My sister got close to the same deal with her kids. They were born in 2000 and 2002. I think it was $7500 each for the lump sum. When my first daughter was born in 2007, I was excited to check out the plans and sign up. It was shockingly expensive. $22,000 for the lump sum payment if my memory is correct. I am on the website now, for a kid born this year... it is $29,472 for the lump sum payment (4 year university plan). That is why I went the 529 option. I really cant complain, I have a 9.4% rate of return on both accounts since inception and it is growing nicely.
So, for my niece, she choose a small (very expensive) school outside the state. The program said, "No problem, she cant use this program but here is your $7500 back." Needless to say, her folks are now shockingly unprepared to help her.