By Terry Savage on October 15, 2019 | College Savings / Student Loans

I was watching last week and I thought you said that you should not have the 529 plan in your child’s name because it would negatively effect the amount of aid/grants they would be eligible for. Is that true?

Terry Says

No,  you mis-heard.  I said you should not have a “custodial” or UGMA account, because money in those accounts weights much more heavily against you in the financial aid formulas.  Parents should be custodians of 529 plans.  AND, if grandparents are custodians of such a plan they don’t count at all in the financial aid formula, BUT — and this is a BIG BUT — in the year in which the money is distributed from a grandparent-owned 529, the money is considered a student asset.  So it would have a huge impact on aid for the next  year.  So if grandparents own a plan for grandchildren, the money should be distributed to pay for the senior year, when presumably they student will not be applying for aid in the  following year.

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