There are two types of 529 plans: prepaid tuition plans and education savings plans. All 50 states and the District of Columbia offer at least one type of 529 plan.With a prepaid tuition plan, you can purchase college units or credits at their current prices for future use. Since tuition is steadily rising every year, buying credits while your child is young can significantly reduce your overall education costs.
While investing in a 529 plan will generally affect the child’s eligibility for need-based aid, the overall impact is generally minimal. To determine how the 529 will impact the beneficiary’s financial aid status, consider who owns the 529 account and how the money is distributed.In this case, the 529 plan would fall under the parents’ assets on the—the form that determines the amount of federal aid the student qualifies for. A parent’s assets are calculated at the most favorable rate.
If a grandparent or other relative has a 529 for your child, reserve the money in that fund for the child’s junior or senior year. With this approach, the withdrawals from that account won’t affect the child’s undergraduate financial aid eligibility.If you are thinking of opening a 529 plan, it’s wise to keep it in the name of the parent or child.
. Whenever possible, federal loans should be used first since they tend to have lower interest rates and more flexible repayment options. But private student loans can be useful tools to cover any funding gaps. If you decide to utilize private loans, compare offers from multipleWhile your child is in school, you may be able to claim someIf you’re worried about how a 529 will affect your child’s financial aid eligibility, know that 529 savings generally have only a small impact.