This is a gross overgeneralization. The complicated answer is, it depends. It depends on how you want to define “overfunded,” how generous a school is with institutional need-based aid, and a lot of other factors. Some schools in calculating institutional need-based aid will categorize a student accessible 529 account as a parent asset, and ding it at the same 5.64% maximum that FAFSA does. This means that a 529 account with a balance of $200,000 might only attribute to the student an expected contribution of $11,280 from that account. Many students who have access to large 529 accounts still receive significant institutional need-based aid.
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