Understanding the Impact of 529 Plans on Financial Aid

April 26, 2025 - 16:27

A 529 college savings plan can be a powerful tool for saving for future education expenses, allowing investments to grow tax-free. However, many families wonder how these plans affect financial aid eligibility. The answer lies in understanding how assets in a 529 plan are treated in the financial aid process.

When assessing a student's financial aid eligibility, the Free Application for Federal Student Aid (FAFSA) considers the assets held in a 529 plan. Typically, the funds in a 529 plan are counted as parental assets, which have a lower impact on financial aid calculations compared to student assets. This means that having a 529 plan can be beneficial, as it may reduce the expected family contribution (EFC) when applying for aid.

It's essential for families to plan strategically. While 529 plans can provide significant tax advantages and help cover education costs, it's crucial to consider their potential impact on financial aid. Families should consult with financial advisors to navigate the complexities of college funding and ensure they are making the best choices for their financial future.