<p>Best not to pay the money directly to the school without first finding out whether the school would consider that a resource of the student. (Some do and it will impact FA the following year.) Also, if the student is attending a school that uses the CSS Profile to determine aid, on that form any 529s held by someone other than the parent or the student are declared. (Not on the FAFSA, but yes on the CSS Profile.)</p>
<p>The tax advantage of the 529 is only the investment can grow without that growth being taxed, but the principal investment is after-tax income already. As for the untaxed growth, given the very short timeline you’re talking about there is not much benefit to be had there for the giver.</p>
<p>As far as the FAFSA-only situation, the giver could also just give the money to you (the parents) and you could use it pay college costs. If it’s spent before you’re preparing next year’s FAFSA, it will not be sitting in the bank as an asset that you must declare. There is a place on the FAFSA where students are asked about “bills paid on their behalf” but that question is not asked of the parents, so there is no where for you to declare that gift. (Even if you have some of it still in the bank at next year’s FAFSA filing, it may fall under your protected asset allowance. That figure is based on the oldest spouse’s age. For us po’ folk with few assets it’s pretty likely it will fall under the protected amount - ours is over $50K --not counting the house-- and we’ve never had anywhere near that much in assets.)</p>
<p>I agree the other good options are to give the money to the student later to help pay off loans, or loan it to the student directly then forgive the loan. Either of these options could happen at any point in 2011 after the student’s senoir year FA aid applications have been filed.</p>