
Does a 529 Plan Affect Financial Aid?
A 529 college savings plan can be a powerful tool when saving for future education expenses because investments in the plan can increase tax-free, but many savers don't take full advantage of all the benefits that 529 plans have to offer.
One common deterrent to investing through a 529 plan is the concern that assets in a 529 account will reduce financial aid eligibility. While it's true that 529 assets have an impact on financial aid, the effect is likely smaller than you think.
Do 529 Plans Affect Financial Aid?
The short answer is yes. An increase in the means to fund higher education naturally means the beneficiary is eligible for less need-based aid.
However, assets in a 529 plan have a lesser impact on financial aid packages than income does. A student's federal financial aid is based on an estimate of what a family can contribute annually from their income and assets. Income is the largest portion of this measurement of a student's ability to pay for college, which is represented by the Student Aid Index, or SAI, on the Free Application for Federal Student Aid, or FAFSA. The SAI replaced the expected family contribution, which was previously used on the application.
Typically, the SAI calculation expects parents to use 25 percent to 35 percent of their adjusted available income to cover college costs, though that number can go as high as 47 percent. Parental contribution from assets, including 529 account balances, is assessed at a much lower maximum of 5.64 percent. So, if a family has a 529 account with $10,000, this raises the expected family contribution by at most $564 and reduces the federal aid package by the same amount.
A 529 Plan's Impact Depends on Who Owns the Account
The impact of 529 assets on a beneficiary's financial aid package depends on who owns the account. As outlined above, if the plan is owned by the beneficiary's parent, then 5.64 percent of the account's value is considered in the SAI, which determines a student's financial aid eligibility on the FAFSA.
On the other hand, if the plan is owned by the student, then up to 20 percent of the account value may be considered in calculating financial aid eligibility.
With changes to the
Siblings' 529 Assets Don't Count for Federal Financial Aid
After the FAFSA Simplification Act, assets in 529 accounts are counted as parental assets only for the beneficiary of the account. That means, if you have 529 accounts set up for your other children, the assets in those accounts are no longer counted toward the expected family contribution. As mentioned above, accounts owned by grandparents or other relatives will also be excluded from determining federal financial aid eligibility.
Financial Aid Eligibility Differs Between FAFSA and CSS Profile
There are also schools that use the College Scholarship Service, or CSS, Profile (primarily private schools) to calculate their financial aid packages. The CSS Profile's formula to calculate aid differs from FAFSA's. For instance, the CSS Profile asks for all 529 accounts owned by the beneficiary's parents, whereas the FAFSA only counts 529 accounts for which the student is the beneficiary. Moreover, the CSS Profile is customized by the institution, so each school can have its own formula to calculate its aid packages. While each school that uses CSS Profile information applies its own standards, this
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By Hyunmin Kim, Margaret Giles of Morningstar
The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
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CNBC
a day ago
- CNBC
Trump aims to slash Pell Grants, which may limit low-income students' college access
For many students and their families, federal student aid is key for college access. And yet, the Trump administration's budget proposal for fiscal year 2026 calls for significant cuts to higher education funding, including reducing the maximum federal Pell Grant award to $5,710 a year from $7,395, as well as scaling back the federal work-study program. The proposed cuts would help pay for the landmark tax and spending bill Republicans in the U.S. Congress hope to enact. Roughly 40% of undergraduate students rely on Pell Grants, a type of federal aid available to low-income families who demonstrate financial need on the Free Application for Federal Student Aid. Work study funds, which are earned through part-time jobs, often help cover additional education expenses. More from Personal Finance:Social Security gets break from student loan collectionsIs college still worth it? It is for most, but not allWhat to know before you tap your 529 plan President Donald Trump's "skinny" budget request said changes to the Pell Grant program were necessary due to a looming shortfall, but top-ranking Democrats and college advocates say cuts could have been made elsewhere and students will pay the price. "The money we invest in post-high school education isn't charity — it helps Americans get good jobs, start businesses, and contribute to our economy," Sen. Elizabeth Warren, D-Mass., told CNBC. "No kid's education should be defunded to pay for giant tax giveaways for billionaires." Nearly 75% of all undergraduates receive some type of financial aid, according to the National Center for Education Statistics. "Historically the Pell Grant was viewed as the foundation for financial support for low-income students," said