<br><div><aside class="gnt_em gnt_em__fp gnt_em_vp__tp gnt_em__el" aria-label="Video - What is a 529 college savings account?"/><p class="gnt_ar_b_p">The <a target="_blank" href="http://www.usatoday.com/money/blueprint/student-loans/what-is-a-529-college-savings-plan/" data-t-l=":b|e|k|${u}" class="gnt_ar_b_a" rel="noopener">529 education savings plan</a> got a couple of big upgrades in 2024 as a tool to save and pay for school.</p><p class="gnt_ar_b_p">Starting this year, Congress is allowing up to $35,000 in leftover savings in the plan to roll over<a target="_blank" href="http://www.usatoday.com/story/money/personalfinance/2023/01/11/unused-529-education-savings-rolled-roth-ira/11025092002/" data-t-l=":b|e|k|${u}" class="gnt_ar_b_a" rel="noopener"> tax-free into Roth</a> individual retirement accounts, eliminating fears unused money could forever be trapped or incur taxes. Then, at the end of December, the Department of Education <a target="_blank" href="http://www.usatoday.com/story/money/personalfinance/2023/12/06/fafsa-changes-2024-25/71767926007/" data-t-l=":b|e|k|${u}" class="gnt_ar_b_a" rel="noopener">revised the Free Application for Federal Student Aid (FAFSA)</a>, creating the so-called grandparent loophole.</p><p class="gnt_ar_b_p">The grandparent loophole allows grandparents to use a 529 plan to fund a grandchild’s education without affecting the student's financial aid eligibility. <a target="_blank" href="http://www.usatoday.com/story/money/personalfinance/lifestages/2018/01/13/what-you-need-to-know-about-529-plans/105954320/" data-t-l=":b|e|k|${u}" class="gnt_ar_b_a" rel="noopener">Previously</a>, withdrawals could have reduced aid eligibility by up to 50% of the amount of the distribution.</p><aside aria-label="advertisement" class="gnt_m gnt_x gnt_x__lbl gnt_x__al"/><p class="gnt_ar_b_p">“A $10,000 distribution from a grandparent-owned 529 may reduce the following aid award by $5,000” under prior rules, wrote William Cass, director of wealth management programs for Boston, Mass.-based asset manager Putnam.</p><h2 class="gnt_ar_b_mt">What is the grandparent loophole?</h2><p class="gnt_ar_b_p">Beginning with the <a target="_blank" href="http://www.usatoday.com/story/money/personalfinance/2023/12/31/new-fafsa-application-open/71934979007/#:~:text=The%20long%2Dawaited%20simplified%20Free,long%20New%20Year's%20holiday%20weekend." data-t-l=":b|e|k|${u}" class="gnt_ar_b_a" rel="noopener">new 2024-25 FAFSA launched late last year</a>, a student’s total income is only based on data from federal income tax returns. That means any cash support, no matter the source, won’t negatively affect financial aid eligibility.</p><p class="gnt_ar_b_p"><strong>Learn more:</strong> <a target="_blank" rel="noopener" data-t-l=":body nav (pl)|e|auto spike click:7|${u}" class="gnt_ar_b_a" href="https://www.usatoday.com/money/blueprint/personal-loans/best-personal-loans/">Best personal loans</a></p><aside aria-label="advertisement" class="gnt_m gnt_x gnt_x__lbl gnt_x__al"/><p class="gnt_ar_b_p">Though it’s called the “grandparent loophole,” any nonparent, including friends and relatives, can use it.</p><p class="gnt_ar_b_p"><a target="_blank" href="http://www.usatoday.com/story/money/columnist/powell/2018/09/05/saving-college-how-grandparents-help-without-affecting-financial-aid/1120068002/" data-t-l=":b|e|k|${u}" class="gnt_ar_b_a" rel="noopener">Previously</a>, distributions from any nonparent-owned <a target="_blank" href="http://www.usatoday.com/money/blueprint/student-loans/what-is-a-529-college-savings-plan/" data-t-l=":b|e|k|${u}" class="gnt_ar_b_a" rel="noopener">529 plan</a> were included as untaxed...</p></div> <style> .wrapper { text-align: center; } </style> <div class="wrapper"> <a class="button" href ="https://www.usatoday.com/story/money/personalfinance/2024/04/24/fafsa-rules-529-plan-grandparent-loophole-financial-aid/73385398007/">Read more <span>➤</span></a> </div>
