Coverdell ESAs now share advantageous financial aid treatment

The U.S. Department of Education has issued a letter to financial aid officers clarifying that a Coverdell ESA is to be treated is an asset of the parent, provided the parent is the "owner" of the ESA. This puts ESAs on a par with 529 plans in their impact on a student's eligibility for federal financial aid.

Department officials apparently have not picked up on the fact that ESAs do not have "owners." A financial institution acts as trustee or custodian, while the parent is usually the "responsible individual." The usual conclusion in this situation would be to treat the ESA as the beneficiary's (i.e. student's) asset. Regardless, the ruling is good news for many families using ESAs.
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