Yes, they can and will provide consideration to special circumstances. (I’m not sure this would be one of them though).
In my experience, the financial aid offices are also straightforward about applying the rules and standards. For example, if a change was made in ownership of 529s after student enrollment and initial FA determinations, they might ask for explanations the following year if they noticed significantly different asset declarations, but they wouldn’t classify this as “unethical”, and would simply note the change and apply the rules.
You’re really splitting hairs. Yes, they are technically our assets now, but we also have the opportunity because of the FAFSA change to treat them as a grandparent gift, which is also accurate. If I had asked years ago whether there was a financial advantage to transferring them out of the grandparent’s custodianship to mine would you have also claimed that was unethical? We are a family of 5 with two parents working for non-profits, currently struggling to make ends meet. You’re not talking to someone who is gaming a system to hide thousands of dollars we’ve saved on our own. But okay, you’ve made your point multiple times.
In the end, with $450K in home equity and $135K in income and I assume there will be savings, in most cases you might be donut hole or won’t qualify for significant aid. I’m not talking Princeton but most high end privates and UNC/UVA who meet as publics.
But it goes back again to:
Have assured schools you can hit the price on merit - those schools that publish a table - if this is your GPA or GPA/ACT combo, this is your discount - you need two.
Apply to schools you’re pretty sure will get you there - lots of LACs discount 40% or more.
Apply to those highly rejective but the NPCs aren’t good for you and I’d personally include the 529 in them (but run both ways to see) - but if they’re not good for you, don’t apply…unless the school has a merit possibility. Not a likely but at least possible…so the $80K school could get you to budget…as long as you have #1 in the bag, then these are fine.
But if they show you full pay and offer only need aid, then don’t apply.
I think you’d have gotten better advice AND a lot more empathy if you’d begun with these facts. If you are struggling to make ends meet, maximizing the value of your 529 is the LAST piece of the puzzle, not the first piece. A “struggling to make ends meet” family needs a very different application strategy vs. a “we don’t want to touch our home equity and we have generous grandparents in the picture” family. It was hard to tell from your original post what your financial situation actually is.
Now it’s clearer. At your income level and with your D’s stats, I’d recommend a barbell strategy for applications- a couple of “we’ll get aid” schools IF she gets in (i.e. the mega generous ones), a few rock solid safeties- admissions and financially feasible regardless of who owns the 529, and then a couple of “maybe yes, maybe no’s” in the middle where maximum merit aid might mean it’s affordable, or getting a special circumstances review might make the need based aid work.
If you are struggling to make ends meet, you cannot count on the 529’s (particularly since they’ll be volatile) carrying the day. The gap between them and the sticker price is too high.
I really didn’t think I was asking a controversial question, or that I would have to divulge more personal parts of our family financial situation in order to get a straightforward response. I’m asking about the 529s now because I’m seeing the grandparent next week and it’s our chance to discuss it with him, not because it’s the first piece of our college financial puzzle.
But in general on CC, the more information you divulge, the more helpful the answers. Otherwise, you get a lot of people telling you to apply to Alabama and Arizona, major in engineering, and call it a day!
Noted! This was my first CC post and lesson learned! I might have to start a new thread seeking advice on schools that offer generous merit aid but are also small with good arts and humanities programs. Thank you for all your input above!
I see no ethics problems here. We were in a similar situation with D23 last year. She had two custodial accounts that would have counted as student assets at 20%. The stock was gifted by a grandparent. A friend that is an attorney (tax) advised us to transfer it back to the grandparent which is not illegal. Like your case it wasn’t a huge sum of money but we needed it for tuition. The problem is people use custodial accounts to hide large sums of money which we were not doing. We opted to cash in accounts and open a 529 instead of having D23 draw down the custodial accounts first. Who knows if it was the right financial move but D23 is an only child and we actually included her in the discussion and let her be the person that made the decision because it was her money and affected her financial aid.
It is very difficult to hide money in a custodial account because you are getting a tax statement- and paying taxes on the dividends or interest-- every year. it is NOT a tax advantaged way to hold assets now that the “kiddie tax” break has been eliminated.
If you cashed in an account- which then triggered a capital gains tax which is likely- you might have ended up paying more in taxes than you got in financial aid. Trying to move assets around to maximize financial aid only works if the underlying financial strategy is sound.
Water under the bridge for you guys- but for anyone else reading this- “cashing out” sounds easy and financially advantageous except when it’s not. Moving other assets (like from a cashed out custodial account) to a 529 once a kid is already in HS is missing the key advantage of a 529-- that the money is growing tax free.
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This also works with other like schools. I was using this example as HYP only matches HYP not all 8 and not Stanford or MIT.
SO my advice is to apply to peer institutions. The aid offices will tell you who they match.
Glad you clearly explained this. I’m sure we probably did it all wrong. Finances aren’t aren’t our strong suit. We should have moved the money well before HS. Thanks for posting this for others.
Start that thread! Give your kid’s criteria for colleges (size, location, types of majors being considered, budget). People here have a lot of ideas and will definitely help you find schools where your very strong student could get decent merit aid. Places at least worth exploring.
Unlike FAFSA, there is no Profile “formula.” The Profile form simply collects data. Profile schools can use that data however they please. I know from personal experience that different Profile schools will treat student-owned/custodial 529 accounts in different ways (parent asset or student asset), according to the policy in place at each particular school.
Yes, every school has formulas. However, unless they asked additional questions not in the CSS Profile, the schools would not know the status of the ownership of the 529 accounts as they would simply be listed by the applicant in the parental assets sections.