How will a 529 plan affect my childs chances to qualify for financial aid?
U.S. Department of Education says that your 529 savings account is treated as an asset of the parent or other account owner in determining eligibility for federal financial aid. This means that your expected contribution towards your child’s college costs will include 5.6%, or less, of the value of your account for each academic year. This is much better than the 35% assessment against assets owned in your child’s name or in a custodial account.
Assets in a 529 account are treated as an asset of the parent or other account owner in determining eligibility for federal financial aid. Expected contribution towards your child’s college costs, for parents, will include 5.6%, or less, of the value of your account for each academic year. Comparatively, 35% is the assessment against assets owned in your child’s name or in a custodial account.
A new law enacted in 2006 (Deficit Reduction Act of 2005) made substantial changes to the treatment of 529 plans in the federal student aid eligibility formula. The changes were first effective for the 2006-07 school year. The 2006 law prevents a 529 account from being treated as a student asset on a Free Application for Student Aid (FAFSA) filed by a dependent student.
