Viewing Question: How are assets in a 529 counted with regards to financial aid?

1 Response

  1. Okay this is a complicated one. There are a lot of moving pieces here.
    If you are a parent, then the assets in your 529s are counted towards family contributions. Currently this means that 5.64% of the assets in your 529 are considered “expected family contributions” towards college. For example, if you have $100,000 in a 529, and one child in school, you would have an expected contribution of $5,640 from the 529.

    Now, many grandparents have funded 529s for their grandchildren. These are treated differently. Grandparents’ 529 assets are not counted towards the expected financial contribution. However, when a distribution is made from a grandparent’s 529 towards a grandchild’s college payments, the distribution gets treated as income for the college student on the next FAFSA. 50% of student income is counted towards the expected family contribution. This means that if you take a $10,000 distribution from a grandparent’s 529, you stand to lose $5,000 of financial aid the following year. Of course if you use distributions from a grandparent to fund a senior year of college that won’t impact aid eligibility.

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