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Get It Done: Fast FAQs on 529s

Motley Fool Staff
April 24, 2008

Opening a 529 plan account is a great way to save for your kids' college expenses. Yet doing so isn't quite as simple as merely opening a savings account and making deposits every month. Here, we answer some of the most common questions about 529 plans.

Q. Will having a 529 affect my child's financial aid eligibility?
A. Currently, at the federal level, 529 plan assets are reported as yours, so they have just a marginal impact on your child's eligibility: In the need-based financial aid formula, student assets greatly outweigh those of the parents. That may vary at the state level. (For information on how individual states treat the proceeds, you'll need to consult the administrator of the 529 plan you select, or a financial aid officer at the college your child will attend.)

Our take? While it's unfortunate that planning ahead has any impact on financial aid eligibility, the effect is comparatively slight, because plan assets are treated as yours. And of course, unless you spend those assets, they will have to reside somewhere. Because that moola will also be taken into consideration if you stash it, say, in a taxable account, putting it to work now in a way that can lower -- indeed, elimina