<p>As BobWallace says, there are scenarios where having that money in a student account can result in them being counted toward EFC when the events turn so that the family becomes eligible for financial aid. Since assets are listed on the day FAFSA is filed, it is important that your student understands that any assets in his/her name will be assessed at 20% towards EFC with no allowance. So in such a situation, it might behoove said student to reimburse the parents for some expenses before completing the aid forms. The student should be aware of how FAFSA works because this is a main issue for him/her, and something that may important later in life.</p>
<p>There are risks to just about anything. It may not be that easy right now to transfer funds over to the 529 and the student might not want that money tied up for educational use only. Also depending on some of the investment vehicles used, there can be risks that way. It also hinders easy access to the money which can be a plus, but also can be a pain.</p>
<p>My son keeps his money in his own accounts in the same situation the OP has. He uses his money year round for all sorts of things, not just educational. We pay the bulk of his billed college expenses and he pays what’s left and all of his living and discretionary expenses, as well as unbilled college costs such as books, materials, and some transportation. He also spends his money for none college related things. He wants easy access to the money. He had considered taking a term off to travel and would not have wanted the bulk of his money tied up somewhere, and he also wants to spend his money without involving us.</p>