Last year was a tough year with my husband losing his job and my mother dying. I moved her to our state so I could take care of her so I too was without my normal salary. My daughter has been recruited as D! athlete - OOS State school- and we thought the first year she would be eligible for AID based last years 61K family income. Thing is when mom died we also inherited kids 529s so instead of virtually no assets we now have to claim 160K on FAFSA. Now based on school calculator she will receive no aid. EFC says 13K but school calulator qualifies her for no aid besides 5500 loan. So We are looking at 40K vs 25K she would have paid in state. (She does have a small 20% scholarship). In hindsight the account perhaps should have stayed in grandparents name until time to be used. However, due to crazy market last month we changed from deceased mother into my name and moved to cash since kids are so close to college. For daughter to be eligible for aid/scholarships school has said she really needs to submit by Dec 1. Should I consider putting dependent 2 529 (80K) in her own name so that we can be eligible for what looks like it might be 5K in aid. If mom hadn’t died or I hadn’t changed account she would have been eligible for a ton of aid. Now nothing. Double blow. Any thoughts/advice, welcome.
Why wouldn’t you just use some of that 529 money to pay some of your daughter’s college costs? The 529 is assessed at 5.6% of its value for FAFSA purposes. That’s the same assessment as if the 529 was in your daughter’s name.
If grandma set up a 529, wasn’t the intention that it would be used to help pay for college? It’s a very nice gift.
I don’t know if you can convert a parent owned 529 to a custodial 529 directly. You can convert assets in a UTMA/UGMA into a custodial 529. But the asset isn’t currently in a UTMA/UGMA Of course, if you can make it a custodial 529, your younger child could decide on their 18th birthday to cash out their 529 and pay the penalty.
If the scholarship she received is an athletic scholarship, any need based aid received from the institution would be counted in as athletic aid. That might put the team over its limit, so many schools do not allow need based financial aid to be combined with athletic aid. Combining merit aid or talent aid is fine, but not need based and athletic.
You could move your second child’s 529 to his name and then you wouldn’t have to report it on daughter’s FAFSA, but that only takes $80k in assets away (a good thing, IMO). Then you are looking at $61k in 2017 income, and $80k in assets. Some of that $80k might be covered by the parent asset protection, but you’ll still be looking at and EFC above Pell grant levels.
See if an athlete can get instate tuition which might help you more than an actual grant. Call the athletic dept and ask if there is someone there who deals with FA. When I found the right person at my daughter’s school, it was very helpful. My D had a few scholarships that could only be used for tuition, but this person was able to apply those first, then school aid, then state scholarships, and finally some aid that could be refunded to D (for her rent).
Even with a $61k income and no assets, you might be at an OOS public that would have given very little need based aid anyway. Even if the school calculator says that you’d receive $xxx in need based aid, that calculator will not ‘know’ that you’ve received athletic aid, and it’s unlikely you’d get both.
You need to call and find out what you can get, what you can combine.
Thanks so much for all your thoughts and advice! Yes, indeed it was a wonderful gift and all 529 funds will be used for both kids college! I was just trying to decide if changing from the parent owned to custodial made sense due to potential upside this year. Spoke with Scholars Choice and they did say this is an option. Had not really thought about possibility kid could withdraw funds and not use as GP intended. Highly unlikely -great kids but great point. Twinanddone I think you make some good points about OOS and chance it would have no upside given athletic scholarship. I had spoken to FA contact referred by team -super nice but rather ambiguous answers… she did caution about aid canceling scholarships and the need to pick one or the other. I like the in-state angle. That would be amazing!
One thing to note about moving from a parent owned 529 to a custodial 529 is the potential impact of custodial 529 on the second child’s FA. This has been talked about on this forum a bit in the past. On the FAFSA, it will be considered a parent asset so no issue there. However, on the other financial aid form used by more select schools - the Profile - it is not so clear and may depend on the college.