A Grandparent-owned 529.
“My mother has a 529 college-savings plan for my daughter. Will it affect my daughter’s chances for financial aid?”
A grandparent-owned 529 is not reported as either a parent’s or a student’s asset on the Free Application for Federal Student Aid (FAFSA). However, distributions must be reported as student income on the next year’s FAFSA. And, students are expected to contribute 50 cents of every dollar of income toward the college bills (after an allowance of about $6,000).
To minimize the impact, you could wait to withdraw money from the grandparent-owned 529 until the last financial aid form has been filed. Or, find out whether you can switch the owner to a parent. Assets in parent-owned 529s are tapped at up to 5.6%, after an allowance, but withdrawals are not reported as income. Some 529 administrators, including TIAA-CREF, let you switch account owners by filling out a form. If yours doesn’t, you can move the money to a 529 that lets you switch the owner from the grandparents to the parents.