I have read that any money a college receives from a grandparent-owned 529 will cause the school to increase the expected family contribution in subsequent years.
I am worried that help we (the parents) receive from grandparents in the form of disbursements from a 529 during our kid’s freshman year will increase our expected financial contribution in future years. Does anyone have direct experience with this?
I have read that changes in the simplified FAFSA will mean that 529 disbursements will not be counted as untaxed student income starting in 2022, so maybe I don’t need to worry so much. Does anyone know when the word on this will be finalized? The school also uses the CSS profile some even if that FAFSA changes there is still an opportunity to ask about this.
@BelknapPoint can answer this!
It used to.
Then it was changed to it won’t.
Then the change was delayed so it still will.
Until the change takes effect and it won’t (plan is the ‘24-25 school year. Unless it’s changed again).
I suggest researching/following the topic and maybe speaking to a well-versed advisor. As has been shown, “plan to take effect” can change, making planning difficult.
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The major FAFSA revision, whenever if finally takes effect, will not require the reporting of contributions from grandparent-owned 529s. Schools that use CSS Profile to allocate institutional aid will set their own individual policies on this, so unless a Profile school makes public what they will do, you will have to ask staff at the school’s financial aid office. Since student untaxed income is reported on a prior-prior year basis, one longstanding method to avoid taking a hit on using funds from a grandparent-owned 529 account has been to wait until the spring semester of sophomore year to do so (assuming that the student is on a traditional academic calendar and will graduate in four years).
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