For example, if there is initially $30,000 in a 529 plan and $20,000 of that gets used to partially pay for freshman year tuition, will the financial aid office see that the family no longer has that $20,000 and increase financial aid to take that into account?
If it does, how should I account for this when trying to estimate how much a college will cost after using the net price calculator?
I’m asking about this as it relates to 100% need met private colleges that use the CSS profile, not federal aid (which I wouldn’t qualify for), if that makes any difference.
Also, should a 529 plan be reported on the FAFSA and CSS profile as it is when these forms are being filled out, or as it was when the 2-years-ago tax information was filed?
Your 529 is an asset…and as such the value is reported as of the day of the filing of your FAFSA and Profile.
If you have less in your 529 for the following year…that reduction in your assets might be make your need based aid increase. I say MIGHT because we have no idea what your income is…and really…that counts a lot more.
Generally, yes. Depending on the specific formula that any school uses to calculate need-based aid, the lower the asset value the more need-based aid.
When the parent asset value is asked for, use your best guess of what you think the 529 account balance will be at any particular time.
Schools that use Profile to allocate institutional need-based aid can use whatever formula they want, so who knows.
What thumper1 said. A student or parent-owned 529 account is always a reportable asset for FAFSA or Profile, and the amount to report is therefore based on the account value on the day the forms are filed.
Are you wondering if your need based aid for freshman year will be higher if you use some of your 529 money to pay college costs for freshman year? If that is what you are asking…the answer is NO.
But if you use money your freshman year…then when the sophomore year financial aid forms are filled out…the asset amount will be less.
For the 2018-2019 academic year…your balance in the 529 will be reported as of the day you file your FAFSA.
Your assets are run through the formula, and a 529 is just an asset. Parent assets are assessed at 5.6% for the FAFSA, but a CSS school and do anything it wants (and even take the 529 for other children into consideration when the parents don’t want that to happen). You might get more FA, but it depends on other assets, income, etc. reported for that year.
I tried to do a very rough estimate of this very thing, assuming no significant income change and ignoring the possibility of growth of assets. I also pretended the value of our home wouldn’t change, in the case of CSS Profile schools.
Since I was doing this to gauge future costs of Profile schools, I included my home value in the assets.
Since multiplying assets by 5% and adding an EFC value based on income alone and family size gets very close to the common NPC result, I used that basic methodology.
I started with a year one asset amount . and a year one cost based on a frequently occurring NPC value
For year two, I got a new asset amount by subtracting the first year cost from the first year assets. I multiplied the new asset amount by 5% again and added in the income-only EFC to get the second year cost.
You could repeat this method for year 3 and 4.
I made it more complicated because I will have another kid in college in years 3 and 4…if all goes well…lol. And my purpose was to see how that also affected costs and if it might even help in budgeting.
So, again, this is a rough and imperfect but it’s something an obsessive person could do for fun on a quiet evening to get a better sense of how costs might change over time as assests decline.
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Any parent-owned 529, even those with siblings (or anyone else) as the designated beneficiary, must be reported on the student’s FAFSA as a parent asset.
Right, you have to report them, but a CSS school can do what it wants with that information. It could decide that there are 2 more children in high school and allow the family to ‘save’ that money, where the FAFSA doesn’t even ask, assets are assets. I think some CSS schools are a little more aware that the oldest child doesn’t get it all, that there may be private school tuition being paid to a high school or grade school.
Signed, a third child with a sister 3 years older and a brother 18 months older who finds it very unfair that the oldest child gets to use it all.
@twoinanddone , my hope is that Profile schools really use all the information but I’ve become very skeptical after talking to a couple FA officers.
I specifically asked if our unique situation would be taken into consideration (the fact that we lived overseas for much of our working lives so did not put our savings into the typical retirement accounts and that we have pathetically little in real retirement accounts or put into social security; lower income with one older wage earner; two younger kids; blah, blah, blah.) And answer I got was no.
I wouldn’t expect it all to be protected but maybe they could care enough to look at the whole picture if we take the time to fill out that stinky form and pay for it and pay for them to get a copy.
It’s disheartening.
And not to sound like a radical communist but it’s an elitist system that favors wealthy people who have learned how to keep their money safe, because people of my background aren’t really taught about things like retirement accounts and protecting assets. We are just happy to have money to save and that’s good enough…until it’s time to pay for college.
My kids picked FAFSA only schools, so I was spared the CSS misery. A workmate shouted with joy when she finished her final one at the office (3 kids, 5 years of CSS). She thought USC really did give a lot of consideration to her kids (2 of the 3 went there) and their special circumstance of a big reduction in income and the mother having to take a job in a different state, but who knows?
And for my own case, long before CSS, there wasn’t any money saved for my sister to use it all up but if there had been, I would have been mad that the oldest child CAN use the younger kids’ money or that the colleges basically expect them to. After a year at an LAC with no financial aid she transferred to a state school, and my brother and I always went to state schools.
I agree that most CSS schools would take some convincing that reported 529 accounts are not available to the first born.
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lower income with one older wage earner; two younger kids; blah, blah, blah.) And answer I got was no.
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How “low” is the lower income???
If your child won’t likely be getting the aid that you want, then have them also apply to a few schools that will give huge merit for stats. Then income/assets/whatever won’t matter.
That’s because this is NOT a unique situation. There are plenty of people with little to no retirement savings. While living overseas, you had the benefit of a tax reduction for U.S. federal taxes. Most folks don’t get that.
Plus…need based aid is largely based on your current income.
@thumper1 True, and our earned income is not far from limit of the simplified needs test where we might have had our assets ignored completely for fafsa purposes.
We have retirement savings. It’s just not in the right type of accounts because I did not know any better. It’s not as though we were irresponsible about our future.
