A. It's true that 529 accounts may affect a beneficiary’s ability to qualify for federal need-based financial aid.
A 529 account is regarded as an asset of the student if the student is an independent student and an asset of the parent if the student is a dependent student.
An independent student generally includes an individual who:
- is age 24 by December 31 of the award year,
- is an orphan, in foster care or a ward of the court (other rules may apply),
- is an emancipated minor,
- is a war veteran,
- is a graduate or professional student,
- is married,
- has legal dependents other than a spouse,
- is homeless (other rules may apply), or
- has special and unusual circumstances which can be documented to his or her financial aid administrator.
As you can tell now, in most of the situations, 529 asset will be viewed as parents' assets and it has limited impact on the student's financial aid eligibility. Its benefits far outweigh the potential drawbacks.