Having a 529 college savings plan can affect your child’s financial aid eligibility in a few ways. First, it’s important to note that 529 accounts are considered the parent’s asset, not the student’s. This means that they are typically less of a factor in the financial aid calculation than the student’s assets, which are given more weight in the calculation.
That being said, any money in a 529 account (as well as other types of education savings accounts) may be counted as part of the parent’s assets when determining the expected family contribution (EFC), which is used to determine financial aid eligibility. The EFC is a measure of the family’s ability to pay for college and is calculated using a formula that takes into account the family’s income, assets, and other factors.
The good news is that the impact of a 529 account on financial aid eligibility is typically relatively small. According to the College Board, for the 2021-2022 academic year, only 5.64% of a parent’s assets are considered in the EFC calculation. This means that even if a 529 account is well funded, it is unlikely to have a significant impact on financial aid eligibility.
It’s also worth noting that there are some types of financial aid, such as need-based grants and scholarships, that are not based on the EFC and are not affected by the assets in a 529 account.
It’s always a good idea to talk to the financial aid office at the schools your child is considering to get a better understanding of how the school calculates financial aid and what options may be available to you.
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