In this NJ Money Help article, a grandmother asked whether she should roll over a 529 plan she owns for her granddaughter into a custodial 529 account and how that decision could affect her granddaughter’s financial aid eligibility.

In his response, Howard Hook, CFP®, CPA, CPA®, first noted that before making the change, the grandmother should consider whether she wants to give up control of the account. In New Jersey, a custodial 529 plan generally becomes the beneficiary’s property at age 21, allowing them to use the funds for any purpose.

Hook discussed how different types of 529 plans are treated under FAFSA rules. He explained that grandparent-owned 529 plan assets are not reported on the FAFSA, while custodial 529 plan assets do count toward the Expected Family Contribution (EFC) calculation. He noted that distributions from a grandparent-owned 529 plan could be treated as student income, potentially affecting financial aid eligibility.

The article also addressed a planned FAFSA rule change that would eliminate the treatment of distributions from grandparent-owned 529 plans as student income, although implementation has been delayed.

Based on the current rules, Hook suggested that keeping the account in the grandmother’s name could offer advantages from a financial aid perspective.

To read Howard’s full response, visit the original article on NJMoneyHelp.com: How Will This 529 Plan Affect My Grandchild’s Financial Aid for College?

Want to Learn More?

529 plans can be powerful education funding tools, but the rules do change. Speak with a financial planner to better understand how setting up a 529 plan can help you with your future education expenses.

For additional information on college planning and how you can leverage a 529 Plan, explore our College Planning Articles.