Lesley Turner, an associate professor at the University of Chicago Harris School of Public Policy and a research fellow of the National Bureau of Economic Research. "It's the first dollar, regardless of other types of aid you have access to." Under Trump's proposal, the maximum Pell Grant for the 2026-2027 academic year would be at its lowest level in more than a decade. "The Pell reduction would impact the lowest-income families," said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit. More than 92% of Pell Grant recipients in 2019-2020 came from families with household incomes below $60,000, according to higher education expert Mark Kantrowitz. If the president's cuts were enacted and then persisted for four years, the average student debt at graduation will be about $6,500 higher among those with a bachelor's degree who received Pell Grants, according to Kantrowitz's own calculations. "If adopted, [the proposed cuts] would require millions of enrolled students to drop out or take on more debt to complete their degrees — likely denying countless prospective low- and moderate-income students the opportunity to go to college altogether," Sameer Gadkaree, president and CEO of The Institute for College Access & Success, said in a statement. Already, those grants have not kept up with the rising cost of a four-year degree. Tuition and fees plus room and board for a four-year private college averaged $58,600 in the 2024-25 school year, up from $56,390 a year earlier. At four-year, in-state public colleges, the average was $24,920, up from $24,080, according to the College Board. The Pell program functions like other entitlement programs, such as Social Security or Medicare, where every eligible student is entitled to receive a Pell award. However, unlike those other programs, the Pell program does not rely solely on mandatory funding that is set in the federal budget. Rather, it is also dependent on some discretionary funding, which is appropriated by Congress. The Congressional Budget Office projected a shortfall this year in part because more students now qualify for a Pell Grant due to changes to the financial aid application, and, as a result, more students are enrolling in college. Although there have been other times when the Pell program operated with a deficit, slashing the award amount is an "extreme" measure, according to Kantrowitz. "Every past shortfall has been followed by Congress providing additional funding," he said. "Even the current House budget reconciliation bill proposes additional funding to eliminate the shortfall." However, the bill also reduces eligibility for the grants by raising the number of credits students need to take per semester to qualify for the aid. There's a concern those more stringent requirements will harm students who need to work while they're in school and those who are parents balancing classes and child care. "These are students that could use it the most," said the University of Chicago's Turner. "Single parents, for example, that have to work to cover the bills won't be able to take on additional credits," Mayotte said. "If their Pell is also reduced, they may have to withdraw from school rather than complete their degree," Mayotte said.


CBS News
4 days ago
- CBS News
Student loan moves to make for the fall 2025 semester
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. If you're planning to enroll in the upcoming fall college semester, you may want to make these moves sooner rather than school year has ended and summer vacation is here. While it can be a time to relax and enjoy a break from your studies, getting your student loan financing in order now to prepare for the fall 2025 college semester can be a smart move. Whether you're entering college for the first time or enrolling for another year, paying for your tuition costs and fees is crucial to continuing your education without any interruptions or hurdles. And, paying out of pocket may not be an option for many college students and their families, given the steep costs. According to data from the College Board, the average tuition and fees in 2024-25 for full-time undergraduate students range from $11,610 to $43,350, depending on whether the college is public or private and if the student is paying in-state or out-of-state tuition. To ensure you have the necessary financing to cover those costs, we've outlined below the steps to take now for the fall 2025 semester, what can be delayed and the important student loan mistakes to avoid. Start comparing your private student loan options online now. Student loan moves to make for the fall 2025 semester Though the fall semester may be months away, you can take steps to prepare now. Here are student loan moves to make for the upcoming semester: Maximize your financial aid options Before turning to any student loans, see if you qualify for any grants or scholarships. These options are gift aid, meaning you don't have to pay them back. You can find scholarship opportunities on CareerOneStop and You can fill out the Free Application for Federal Student Aid (FAFSA) to see if you qualify for a federal Pell Grant. The FAFSA can also help you qualify for work-study and federal student loans. Gift aid and federal student loans are typically recommended as the first options to turn to, due to the generous benefits. Unfortunately, though, federal student loans do have loan limits. These