As noted by other posters I used the wrong word in my haste. It’s not actually a penalty – it’s just the percentage of parent assets that colleges will assess as being available for college expenses, so it reduces any need-based financial aid you will receive by that much each year.
Student assets are assessed at a much higher 20 percent each year. Note that all 529s are considered parent assets, which is great news as they are then assessed at the lower percentage.
Yes, thank you for clarifying. But – I don’t think rental income is assessed as assets. I think it’s reported and assessed as income, which is a much higher percentage than 5.6%.
Also, remember that tuition fees (and/or housing) often go up an average of 2-3% a year—although if you are lucky enough to attend an institution that freezes tuition for all four years, room&board may be the only expenses to go up.
I tried to plan for her to need more out of the 529 each year; also because Financial Aid awards more in loans over time: up to $5,500 the first year, $6,500 the second, and $7,500 the third and fourth (we didn’t need to take out that much, though).
Luckily, my D qualified for and won more scholarships over time, leaving her some money to assist with graduate school.
Thank you! The fact that Loyola does not freeze tuition is one of the scariest things about it. They give an estimate, not a guarantee, of 3.5% per year at the bottom of the financial aid award page.
If you are receiving need-based financial aid, your ability to pay will be reassessed each year based on the increased tuition so you will likely get more aid if tuition increases, assuming your income and assets don’t increase.
I’m confident that will happen if our finances don’t change. The school has been responsive to everything we need to make it work. It’s just an uncontrollable factor, but we feel good about their track record for increases.
Plus you will likely have fewer assets as you start paying tuition, so that usually increases need as well, which should lead to more aid.
That’s why in a previous post I recommended using your son’s own assets up first, as they are assessed much more heavily than parent assets. So, 10k remaining in your son’s account means you receive 2k less aid the following year (20% of 10k balance); 10k remaining in a 529 or a parent cash account means you receive $560 less aid the following year (5.6% of 10k balance). Of course, this is all leavened by whether or not the school meets full need, but that’s the general formula.
The school has been responsive thus far. Now they have you.
I would account for 3-5% annual cost of increases without any further assistance, if you are on merit based aid only.
One should expect that the price will go up without any more aid. Hopefully that won’t be an issue but if it were, I would reassess before getting in to deep. That being said, if 3% - 5% caused a hardship, it probably would now too.
So I assume most committed now would figure out how to make that increase work.
