Beware of 529 Plans

An article posted on today caught my attention today, and I had to write about it. The article boasted that 529 Plans are a great place to save for college (despite the worry about how it effects financial aid awards). The article sites an expert, Joe Hurley, on this topic. With his advice the article explains that the impact of 529 Plans on financial aid is “minimal.”


That is WRONG.


While it is true that parent income and assets effect one’s Expected Family Contribution (EFC) towards college costs, your EFC is not exactly what you’ll end up paying. Your EFC is what the government thinks you can afford for college, but the school doesn’t have to meet your left over financial need. That number can fluctuate based on a college’s award and ability to cover your need. So while Mr. Hurley explains that these assets are only assessed at 5.64% towards your EFC, it’s not that straightforward.


529 Plans are educational savings accounts. When a college sees that this type of account is available for aid, they can use it in creating their awards package. Let me ask you this: if you were a college financial aid officer and you saw a parent had saved $60,000 in a 529 Plan (Education Account), wouldn’t you want to use at least ¼ of that account towards your fees before giving a discount? Why give away free money to a family who has money saved in an account for college costs. That’s how it works with need-based aid. Colleges want you to pay what you have before they give you money, so claiming 529 Plans are a great way to save for college is not exactly true.


Another thing to consider—Mr. Hurley sells 529 Plans. Wouldn’t that make it his intention to promote 529 Plans?


We recommend families get an individualized, one-on-one college planning analysis before making a decision on how to prepare to afford college. Reading articles like this online can lead to bad decisions and poor plans of action. College Planning Experts can help with a FREE one hour session. We’ll get you college ready and make college affordable for your family and your specific situation. Call us (661) 295-9946.

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