My children are still young (my oldest is only three and a half) but I am already thinking about their college education. To rephrase, how am I going to pay for their college education! Today, private university costs nearly $40,000 a year. What is it going to cost in 15 years? I have already setup their 529 plan with my state’s provider (NY Vanguard). I wanted to settle a few myths about saving for your child’s college education. Many people feel that saving money in a 529 will hurt your child’s eligibility for federal financial aid. I recently received updated information and could not wait to share it with you.
* 529 IS VALUED LOWER. For the current federal financial aid formula, a 529 account is treated as the asset of the owner, which is usually the parent. Therefore, the value of the 529 account is valued at 5.64% of total assets. To compare, a student owned asset (UGMA or your child’s savings account) is valued at 20% of total assets. Private universities may differ in how they value 529 plans.
* LOWER INCOME. The money that comes out of the 529 plan is not considered income, which increases the federal aid eligibility. It used to be considered income so that has changed. However, if the 529 plan is not in the student or parent’s name, it will be considered income.
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