529s, do college savings affect admissions?

Paying for College
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When you say state schools, UCs and highly competitive privates - what is your state?

The UCs OOS won’t give you money. UCLA is over $70k a year now. Michigan the same. But with a 4.0, U of Arizona, for example, would be $25k ish a year OOS. Bama $20k. In most areas (not sure what is being studied), do you really think there’s that much a difference to a UC? Or schools like Florida, South Carolina, UGA are much lower cost relative to UCs - and while we don’t know her overall profile, kids with a 4.0 and 1530 are a dime a dozen at all these schools.

Top privates will have income scales and know that your assets will be a part of it. When I spoke to Cornell, they told me a million in assets, regardless of income, will likely leave you with no aid most anywhere.

Your home equity and other assets might be included, depending on the school. My daughter got into a school where 88%of kids got $38k on average. It was an income based scale. We got none. I asked why. They said because you had more than normal assets. I asked what’s that ? They said 2x income - which isn’t much.

So if you want highly rejective - go for it. Run the NPCs first. No point in applying to a need based only school if you can’t afford the # it spits out.

But there are many smaller, strong privates that do give merit. Some half or more. No, they’re not Ivy or NESAC. But schools like Depauw, Kalamazoo, etc are strong. And you have the Johnson at W&L, Presidential at American, and full rides at schools like Vandy, WUSTL, Emory, Miami etc

If you’ve ensured an affordable safety then why not ? But @twogirls noted budget has to be determined up front and made very clear.

You only apply to schools that can achieve that #. They may not but can. And ensure two that will and that are assured admits where the student would be happy to attend.

And if cost matters and you want pedigree, apply widely. You have 20 common app spots - use them - but note it’s a ton of work and many students wear down early in the process. It’s essays galore.

Good luck.

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So she will be applying for financial aid as soon as possible in the fall of 2023. On the FAFSA you will be submitting information from the tax year ending 2021.

Some strategies applied in 2023 might not affect her application (but possibly younger siblings).

What I don’t know is, whether the prior-prior year rule also applies to 529 balances.

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@kelsmom aren’t 529 balances considered as assets? If so, those are reported as of the date of filing the FAFSA…correct? Assets are not reported as prior prior year amounts.

But remember also, the FAFSA this year won’t be available for filing until December sometime.

Again I say…you have saved this 529 money for college. Each year about 5.6% of its value will be added to your family contribution per FAFSA…not 100%. I’m not sure I see the issue with using some of this money to actually pay for college.

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Adding…for $150,000, that would add $8400 or so to your family contribution…not all $150,000.

I’m sorry, but I think I would spend that $8400 on my kid’s college education each year. It’s not like you will get a Pell grant or something if you give it all to the grandparents.

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Question : so you can determine what year you supply the tax information for depending on if you file in fall of 2023 or Jan 2024? Would you not have to update the information? Thanks!

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I was incorrect - the filing date does not control which tax year you must used. According to the Dept. of Education:

You cannot update your 2023–24 FAFSA form with your 2022 tax information after filing the 2022 tax return.

The 2023–24 FAFSA form requires 2021 information.

https://studentaid.gov/articles/things-you-need-for-fafsa/

In case the 2021 numbers are no longer representative…

You cannot use your 2022 tax information.

If your 2021 financial situation no longer reflects your current situation, speak with the financial aid office of the school that you plan to attend after submitting your FAFSA® form.

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FAFSA for 2024-25 school year will use 2022 tax filing information.

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This is a helpful summary of 2024-25 FAFSA changes from the California Student Aid Commission

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See the below too. While the new “grandparent loophole” for 529s will work for FAFSA aid determination, it likely won’t for CSS Profile schools. Depending on what type of schools are being considered, the least-risky. lowest-impact move may be just to keep the existing 529s.

Keep in mind, however, that grandparent 529 plans will still be considered on the CSS Profile. The CSS Profile is an additional financial aid form used by about 200 private colleges to award their institutional aid.

It’s still unclear how the upcoming FAFSA changes will affect the CSS Profile and institutional aid eligibility at other schools. Vasconcelos says cash support from grandparents will likely still have an impact.

“It is also possible that with the reduction of questions on the FAFSA, more colleges that are interested in collecting information that is no longer available on the FAFSA will begin to require the Profile or their own institutional application,” she said.

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In my experience, the biggest driver of variability for NPC figures for CSS Profile schools with lots of need-based aid is how they treat home equity. They cap at different multipliers of annual income, some don’t cap at all, and some don’t consider equity at all.

