Both stock and bond mutual funds have pillaged so-called 529 college-savings plans during the last year and smashed the best of intentions.

Even avoiding stocks and choosing conservative investments has not worked in many 529 plans, which are state-run programs that allow people to save for college tax-free. Many plans are geared toward specific ages of students.

For example, in Illinois, parents using Oppenheimer funds in the state's Bright Start program could have an 18-year-old on the way to college next fall and have lost almost 9 percent of their college savings this year, according to Joe Hurley, founder of SavingforCollege.com. In California and Arizona, which use Fidelity funds, the damage is similar.

Parents with young children do not have the pressure of tuition bills arriving soon, so they can wait out a serious loss and hope that a surge in the stock market will eventually fix the mess.

Evanston, Ill., financial planner Sid Blum said parents concerned about 529 losses should realize that they do not need all their savings available the day their child starts college. So even a 16-year-old still has six years to allow some of the investments to heal.

But families who want to reap some benefit from the miserable losses might find some solace in a tax strategy.

Hurley said that if a 529 plan was worth less now than when money was originally deposited, a family could close the account, withdraw the entire sum, and claim the loss for a tax deduction when filling out the forms next year.

But families considering such a strategy must be careful.

The tax benefit is not the same as taking a loss on an investment on stocks, bonds and mutual funds in a taxable account. Rather than falling within the rules on capital gains and losses, the 529 losses would have to be claimed as a miscellaneous deduction on the tax return. That means closing a 529 account would have value from a tax perspective only if the loss on the original investment exceeded 2 percent of a person's adjusted gross income.

It would apply only if people itemize their tax return. In addition, large miscellaneous deductions can trigger costly bills through the alternative minimum tax. Hurley suggests that, before closing a 529, people check their vulnerability to the AMT by using last year's IRS Form 6251 to do a calculation.

If the deduction would throw you into the AMT, it probably is not worth it.

In addition, Blum said, parents should be aware of state tax deductions for 529 contributions. If they close a 529, parents would lose the deduction. Also, grandparents or parents who used gifting rules to make a large contribution to a 529 could be prohibited from providing another gift for a while.

Hurley emphasized that it remained critical for families to save for college, and 529 plans provide the benefit of saving without being taxed. So if parents decide to close a 529 plan to capture a miscellaneous deduction, they should continue to save the remaining contents for college, using another 529 plan. To satisfy IRS rules, Hurley suggests waiting 60 days for that.

Parents who have a child in college or about to start next fall might want to insulate a year of tuition from both the stock and bond markets now, because of the uncertainties in the markets, said Park Ridge, Ill., financial planner Gary Bowyer.

Outside of a 529 plan, certificates of deposit would work. Inside a 529 plan, a money market fund would be a stable choice.