Given the escalating cost of college schooling, an increasing number of grandparents are pitching in to pay for college fees for his or her grandchildren. Given their flexibility, 529 plans are the top choice for grandparents. However, they can complicate a child’s chances of qualifying for financial aid.
The problem arises when students receive money from the 529 plan. That will appear as income in the student’s name, which must be reported on the FAFSA, which reduces the amount of financial aid. Note that FAFSA, the financial aid form that most colleges require when a student applies, is also required to be updated every year he or she is in school.