How 529 Plans Affect Financial Aid—and When to Use Them Strategically
Many families invest in 529 college savings plans assuming they’re always a financial aid win—but that’s not always the case. Depending on who owns the account and when withdrawals are made, a 529 plan can either help or hurt your financial aid eligibility.
At Diversified College Planning, we help families make strategic decisions around how and when to use 529 funds—so they support, not sabotage, your college funding plan.
How 529s Are Treated on the FAFSA
Here’s what families need to know:
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Parent-owned 529s are considered a parental asset on the FAFSA (not the student’s), which usually results in a small reduction in aid eligibility.
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Withdrawals from parent-owned accounts are not counted as student income.
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Grandparent- or non-parent-owned 529s used to count heavily against aid, but recent FAFSA changes have removed that penalty starting with the 2024–2025 cycle.
Strategy Still Matters
Even with FAFSA changes, timing and usage still matter:
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It may make sense to delay 529 withdrawals until later years of college to optimize aid.
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Using other assets first (like student work income or savings) can be a smarter sequence.
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For families completing the CSS Profile, 529 treatment varies by school—so we review each case individually.
At Diversified College Planning, we help you look beyond generic advice and create a personalized strategy that maximizes both your aid and your savings.
Contact Us Today:
Using a 529? Let’s make sure it’s working for your family—not against it.
📞 Call us at 770-662-8510
📅 Schedule a free consultation: Book with Jarad
Or visit our Contact Page: https://diversifiedcollegeplanning.com/contact-us/
