State Treasurer Robert P. Casey recently hired Moody's Investors Service to evaluate the Guaranteed Savings Plan, one of two Pennsylvania-sponsored college savings plans.

The accounts are known as 529 plans for the section of the tax code authorizing them. Through at least 2010, the federal government won't tax earnings on money invested in these plans if withdrawals are used for qualified college expenses.

Pennsylvania markets its 529s as Tuition Account Plans, or TAP, and they come in two flavors: the guaranteed plan scrutinized by Moody's and an investment plan built around mutual funds.

It is the guaranteed plan that has drawn most of the headlines because of questions about its ability to keep promises it's made. The plan allows investors to purchase tuition credits for schools across the country at today's prices, redeeming them when their child, grandchild or other loved one heads off to college.

Underlying that promise is the assumption that when the state invests the money, its returns will keep pace with college tuition increases.

That worked during the bull market, but hasn't been the case in recent years as college costs increased dramatically. As of June 30, the guaranteed plan had a $43.7 million deficit. That compares with a $47.2 million deficit the prior fiscal year and a $52.6 million shortfall two years ago. Because of the gap, the state imposed surcharges two years ago. Depending on the type of school for which you're purchasing tuition credits, premiums range from 1.8 percent to 9.7 percent.

Despite the shrinking deficit, concerns remain. Mr. Casey hoped Moody's evaluation would alleviate them and, to an extent, it has. Although the state is not legally bound to cover any deficits, Moody's concluded that, given statements by elected officials, the state is likely "to support the plan in a time of crisis." So the ratings agency gave the plan a higher grade than it would have if state aid wasn't considered.

Moody's rated the plan A3, its lowest A rating. The score applies to investments of upper-medium grade quality that are subject to low credit risk. The 3 indicates the plan is in the bottom third of A-rated investments.

"I hope that the low credit risk associated with the plan's A3 rating will encourage many new families to join the TAP program," Mr. Casey said.

That hasn't been a case in recent years. Investors put $141.8 million into the guaranteed plan in the year ended June 30, down from $206.5 million the previous fiscal year and $233.9 million two years ago.

Treasury officials believe the surcharges have something to do with the drop-off, but aren't the only factor. They say contributions to the state's other TAP plan, the mutual-fund based 529, increased last year. That option, launched in 2002, has assets of $256.7 million vs. more than $1 billion in the guaranteed plan, which has been around since 1993.

Investors contributed $86.9 million to the mutual-fund based plan in the last fiscal year vs. $81.7 million the previous year. The plan offers portfolios built around funds offered by money managers Delaware Investments and Calvert.

Three financial advisers I spoke with said Moody's rating gives investors more comfort about the guaranteed plan, based on the likelihood of state assistance should it be needed. However, their eyebrows were raised by one assumption on which the $43.7 million deficit is based: that the state will earn 7.5 percent investing money in the plan over the next three years and 8.5 percent after that.

The higher the expected return, the smaller the deficit is. But the advisers say the state's assumption is aggressive for how the state invests the money: 60 percent in stocks and 40 percent in fixed income and cash.

The assumption is "a little on the high side for that kind of account," says Jim Meredith, executive vice president of Hefren-Tillotson, the Downtown money manager and financial consultant.

The advisers believe the earlier someone starts saving for college, the less attractive the guaranteed plan is. They say returns from investing in fund-based plans are likely to create a bigger pot of money than you'd get from the guaranteed plan.

Trouble is, none of the advisers is wild about the funds Pennsylvania uses, saying the 529 plans of other states offer better-performing, less expensive funds.

"I'm not a real big fan of Delaware Investments. I think there are better investment managers out there," says David Root Jr., chief executive officer of D.B. Root & Co., Downtown.

He and Mr. Meredith use Virginia's plan, which relies on American Funds. James Holtzman of Legend Financial Advisors in McCandless recommends Missouri's plan, built around TIAA-CREF funds.

Pennsylvania doesn't tax earnings from investments in its 529 plans, but earnings on out-of-state 529 accounts are subject to state taxes. While that's an incentive for Pennsylvanians to invest at home, the lower expenses of other states' plans will "more than compensate longer-term investors," Mr. Meredith says.

Saving for college is tough enough. Figuring out which 529 plan is best for you based on your income, tax bracket and other factors is even tougher. For help, go to www.sec.gov, do a search for "529 plans" and choose the link for investor education. You'll find more helpful Web sites listed there. Also visit www.savingforcollege.com, where you'll be able to compare plan features on a state-by-state basis.