Will My Child Lose the ‘Grandparent Advantage’ on Financial Aid After My Parent’s Death?

Many parents use 529 accounts to help cover their children’s education costs. It’s even more advantageous if grandparents create these accounts since their 529 plans do not impact a student’s ability to access financial aid.

On the other hand, if the child’s parent has a 529 plan, that account will show up as a parental asset. It’s included in the Student Aid Index, but only if it’s the child’s parents. Grandparents aren’t included in this calculation, and it’s been referred to as the “grandparent advantage.”

One Redditor is worried that his children may not be able to reap this advantage. He posted in the Personal Finance subreddit asking what would happen if his grandparents pass away before the students reach college. Redditors jumped on the post and left some comments explaining some key details.

Ownership Shifts to the Heir

If your grandparents pass away, their 529 plan will go to their heirs. When you receive the 529 plan, you are the new owner, and it will show up in your finances. Colleges, governments, and state programs will include the 529 plan when determining how much financial aid to give out.

However, that won’t matter much if your household income is above $120,000 per year. One commenter said that if your household income is above that number, your child will not receive any need-based aid.

Plan for Other Ways to Lower Costs

The grandparent advantage can make it easier for your child to secure need-based financial aid. However, that’s not the only way to reduce how much you pay for college tuition. Out of the options, the grandparent advantage is the one thing you cannot control. It’s impossible to anticipate how long your grandparents will live.

Merit-based scholarships offer another opportunity to reduce costs. Getting good grades in school will help, and if your child commits to a sport, there’s even a chance for an athletic scholarship.

However, your child can also apply for many online scholarships. Sites like Scholarships.com make it easy to find organizations that are providing scholarships for incoming college students. Most students are content with taking exams and seeing if the university gives them a merit-based scholarship. However, some online scholarships don’t have as much competition.

If your child applies for 3-5 scholarships every day, the savings can add up. It’s better to use this approach than to hope that the grandparents stay alive long enough to see your kids through school.

FAFSA Can Change

The recent Reddit post is based on how the FAFSA currently operates, but the program can go through some significant changes over the next 1-2 years. One commenter mentioned that FAFSA was managed by the Department of Education. President Trump is in the process of dismantling that department. It’s currently unknown how Trump’s policies and the potential shutdown of the Department of Education will affect the FAFSA process and its rules.

Parents who will send their children to school should continue to monitor any developments around FAFSA. It can end up staying the same, but the Trump Administration has been known for dramatic moves and volatility.

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