Most grandparents want to be part of the grandchildren’s life, but for years they were told to stay on the sidelines when it came to helping with college costs. Money from a grandparent-owned 529 college savings plan could count as student income on the FAFSA, which could change a grandchild's eligibility for financial aid. That rule is gone. |
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Under the FAFSA Simplification Act, distributions from grandparent-owned 529s no longer appear on the FAFSA as student income. What does this mean? Grandparents can now open and contribute to a 529 on their grandchild's behalf without the worry that using those funds later will work against the student's aid picture. The account stays in the grandparent's control. The grandchild benefits when the time comes. So it may be time to take a second look at a 529 plan. If you have been setting money aside for college in a separate account, the new rules may change what you do with that money and how you’ll approach college funding in the future. |
Disclosure:
A 529 plan is a tax-advantaged education savings plan. Before choosing a plan, it's important to consider not only the state tax treatment but also any associated fees and expenses. Availability of a state tax deduction will depend on your state of residence, as state tax laws and treatment may vary from federal tax laws. If you make nonqualified distributions, earnings will be subject to income tax and a 10% federal penalty tax.
This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm.