<p>Since 2 of my D's top choices give need-base aid only, and our income has changed a little since last year, I am trying to project how this will affect the grants she has been awarded. So I am going back to our FAFSA and PROFILE and trying to reconfigure using estimates for this year.</p>
<p>I see that grants are to be listed on D's part of the FAFSA-- are they counted as income and therefore work against her? She's never had to file a tax return (didn't make enough money last year). Will she have to list the grant/scholarship on the return and owe taxes on it? !!!</p>
<p>As far as I know federal work/study money is not counted as taxable income--correct?</p>
<p>One FAO told me that as long as our income stayed about the same, she should get the same grant as this year. It will be about $13,500 higher. Is there some quick guestimate way of figuring out how much of our EFC will go up? </p>
<p>The only asset that will change is D's 529--we will be using most of it to cover freshman year. And am wondering if it is better to just save from current income into a regular savings account or keep funding the 529? Again, a matter of tax benefits there too.</p>
<p>Wondering if there is any thing we can do to offset income increase to keep EFC about where it is. We have stopped/and reduced our 401k contributions (higher tax = good; more cash flow = good; less retirement savings = bad).</p>
<p>Using only the FAFSA formula, the the marginal increase of your EFC due to an increase of income will be about 47%. So if your income increases by $13,500, your EFC will increase around $6345.</p>
<p>Do you live in a state where 529 contributions give you a state tax credit or deduction? If so, it might be a good idea to continue to fund the 529 if you can. That increases the real rate of return on the 529.</p>
<p>You can use all of the 529 funds the first college year, but remember that’s not the same as the first calendar year. The funds have to be withdrawn during the calendar year they’re spent, so it’s possible that only about half of the 529 funds will be spent in 2011. You could withdraw additional funds before filing FAFSA in 2012 if that makes sense for your college payment schedule. The 529 funds will add a marginal 5.6% to your EFC. If you have $10,000 in the 529 and will have $2500 the next time you file FAFSA, your EFC will be reduced by $420 in 2012 ($560 - 140).</p>
<p>Thank you, thank you, thank you! This is great, although I still want to run all the numbers through the calculator you posted on the other thread, this gives me a really good shorthand idea of next year.</p>
<p>Yes, we do live in a state that gives a credit for 529. Will have to sit down and figure that one out. Good point about timing of spending down the 529. I think the college my D is most interested in requires payment for the spring semester by Dec. so we will get it all in this year.</p>