When Should I Use My 529 Funds?
by Wally Boudet, former financial aid officer Loyola University New Orleans
If you have saved enough to cover your college costs, congratulations and well done! For families who have a shortfall, the question we hear often is, “Should I use the funds from my 529 plan to pay for college up front and then borrow loans, or divide the money over the four years and borrow loans each year?
Here are some considerations:
- If the parent owns the 529, it is counted as an asset on the FAFSA and Profile, and about 5.6% of the value is counted as an asset in determining eligibility for need-based financial aid.
- Families eligible for the American Opportunity Tax Credit (AOTC) qualify for a tax credit of up to $2,500 based on up to $4,000 from a non-tax advantaged account. Paying cash or using a student or parent loan will qualify.