How does a grandparent-owned 529 affect financial aid under the new FAFSA rules?

This recently got much better. Under the old rules, money a grandparent paid out of their 529 counted as untaxed student income on the FAFSA and could slash aid by up to 50% of the amount withdrawn. The redesigned FAFSA removed the question that captured this "cash support," so distributions from a grandparent-owned 529 no longer reduce federal aid eligibility. That makes a grandparent-owned 529 an attractive way to help — the assets don't appear on the grandchild's FAFSA, and the withdrawals don't either. One caveat: some private colleges use the CSS Profile, which may still ask about grandparent assets. For federal aid purposes, though, the strategy is now a clean win. Confirm a school's CSS practices before relying on it.