<p>You will want to have your financial aid packages before you need to make a decision on which college you will be attending. That decision needs to be made by MAY 1. If you do not complete your FAFSA until May 1, you will NOT have financial aid awards to help you make this enrollment decision. </p>
<p>In addition, limited funding aid will be LONG GONE (SEOG, Work study, Perkins Loans).</p>
<p>You are being very irresponsible regarding financial aid if you really need it…if you wait until May 1 to apply for need based aid.</p>
<p>Sure, you might get only a tiny bit less aid. But you will have NO IDEA what that aid actually is when you have to make your college choice.</p>
<p>Since the 529 counts as 5.6%, would it be wise to put ALL of my savings into it, instead of leaving it in my bank account where it counts as 20%? Let’s say I have 70,000 in a 529. At the end of the year it grows to 77000. Let’s say I spend 65000 on tuition. And I want to take out the remaining money for something that’s not tuition. Would they take 10% of my earnings (700), so I would get 11300 when I take it out? Is that how it works?</p>
<p>No. Distributions are made on a pro-rata basis between contributions and earnings, so your $65,000 distribution for tuition would be made up of both contributions and earnings on a 10-to-1 ratio, assuming at the time of the distribution you had $70,000 in contributions and $7,000 in earnings. Future distributions would be handled the same way, based on whatever the current ratio of contributions and earnings is.</p>
<p>how low are your parents’ incomes? Are they low enough that your assets don’t count at all?</p>
<p>Are your parents not permitted to have ANY savings at all? if they are allowed SOME (say, $5k), then give them $5k to hold for you…and put the rest in the 529, if necessary.</p>
<p>Hmmm…do the parents qualify for the simplified needs test? Income needs to be below a certain threshold…and they need to qualify for a means tested benefit (wonder if Medicaid counts).</p>
<p>ETA…AGI needs to be below $50,000 for the year. In addition, the family needs to have used a 1040a or EZ form.</p>
<p>I thought they it was either that tax form OR receipt of a needs tested benefit, but I can’t seem to find that reference.</p>
<p>If the student’s parents meet the simplified needs test, no assets are considered in the FAFSA formula.</p>
<p>This would not be the case for schools requiring the Profile.</p>
<p>Regarding the step of converting the mutual fund to cash or money markets (not the step of getting the resulting cash out of the account and possibly spending it…)</p>
<p>Is the mutual fund primarily in stocks or a lower-risk, interest-bearing fund? If it is stock, you may not want to commit yourself in advance to selling on a particular day within the next year. You might do better (or might not with stocks) if you sell when the fund seems high enough. If it is interest-bearing, then interest rates aren’t that great anyway.</p>
<p>A 529 account will only take cash; you can’t just transfer mutual funds, the funds must first be liquidated. Be aware of capital gains implications before doing this.</p>
<p>Lanoire, You need to call your school’s financial aid office and talk to a director or officer who knows how the rules work at that school in calculating financial aid for students. The way FAFSA is set up, they do not use IRAs, Roths, 401Ks, qualified plans at all in coming up with the expected contribution amounts for student and parents. They also assess 529 plans whether held by parents or students at 5.6%. That is not necessarily so with PROFILE schools or any schools using their own assets for aid and asking for additional information. They can use any formula they please. They can include 529s , IRAs and they do not have to stick with the 20% that FAFSA uses for student assets. The rules go out the window, and every college is free to do as it pretty much pleases in this regard. You need to find out specifically how your college handles 529s and any assets includeing qualified plans in your name. FAFSA rules may not hold. Also be aware that 529 funds can only be used for educational expenses without incurring penalities. Unless you are pretty sure you are going on to grad school, or prof school, it may not be the best place to park your money. You might as well pay the school its due instead of going through all of those shenanigans.</p>
<p>Also if you sell stocks or any asset and you have a realized gain, it is going to be counted as income in that year you sell it. The income will be hit at that 50% over approx $6K a year for financial aid purposes under FAFSA formulas-again, PROFILE schools are not bound by that formula and can do as they please. </p>
<p>I strongly recommend you have a talk with a fin aid officer and get what info you can regarding how student income and assets are treated by your school, whether they use the FAFSA rules, or their own, and what their own are.</p>