When considering an application for federal financial aid, the government calculates the applicant’s expected family contribution (EFC) to determine need. Applicants whose family has a greater store of assets may not receive as much as those whose families are expected to have little income to put toward college.

When making this calculation, all sources of income are considered, but not always to the same degree. For instance, a 529 plan owned by a parent will only contribute 5.64% of its value to a student’s EFC, whereas one owned by a grandparent could add 50% of its balance, greatly reducing a student’s eligibility for federal financial aid.