A 529 plan typically has a minimal effect on financial aid, but it varies by situation. Federal financial aid is a needs-based award and is determined by the cost of attendance (the total amount school will cost for one year) and the expected family contribution (based upon the income and assets of both the parents and the student).

A 529 plan does not count as an asset of the beneficiary. If a 529 plan is held by the parents, it does count as an asset of the parents. If the 529 plan is owned by someone else, such as a grandparent, the 529 plan does not count as an asset of the beneficiary. However, the amount withdrawn from a 529 plan owned by someone else, such as a grandparent, is considered income of the beneficiary when it is withdrawn on the beneficiary’s behalf. This may impact any potential financial aid in following years