Bostonian, we have considered 529s but were advised against them. Now I sort of forget why, but this may have something to do with it:
Of course, schools can do whatever they want with their own money and they may develop their own policies with regard to the impact a 529 plan will have on any institutional aid eligibility. Some schools piggyback on the federal EFC, some rely on a different form called the CSS PROFILE, and some come up with their own formulas. State schools tend to rely on the federal EFC.
Anyone who decides to save for college with a 529 plan and then finds their child wants to attend a private college should ask the college about their policies surrounding 529 plans as part of the college selection process. This will be just another factor in choosing a school. If it turns out that your child will lose a substantial amount of institutional aid because of the 529 plan, you always have the option of simply taking all your money out of the 529 plan, although that can lead to taxable income and a potential 10% penalty on the earnings.
Not saying we made the right choice, however. It's still rather murky to me. We really ought to consult a professional about this some time soon.
