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Do 529 Plans Affect Financial Aid?

Jul 30, 2012

You have done a good job saving for your child's college education by using 529 plans. When it's time to enroll in college and you want to apply for financial aid, will your ability to qualify for the aid be hampered by your assets of the 529 plan?

To answer that question depends on many factors. Is your child attending public or private college. Most of the time the government counts only a small percentage of your 529 savings when determining if your child gets grants or loans. The Expected Family Contribution (EFC)The EFC is how much money your family is expected to contribute to your college education for one year. The lower your EFC, the more money you can receive.

The federal government counts less than 6 percent of a parent's assets as an Expected Family Contribution (EFC) for college — a maximum of 5.64 percent, to be exact, as long as the parent owns the account. The smaller the EFC, the more need-based federal aid you may receive.

For example, say you have $10,000 in a parent- or dependent student-owned 529 account. When you
file the Free Application for Federal Student Aid (FAFSA), your child's eligibility for aid will be reduced by no more than $564 (5.64 percent of your 529 savings).

The bottom line is do not worry you are messing up your financial aid money by having a 529 plan. If it affects it at all it will only be minimal, no reason to not have the benefits of a 529 plan.



Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.com. Want to be heard? Leave a reader comment below.

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