529 Accounts and Merit Based Scholarships

[stronggirl256]

I am a financial advisor and in our practice we frequently recommend our clients use 529 plans to save for their children's college educations. Recently we had clients come back to us saying that their college advisors advised them not to contribute to 529 plans. The college advisor said that 529 accounts detract from students' opportunities to be awarded merit-based scholarships. Is this accurate?

[dcandmc]

If the scholarship really is truly based on merit and merit only (academic, artistic, athletic, etc.), I see no way that the student's status as a 529 beneficiary can have any impact on the student's chances of being awarded such a scholarship.

[Brian_Boswell_SFC]

The college advisor said that 529 accounts detract from students' opportunities to be awarded merit-based scholarships. Is this accurate?

@dcandmc is correct: Merit based aid is exactly that: Based on merit. There would be no way for the scholarship to know whether the student is the beneficiary of a 529 plan or not, so it cannot have any impact on the award.

Any scholarships that take financial resources into account are need-based, or merit-based with a needs-based component.

Brian Boswell
VP, Research & Development

This information does not constitute tax advice and is provided for informational purposes only. Please consult your tax advisor, financial advisor, local taxing authority, and/or plan provider or sponsor for more information.