vary by your year in school and depend on your status as a dependent or independent student. "Once someone exhausts federal aid or receives a smaller package than expected, turning to private student loans can feel like the next logical step, but it is so important to pause and really understand what you are signing up for. Private loans often come with higher interest rates and fewer protections, like income-driven repayment or forgiveness options," says Becca Craig, certified student loan professional and certified financial planner at Focus Partners Wealth. If you do need to turn to private student loans to cover any gaps, there are steps you can take now to set yourself up for success. Find out how affordable the right student loans could be today. Get a cosigner Federal loans generally don't require a credit check, but most private student loans do. This can present a problem for undergraduate students when it comes to private student loan eligibility. "Because private student loan applications are approved based on the creditworthiness of the borrower, many would-be borrowers are unable to qualify, especially undergraduates who may have a thin credit profile or no credit profile at all," says Glenn Sanger-Hodgson, certified student loan professional and financial planner at Shonan Gold Financial LLC. A cosigner is someone, like a parent, who agrees to take on the legal liability of the loan. So if there are issues with the loan repayment, the lender can turn to the cosigner to recoup what's owed. "A cosigner acts as a financial backstop, as they are equally responsible for the repayment of the loans in the event the student borrower can not make adequate student loan payments, which provides greater assurance that the loan will be repaid," says Sanger-Hodgson. Getting a qualified cosigner is an important step if you need private student loans and are unable to qualify on your own. Start having discussions now and talk about rights and responsibilities so you're on the same page. Improve your credit and debt-to-income ratio Whether you're applying for a private student loan on your own or with a cosigner, lenders will look at various factors when determining your eligibility. To put you in the best position possible, both students and cosigners "should focus on getting their credit score up, and paying off other debt to lower the debt-to-income ratio that lenders will look at to determine whether a student loan will be approved," says Jack Wang, college financial aid and wealth advisor at Innovative Advisory Group and host of the Smart College Buyer podcast. Your payment history and credit utilization make up a significant part of your FICO credit score. On-time payments and using less of your available credit can help. Paying down your balances and boosting your income can also help lower your debt-to-income (DTI) ratio. Taking these steps can help your approval odds when applying for a private student loan. Start applying with private student loan lenders now If you need additional financing for the fall 2025 semester, now is a good time to submit a private student loan application. Some private lenders allow student loan borrowers to get prequalified, so you can check your prospective rate and eligibility. You may also stand to save if you submit a private student loan application now. For example, some lenders offer small discounts for applying early (before a certain deadline). And, aside from getting prequalified and raking in potential rate discounts to reduce student loan costs, getting started now can ensure you get the funding you need on time. "If you think you're going to have a funding shortfall and that you will need private student loans in order to continue your education, then it's important to start the application process at least two months before you will need the funds disbursed," says Sanger-Hodgson. "So if your school's tuition is due in August, for example, then you would want to start the application in early June at the latest." Sanger-Hodgson notes that once you're approved, your lender will need to confirm your enrollment and the cost of attendance through something called loan certification. This can take several weeks, so starting now can ensure you get the financing you need for the upcoming college semester. Student loan moves to make later this summer (but not now) Getting your student loan financing in order now is key so you're ready for the fall 2025 semester without any hiccups. While the aforementioned steps should be done now, here are some student loan moves to make later this summer: Confirm your loan disbursement dates. You can reach out to the financial aid office at your college to confirm when your student loans will be disbursed. You can reach out to the financial aid office at your college to confirm when your student loans will be disbursed. Create a budget. Once you know your loan amount and have a better idea of your school expenses, create a budget for the fall 2025 semester. Once you know your loan amount and have a better idea of your school expenses, create a budget for the fall 2025 semester. Make interest-only payments (if possible). If you take out private student loans, you may be able to make interest-only payments while in school. If that's possible with your budget, it could lower the cost of borrowing and save money on interest charges. Student loan mistakes to avoid for the