My wife and I married last year. 2nd marriage for both of us. While I had established 529 accounts for my two children a long time ago which have grown substantially, my wife did not have one for her daughter (my step-daughter). When we completed the FAFSA recently we had to list the value of those 529 accounts. Since the beneficiary of those accounts are not my step-daughter, we can’t use those monies for her tuition. Yet I think we are going to get penalized on financial aid for my step-daughter because of the significant value on these 529 accounts. Any thoughts on this? Seems like my step-daughter will come up short on financial aid simply because I saved up for her step-sisters.
You might want to shoot this one over to the Parents of 2016 forum for a host of responses.
Are all children college age? Are the 529 account in your name? One thing you could do is transfer the 529 account ts to the children as owners. You do not have to report the assets of the other children for the step daughter’s fafsa, but for those children a 529 is still reported as a parental asset.
But before you do, will it help? Do your new wife and you make enough or have other assets that are going to make FA unlikely anyway for a public school? Is your stepdaughter going to a CSS school? (I don’t know how those schools handle assets of stepchildren)
one of my daughters is in college. the other is in High school. My step-daughter goes to a public university but its out-of-state and of course that costs more. The 529 accounts for my daughters are in my name with each of them listed as the beneficiary. Take away these 529 accounts and my wife and I don’t have much saved away that we can use for my step-daughter’s college costs. And of course my wife’s ex-husband is a deadbeat so no help coming there. That’s why we are worried that the 529 accounts for my daughter’s are hurting my step-daughter’s chances at some financial aid
You could change the beneficiary.
529 in the parents’ name are considered parental assets and since you can technically change the beneficiary, they count against all children in the family. Otherwise, everyone would move all the money to the youngest kid’s name.
What is different about your situation is that you are the step-parent. Not sure how that impacts it but there are plenty here who do. Did her biological father supply his information as well?
Afraid the bio father is a deadbeat. No money and no cooperation will be coming from that direction. Am reluctant to change the beneficiaries unless I really have to. Since my step-daughter’s school did provide some financial aid for her 1st year (based solely on my wife’s FAFSA filing) I’m thinking we might be able to lodge some sort of appeal with them if they come back and say we aren’t eligible for any aid for her sophomore year.
Where did they ask for the 529 account? I have 2 daughters lets call them DA and DB. I have a 529 for both of them. DA is going to Georiga State in the fall. When I filled out FASFA I didn’t have to list DB 529 information. They only ask for 529 in DA names. I don’t know about CSS for private schools but the FAFSA only ask for 529 in the student applying name.
I’m under the impression that 529 accounts in the parents name (with the beneficiaries as my daughters) has to be listed as an asset on the FAFSA. Everything I’ve seen online as well as the FAFSA instructions seems to indicate that
That may be the difference then. My daughters 529 are in their names.
The is correct. If the parent is the owner, the amount is included in asset calculation. Why? Because changing the beneficiary is really simple.
Wonder if there are any tax implications about changing the 529 ownership over to my daughters? That way I could avoid putting it on the parent part of the FAFSA. However, I assume my one college-aged daughter would somehow need to report her 529 account as an asset.
Your college daughter already has to report it as an asset, but it is a parent’s asset. If you change it to her name as ownership, there is a provision that it is counted as a parent asset. Same result for that child, but it doesn’t show up on the stepchild’s FAFSA as your (father’s) asset since it belongs to the stepsister.
Even if you (parents) don’t have many assets, most of the EFC on fafsa is based on income, or at least it doesn’t take much income to get an EFC that is higher than will generate federal aid like Pell grants and Perkins loans. It is still easy to change those 529 accounts into the students’ names if that helps your stepchild.
What is your income? If it’s too high for pell then it won’t make a difference who the 529 account name is in. I wouldn’t have qualified for pell either way base on my income only. I only filled out FAFSA to get HOPE.
income in the low 100s. When my wife filed the FAFSA last year (before our marriage) it was just her income which was around 50 so my step-daughter qualified for some aid from the school. But with our combined income perhaps that impacts us more than just the 529 issue now that I think about it
Yeah with an income of $100,000 and 1 dependent your pell will most likely be 0. My income is in the 80s with 2 kids and I still didn’t get any pell. What about state aid? What state are you in?
Texas
I don’t know what the answer is, but I know what I would do if I were Ruler of Financial Aid.
I would not treat the 529 accounts as available for your step-daughter’s education, But I would treat them as available for your daughters’ education, meaning that the amount of your income that their education would require would go down, and my assessment of your borrowing capacity would go up. So, yes, I would conclude that your new family unit could afford to pay more to educate this child than it could if you didn’t have the 529 plans for other kids, but not anything like dollar-for-dollar.
But will you qualify for additional financial aid anyway?
Need based financial aid is largely based on income…not assets. The calculation for your need based aid would assess these 529 accounts at 5.6% for FAFSA purposes.
Your incomes…yours and your wife’s…will be the primary determining factor.
Plus if the college doesn’t guarantee to meet need…there is no guarantee your aid will change.
I have bad news. You are exactly correct. I am in the exact same position as your wife. Just realized it last week, got a lot of clarity from folks on this board, had my meltdown, accepted it and moved on.
Unfortunately for my children, my husbands (their stepfather) income, assets and the 529’s for his children are all considered family assets for the purpose of calculating financial need for my children.
Which means in my case that my children do not qualify for any aid, even at a “full need” profile school, despite the fact that my husband will not be paying for my childrens college, only his own, and my children will be funded by myself, 100% solo.
You may at least have the benefit of being able to show 2 children in college which will decrease the amount determined as the EFC for each child (yours and hers). I do not have that scenario as my husbands ex is the primary custodial parent in our scenario which means as far as FAFSA is concerned, my husband could foot the whole bill for my kids. And, if your scenario is the same, where your ex is claiming primary custody (primary for FAFSA means anything more than 50% of the nights and anything more than 50% of the financial support…it is not at all tied to who takes the kid as the tax deduction), your current wife may actually be in my exact boat which isn’t a fun place to be.
I have been told (as I too am in a deadbeat dad scenario) that in the case of a profile school, I may be able to demonstrate the fact that my husbands assets are in fact committed elsewhere (as documented in court filings), that we do (will) in fact have 2 kids in college at once and that I can document the deadbeat dad. But, that’s a long shot at best and would only marginally help if it was a full need school…and most/many are not. To add insult to injury, a profile school will also look at home equity and other assets far more deeply than FAFSA does which could further “penalize” your wife and stepdaughter. How weighted the home equity is varies by school.
It isn’t fair, it isn’t accurate but it is how the Federal aid system works.
The long and short of it is…your wife and her daughter need to focus on schools where she can get merit aid if at all possible.