Footnotes

1 The treatment of investments in a 529 savings plan varies by school. Assets are typically treated as the account holder's and not the student's. (Student assets are generally assessed at 20%, whereas parental assets are generally assessed at 5.6%.) Any investments, including those in 529 accounts, may affect the student's eligibility to get financial aid based on need. You should check with the schools you are considering regarding this issue. ↩

If the beneficiary receives a scholarship that covers the cost of qualified expenses, you can withdraw the funds from your account up to the amount of the scholarship without incurring the 10% federal tax penalty on the earnings portion. However, the earnings portion will be subject to federal and state income tax. If the amount withdrawn exceeds the amount of the scholarship, the earnings portion of the amount withdrawn will be subject to the additional 10% federal penalty tax. Please consult with a qualified tax advisor or consultant.

Historically, withdrawals from grandparent-owned 529 plans have been considered untaxed income to the student and added to the student's adjusted gross income on the FAFSA. Beginning with the 2024-2025 FAFSA, withdrawals from grandparent-owned 529 plans will no longer need to be reported on the FAFSA or negatively affect the student's eligibility for federal financial aid. FAFSA simplification is subject to change. You should check with the schools you are considering regarding this issue. For assistance or help completing FAFSA click here .