fall 2025 semester Going to college can be an investment in your future, but taking out student loans is still a major responsibility, so there are certain mistakes you want to avoid, including: Not shopping around While private student loans don't offer student loan forgiveness or income-based repayment options, there are multiple lenders to choose from. That means you have more agency to choose a lender that meets your needs. A major student loan mistake to avoid is not shopping around. "Different lenders have different underwriting criteria and offer different terms, such as forbearance periods allowed. Borrowers need to shop around for the best terms, not just the lowest rate," says Wang. Consider comparing three to five private student loan lenders and reviewing the various offerings. Make sure to check the student loan qualifications so you meet the requirements. "Look at interest rates, fees, repayment flexibility and whether you'll need a cosigner. I'd also make sure you understand whether the interest is fixed or variable, and how that could change over time," says Craig. Borrowing more than you need Every dollar you borrow is a dollar you must repay, plus interest. Even if it's an investment in your college education, it's important to be smart about the amount you're borrowing. You may get an offer for a higher loan amount than you need. Sticking to only what you need can lower borrowing costs and put you in a better position for the future. Skipping the FAFSA You must fill out the FAFSA every school year to see if you qualify for grants, scholarships, work-study and federal student loans — but not every student takes the time to do so. "One of the biggest mistakes I see is when families think they earn too much money and assume they won't qualify for financial aid, and choose to not file their FAFSA form. This is a big mistake, especially considering there is no cost to file the form," says Sanger-Hodgson. Regardless of your financial situation, it's a good idea to fill out the FAFSA and see what type of aid you may qualify for. You'll want to check your college, state and federal deadlines so you don't miss your opportunity. The bottom line Summertime may not be the time you want to focus on the upcoming school year, but preparing early for the fall 2025 semester can help you secure the student loans you need to pay for school. The last thing you want to do is find out you have a gap in funding or need to rush — or worse, miss a deadline. When looking at your options, compare student loan interest rates, terms, discounts and any borrower benefits. Even if you lock in a rate now, you can always refinance private student loans later on after you graduate. The most important thing is to get started, do your research and maximize your financial aid options. Once you do that, you can be a well-informed student loan borrower and know what you're getting into.
Yahoo
29-05-2025
- Yahoo
BBB: New graduates become targets for scammers during end of school season
HONOLULU (KHON2) – While many new graduates enter the job market or search for their first rental property away from home, the local Better Business Bureau warns that scammers may be targeting these young adults. Experts share tips on how to navigate today's job market as graduation season is upon us Cameron Nakashima from Better Business Bureau identified three types: Fake Job Offers Scammers impersonate real companies or create fake ones. They offer remote jobs or 'hiring now' roles via email, text message, or social media. After a short 'interview,' victims are offered the job—but must provide sensitive information or pay for training or equipment. Student Loan Forgiveness Scams: They mimic federal programs or call pretending to be with the U.S. Department of Education. They claim they can reduce monthly payments or eliminate loans altogether—for a fee. Victims are pressured to act quickly and give up FAFSA credentials. Rental Scams Scammers copy real listings or invent fake ones, post them on social sites or rental apps, and collect deposits before disappearing. First-time renters are especially vulnerable because they often don't know what a legitimate lease process looks like. Download the free KHON2 app for iOS or Android to stay informed on the latest news Nakashima said to prevent falling into these schemes, you need to pay attention. Watch out when people reach out to you – especially via text. Across the board, recent graduates and young adults report the primary method of losing money to scammers is through text messages and with digital payments and payment apps. Do your research on the company. Look up its website, look for the address and contact info – does it all look legit? For example, for student loan forgiveness, that should be a government website (.gov). If its not, that's suspicious. If the website looks good though, you should also check them out on and other online reporting agencies to learn what people and professionals have to say about those businesses. Listen to your gut if something seems off – and get a trusted second opinion. If you feel like something is not quite right about an opportunity or offer but can't put your finger on it, get a second opinion. You can ask a friend of family member or you can even call your local BBB office and we can give you advice based on our database of information. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.