Ask Money

529 Plans

Chris Farrell Mar 11, 2008

Question: How does a 529 plan affect a person in terms of financial aid eligibility? Samir.

Answer: The terrific thing about 529 savings plans is how many pitfalls it sidesteps. Your money compounds tax free. And when the money is withdrawn to pay for qualified college expenses, it’s free of Uncle Sam’s grasp. Most colleges and universities count it as a parental asset in the financial aid formula (meaning parents are expected to fork over 5.6% of their assets, which is much lower than the 20% figure applied to student money.) However, private colleges and universities are free to make their own rules and percentages. The bottom line: It pays to save for college, and a 529 plan is one of the best options available. .

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