By Ron Muffick, Director of Operations & Administration, Achieve Montana

June 22, 2021


Saving for a child’s future is essential but guessing how to pay for a child’s college education can seem overwhelming for many parents. Fortunately, when planning for their children’s future education, parents have help. Opening college savings accounts, like a 529 plan, is an excellent way for parents to take advantage of growing their account, with earnings that are deferred from both federal and state taxes. 529 plans also lessen a child’s reliance on student loans. And 529 plan resources can be used toward the tuition costs of any eligible college, university, vocational school, or other postsecondary educational institution, anywhere in the US and at some schools abroad. Investing in a 529 plan can be a decisive win for parents saving for their child’s future. However, many parents question the impact of 529 plan assets on a child’s financial aid eligibility. The good news is that the impact can be minimal.

Why 529 Plan Ownership is Important? 

Calculated based upon parent’s and child’s income and assets, EFC (expected family contribution) is what the government expects parents and students to contribute toward a college education. Checking accounts, money market funds and cash are types of assets that are counted towards calculating a family’s expected contribution. It is important to note that 529 plans are counted as an asset when calculating EFC as well. And because 529 plans are counted as an EFC asset, it matters who owns the college savings account.

When parents own a college savings account and their child is the beneficiary, this asset is considered and calculated as part of the parent’s asset toward determining the financial aid expected family contribution. However, approximately the first $10,000 of parental assets fall under the asset protection allowance and won’t be counted in the EFC calculation. In addition, for parents who have accumulated more than the allowance, only a maximum of 5.64% of parental assets are counted. When the student is the owner of a 529 plan account, the EFC calculation is based upon the value of the account itself. If grandma or grandpa own the account, none of the college savings account’s assets are calculated in the financial aid expected family contribution.  Under new federal financial aid rules, when a grandparent withdraws the funds to pay for their grandchild’s college expenses, it will no longer be counted as student income.

The bottom line for most 529 plan savers is that 529 plan account assets will have little to no impact on the student’s ability to qualify for federal financial aid.  For parents, the maximum 5.64% protects substantially all assets in a 529 plan account.  For grandparents, no amount saved in a 529 plan will have an impact on financial aid calculations. For more detail, has a wealth of information on understanding financial aid.

Families want the best for their children. They want them to have bright, successful futures full of promise. And when planning for a child’s future education, by opening a 529 plan account, parents and grandparents are taking advantage of one of the best ways they can to save for their loved one’s future education.


About the Author

Ron Muffick is the Director of Operations & Administration for Achieve Montana.