<p>Is it worth the trouble and paper work to file for financial aid when my daughter's 529 account balance is currently enough to cover the first two years of college (including R&B, books, fees)?</p>
<p>Do most public universities and state schools expect parents to completely drain their kids 529 accounts before any financial aid is offered?</p>
<p>Yes. The 529 is treated just like any other asset so only a % of it goes to the EFC. They do not expect you to drain the 529 any more than they expect you to drain your savings or bank accounts. In fact for FAFSA they will not know what part of the reported savings and investments are 529.</p>
<p>If you find do not qualify for much in the way of aid other than loans you can always opt not to take them. On the other hand if you qualify for any grants or even subsidized loans (where the govt pays the interest until graduation) then they are worth taking and your 529 money will last a little longer.</p>
<p>Thanks for the detailed reply Swimcatsmom!</p>
<p>I know many schools will not give any aid to students in 3rd or 4th year if these students do not apply for aid before their 1st year. And most schools I think consider the students’ ability to pay for four years, not two, when calculating fin aid. So certainly you still need to fill the forms; they maybe frustrating I know ^^, but it’s worth the effort. Why use up all your money when you could apply for some aid to assist D’s study?</p>
<p>Remember too that the typical 529 College Savings account is treated by FAFSA as a parental asset. Parents get an asset protection allowance, typically around 40K, and the amounts below that aren’t assessed. The amounts above that are assessed at the lower rate (about 6%), not at the higher student rate (20%).</p>
<p>So, for example, you could have 50K in a 529, with the parent listed as the owner, and the student as the beneficiary. If you had only 10K in other reportable assets (savings, checkings, etc), and your asset protection allowance was 40K, your EFC contribution from parental assets, including the 529, would only be around $1,200.</p>
<p>So, absolutely, file for financial aid under these circumstances.</p>
<p>Make sure that when you pull your money out of the 529 plan that you calculate and do not exceed your adjusted qualified educational expenses (AQEE). This value is generally different than your qualified educational expenses.</p>
<p>If you exceed the AQEE level you may subject yourself to paying taxes and penalities on a portion of the withdrawal and increase your adjusted available income amount reported next year on the FAFSA. This may potentially increase your EFC and expose you to an adjustment on certain types of preferred aid that may be awarded in your child’s freshman year in college.</p>