I got a bit of a look behind the scenes in discussions with financial aid offices because my D got financial aid “pre-reads” at a number of schools along with academic pre-reads for athletics recruiting. Here’s another wrinkle: some schools program their on-line NPC accurately for home equity vs income and some don’t. Don’t necessarily rule a school out for applications because their NPC is worse than others—their actual need-based aid offer might actually come in better than expected.

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It does not. Balances are supposed to be that at the time of entry for FAFSA and CSS. It would be impractical to expect people to keep track of what their balance was 2 years ago. Which date would one be expected to used for that balance?

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All assets are reported as value on the initial date that the form is filed.

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My kids did not have grandparent 529s but IIRC, the CSS profile only asks about parent and student assets. The grandparent 529s would not seem to be either. Hopefully, someone here will correct me if I’m wrong. As @kelsmom indicated, it may help you (if your plan allows, frankly, I’ve never heard of this) to transfer those 529s to the grandparents. This assumes the grandparents will be using this money to pay for the last 1 - 1.5 years of tuition for each child when it no longer affects financial aid determination. Otherwise the 529s are lumped into the parent assets section (non-retirement) which are assessed at ~5.6% each year of college. As @thumper1 said, $150K means you’ll be expected to pay an additional $8400 per year. Why pay that if you can avoid it? The financial aid game is just like paying your taxes. Play by the rules to do what you can to help yourself.

You can’t do anything to change the past, however. Your prior-prior year tax returns will be the major driver for financial aid determination. At a $135K income with your home equity, you still stand to qualify for significant aid at some of the highly selective, ‘meets needs’ colleges. You can be a 401K multi-millionaire and still qualify for considerable financial aid if your income and other assets are low.

Like others said above, use the college-specific NPCs and get a good idea of what you’re up against. Good luck.

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Grandparent 529 accounts aren’t assets, but the payments from the 529 to the student account were reported as untaxed income for the student. That’s what is changing … they won’t be reported anywhere. But Profile can ask about them (Are you the beneficiary of a 529, and who is the owner … or … in 20xx, did you receive payments in your name from one or more 529 accounts?).

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But remember…you can’t have it both ways.

If your kid applies to need aware colleges, their ability to pay could factor into their admission decision (yes, even at some of the highly selective colleges). So…consider that.

At need blind schools, the admissions folks won’t know your specific financial need. You might get some additional need based aid.

BUT…I will ask…what did you save this money for in a 529 if it wasn’t for paying for part of college?

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I don’t think they are expecting to not pay what is in the 529 for school. They expect to be asked to pay significantly more than is in the 529. So, they are exploring ways that they will be asked to pay less than they might otherwise, which will still be more than they have saved, but maybe not as much more than they have.

For my family it works out like this. We have $100,000 saved for each of our kids who’s going to college. However, the schools expect us as a family to pay over $200,000 per child (over 4 years). If there is something we can do, that is legal and ethical, to get that $200,000 a little lower, it would make sense to do it! We will still be paying the full $100,000 that we have saved, but we will either have less debt or be pulling less money out of some other place.

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I don’t think they are trying to avoid using the money for education. My impression is that they are trying to maximize need-based aid before having to dip into it to extend how far the 529 goes.

I don’t agree with their proposed approach, but I understand why they are asking.

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Understood. But they really don’t know IF this will increase their need based aid much…and they also don’t know how this will affect admissions at need aware schools,

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It sounds like the OP is considering a Special Rollover to a new owner keeping the same child as the 529 beneficiary. Any 529 rollover is allowed once every 12 months whether to a new owner or to a new plan (e.g., if seeking better investment options). This is entirely above board and could be a smart move for the OP if the student is admitted to a need blind, meets full need school with generous aid. Presumably the grandparents will pay tuition out of the 529 once the student is beyond the look back period for financial aid ( the last 1 to 1.5 years of college). Even if the new changes to FAFSA do not carry through to CSS or institutional methods, the ‘student income’ resulting from this never matters wrt financial aid. This could help stretch their dollars. With three kids going to college, there may be more to transfer to other children down the road.

Agreed. This may backfire if the student is seeking admissions to need aware places like Tufts.

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One last thing to be aware of is the implications if one or both grandparents die before all three kids are through college. What happens to this asset assuming the estate is divided up among multiple beneficiaries? I’d hate for an aunt or uncle (or several) to have rights to my kid’s college fund.

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