529 reporting

If my grandparent is planning to gift me some 529 money, do I need to report it to student financial services when I apply for financial aid? I found in some schools, they are asking “amount from 529” without stating whether the source is from parent or grandparent.

I don’t know how much, but I know some amount will be gifted by my grandparents.

Any comments, feedback, suggestions will be much appreciated.

Thank You!

Do they already have a 529 account and they will make a payment out of it for your expenses?

Not sure what they have done.

Can’t answer your question without the facts.

I’m assuming you are a dependent student:
For most FAFSA schools, you only report the 529 with parents or the student as the account owner.

But it seems some websites are stating that 529 from grandparents will be counted as income and could impact financial aid and taxes.

Some sites suggest that the grandparent should transfer ownership to the parent.

It isn’t clear whether a grandparent contributing to their grandchild’s education is a curse or blessing.

Just found out that the grandparents have a 529. Probably will be a graduation gift.

Any advice would be greatly appreciated.

Withdrawals from the grandparent 529 is income for financial aid purposes but not for income tax purposes.

Okay, my understanding is this:

If it’s in a grandparent’s name and they take a distribution to pay for some of your school, that money has to be reported as student income next year. Some people wait until the end of junior year to use the $ in a 529 so that they’re already done filing FAFSAs.

If they transfer it to you or your parents, it will count as parent assets for the FA calculation, and reduce your aid by about 5.6% of the value of the account. I think this may not apply if your family has very little savings.

Someone please jump in if I’m misunderstanding – and @shivaya, sometimes different colleges have different methods, so it’s worth it to contact some schools you’re considering and ask them what makes sense.

Change of rules for 2017-2018 FAFSA! People could use 529 of their grandparents starting as early as the spring term of their second undergraduate year; without impacting to their financial aid. See FAFSA Changes Make Grandparent 529 Plans Even Better

This seems like a double edge sword:

  • if grandparent gifts the grandchild, then the gift considered an income for the student and 50% of that amount goes towards reduction in grant amount.
  • if the parent saves the money in 529, the student grant is reduced by 5.6% and considered towards EFC.

It seems better option is for the grandparent is simply give a cash gift.

A cash gift from grandparent(s) to student would also need to be reported on FAFSA, just the same as money from a grandparent-owned 529.

But the smart grandparent gifts cash to the student’s parent, then nothing is reportable for FAFSA if paid out by the day before the FAFSA is filed.