Answering Your Questions about 529 Accounts and Financial Aid

Jonathan Hughes: I've been hearing a lot of questions about 529 plans and how they affect your financial aid, so let's answer a few. First question, do 529s owned by a grandparent affect my financial aid? The answer is no. The FAFSA, the main financial aid form, asks about parent and student assets, not assets from grandparents, aunts and uncles, family, friends, or anybody else.

The CSS Profile, the financial aid application used by roughly 200 schools, does ask if any other family members will be contributing towards college costs, but most colleges don't take this information into consideration when they're determining your financial aid offers. Second question. If I have 529 accounts for all of my children, do I have to list them all on each individual child's FAFSA and CSS Profile? On the FAFSA, the answer is no. One of the FAFSA changes for the upcoming year is that you're no longer expected to list each and every 529 plan you own on every individual FAFSA that you file. You'll only report the 529 plan for the student whose FAFSA you're completing.

On the CSS Profile, however, you will list all of the 529 accounts that you own. Third question. Will my child receive less financial aid because we saved in a 529? No, not significantly. Financial aid applications only take into account a very small percentage of what you saved in the calculation of your financial need, which determines your eligibility for financial aid, with the maximum being 5.6%

And even a little less in the CSS Profile. Which means if you saved $10,000 for college, your savings would lessen your eligibility for aid by only $560 at the most. So it typically has a very minimal effect, and one that pales in comparison to the good that you've done yourself by saving.

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