Some families may consider saving for college through their retirement plans. The advantages to using this form of college savings are: (1) non-assessment in the EFC calculation, (2) contributions are tax deductible, except in the case of Roth IRAs and non-deductible IRAs, (3) tax-deferred growth of earnings, (4) availability of loans from the account, except for some types of retirement plans (e.g. IRAs and Keogh plans) during college years, (5) depending on the type of account investments, the ability to keep up with the high college inflation rates, (6) the account assets are sheltered from creditors, (7) IRA withdrawals (including Roth IRAs) before age 59
The parents reduced their assets by $5,000 by investing in retirement plans for college. Since the parents assets were assessed at 5.6% the asset reduction may increase the childs financial aid eligibility by $280 ($5,000 x 5.6%).
If you are in a financial aid asset assessment rate of 5.6%, you could increase your financial aid eligibility up to $56 for every $1,000 of asset reduction by investing in retirement plans for college.