College Aid Help

Physician's Money Digest, January31 2005, Volume 12, Issue 2

When a college figures out yourchild's financial aid package, it looks atthe assets held in the child's name first.The aid formula taps 35% of thoseassets for college expenses and cuts backany aid by that amount. That has beenone knock on Uniform Gifts to MinorsAccounts (UGMAs)—any money in aUGMA is in the student's name andtherefore cuts into any aid award.Confusion reigned when college savingsvehicles like Coverdell and 529 planscame on the scene. Does the money inthese accounts belong to the parent orthe student? Recent guidelines from theUS Department of Education make itclear that money in a Coverdell accountis to be regarded as a parental asset.Also, qualified withdrawals fromCoverdells or 529 plans are not to betreated as student or parental income,and therefore do not reduce eligibilityfor financial aid.