial aid from the school, it may be best to save those 529 funds for the last couple of years of their undergraduate degree to maintain eligibility for aid. Any excess can be used for grad school or by a sibling.
By the way, 529 plans aren't limited to kids. Anyone of any age can save for college tuition (you don't need to sign up to earn a degree). Adults who plan tot go to grad school in the future or just want to take a course or two can benefit from the tax advantages of 529 college savings plans.