Grandparent-Owned 529 Plans

Many college students benefit from 529 plans that their parents set up for them back when they were in elementary school. A fortunate few even have grandparents or other relatives who have set up plans also.

However, plans owned by grandparents or other relatives are not treated the same as those owned by a student or his or her parents. While parent or student owned plans are entered as assets on the FAFSA, plans owned by grandparents or other relatives are considered to be untaxed income. The result is that every dollar that is contributed from that account toward tuition, will mean a 50% reduction in financial aid the following year.

Fortunately, there are ways to reduce the impact. A couple of well-written articles explain the plans more thoroughly, and suggest things you can do to lessen the hit to your financial aid. They can be found here:

  1. http://www.fastweb.com/financial-aid/articles/3486-how-do-grandparent-owned-529-college-savings-plans-affect-financial-aid-eligibility
  2. http://online.wsj.com/article/SB10000872396390444025204577544910953329298.html