I heard that college funds effect your financial aid eligibility. Is this true?

Question

I heard that college funds effect your financial aid eligibility. Is this true? I started a UTMA account instead of a 529 for my infant and I'm thinking it may be better to just start it in an idividual account for myself and give it to him later. What do you think? Thanks!

Answer 1

An UTMA will effect financial aid for your child since it counts as something he owns, so it would be better to keep it in your name. 529 can do the same too and, in fact, anything you have will because FAFSA is determined by a family's wealth and income, not just the child's. It's better to keep it in your name though (money that children own receives a higher assessment than money you own). However, if someone else has the account (like your parents or siblings or a family member of your spouse) it doesn't get counted at all. If you trust someone to leave the money alone for eighteen years, perhaps you'd want to go that route...