With April 15 looming, Iâ€™ve spent some time this morning figuring out whether to make contributions to my sonsâ€™ Coverdell Education Savings Accounts or their 529 plans (Iâ€™m no longer a big shot attorney, so I donâ€™t have the funds to do both). The issue has come up because on a recent NPR show someone claimed that 529 plans are more favorable from a financial aid standpoint because the assets are considered those of the parent while the assets in an ESA are considered those of the student. This was news to me. My web research revealed conflicting information and advice on the point. But I think I located the definitive answer in this U.S. Department of Education letter. The letter states as follows:
Coverdell Education Savings Accounts and 529 College Savings Plans receive equal treatment in the calculation of federal financial aid eligibility. Specifically, both can be regarded as assets of the parent if the parent is the owner of the account, rather than the student, and thereby displace a smaller amount of financial aid.
Hence, Iâ€™ll be contributing to their ESAs. If youâ€™d like to contribute to their 529 plans, let me know, and Iâ€™ll give you my PayPal information.