Why choose a 529 savings plan?

No matter what state’s plan you sign up for, a 529 savings plan is a smart choice.

If your child gets a full-ride scholarship, you can withdraw the same amount without paying a penalty. It’s a win-win situation.

How savings can affect financial aid

Keep in mind that how a college savings plan is reported on a student’s Free Application for Federal Student Aid (FAFSA) may affect the amount of financial aid they can receive:

  • If your child is a dependent and you own the account, the potential effect on your student’s financial aid eligibility is relatively low—only up to 6 percent of its value will count toward their Expected Family Contribution (EFC) on the FAFSA.
  • If your child is not a dependent and is the account owner, the effect on their financial aid eligibility could be somewhat higher.
  • If a third party, such as a grandparent, owns the account, there could be an effect on the student’s financial aid eligibility since this account would not be reported as either a parent or student asset on the FAFSA.

Nonfederal financial aid programs may vary in their guidelines for how 529 funds are treated. Check with a financial aid officer or the institution offering a particular program for details.

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