<p>We have two kids, and since they were babies, we've had college savings acounts for each of them (e.g. 529). In 4 years, when my older one goes to college, will financial aid officials look at BOTH the kids' accounts when determining the EFC, or only the accounts "for the benefit of" my older one who is applying? We are trying hard to save assuming they will both go to pricey private universities (e.g. $50K+ sticker price). My concern is that the FA people will see the younger one's accounts and think this money can go towards college costs for the older one. I believe that the rules of these college accounts state that the money can be used for the benefit of various relatives other than the one whose name is on the account (e.g. a sibling or a parent). They do this so that if your child ends up not going to college or going to an inexpensive school, you can still use the college fund to pay for a close relatives' schooling. So, do FA officials only take into consideration the amount in the account for the child currently applying? The younger one is seven years younger than the older child. The answer will have a big impact on how we deal with our financial picture. Thanks.</p>
<p>When your kids are ready to go to college, you’ll most likely fill out FAFSA, which is a Federal form that collects income and asset information and calculates an expected family contribution (EFC). Right now, FAFSA asks for the total amount in 529 accounts owned by the family, rather than the total for which the student is a beneficiary. So you would add together the total of your 529 investments. However, this amount will only be “assessed” at the rate of 5.6%. So if you have $50,000 in 529 accounts for each child, the net contribution to EFC of the 2 529s will be $5600. This isn’t a big hit, all other things being equal.</p>
<p>However, you’re talking 4 years from now, and the FAFSA formula is constantly being tweaked. My advice (worth what you’ve paid for!) is to just keep saving as you are, keeping an eye on the rule changes.</p>
<p>In addition, if your children go to private schools, they might have to fill out the CSS Profile which collects additional information regarding parent assets. The 529s will need to be reported there as well.</p>
<p>The only way to avoid having the 2 529 accounts added together would be to gift each account to each child; this becomes a child-owned 529 rather than a parent-owned 529. Then for child 1, you would not report child 2’s assets on FAFSA, with child 2’s 529 falling under that category (ie not reported). However, you lose the ability to change beneficiaries (the gift is irrevocable), and so if child 1 has money left over in the 529, it can’t be transferred to be used by child 2.</p>
<p>Congrats on thinking this far ahead and planning for a $50K+ college bill.</p>
<p>vballmom, if the 529 account is in the child’s name is the “assessed” rate 5.6%?</p>
<p>Yes, all 529s whether in the parent or the child’s name are reported as parent assets for FAFSA.</p>
<p>I guess I have a lot to learn; I am surprised to hear that the 529s are only counted 5.6%. Why would this be so if they are designed to pay for college? I would have thought they counted 100%. What am I missing? If 94.4% of the total sum in the 2 kids’ college savings accounts is a big number (which it will be if we keep with our current saving habits), then any chance we’d still have something other than a full-hit $50K EFC? Thanks again.</p>
<p>The majority of the EFC calculation is based on income. All FAFSA reportable parent assets, net of an asset protection allowance which is based upon the age of the older parent, are assessed at 5.6%. That amount is then included in the EFC. Students have no asset protection allowance and 20% of their assets are included in the EFC calculation…this would include 20% of a student owned 529 account, so depending on whether you are willing to reassign both funds and lose that control/flexibility it may or may not be worth it!</p>
<p>You can follow the formulas through worksheets and tables found in this document (you’ll want the full-time dependent student and parent ones only):
<a href=“https://ifap.ed.gov/efcformulaguide/attachments/111609EFCFormulaGuide20102011.pdf[/url]”>https://ifap.ed.gov/efcformulaguide/attachments/111609EFCFormulaGuide20102011.pdf</a></p>
<p>All of this applies only to the FAFSA EFC though…Profile schools may calculate your need much differently! I would not suspend or limit savings based on any expected need based aid as FA policies and endowment levels change frequently and many families end up shortchanged by thinking they will qualify. You may have much better luck targeting schools that give merit aid!</p>
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<p>This isn’t correct; student-owned 529s are reported as parent assets and are assessed at the rate of 5.6%, not 20%. Any other student asset, such as a savings account, UGMA, savings bonds in the student’s name etc, are assessed at the rate of 20% for FAFSA.</p>
<p>To the OP: The worksheet posted in the above link is very helpful. I’d recommend taking it and turning it into a spreadsheet which will allow you to run various what-if scenarios for income and assets. As far as why 529 are considered parent assets, the rules have changed over the years (for at least one year, student-owned 529s got lost in the rule shuffle and weren’t reported at all). But basically it’s the government’s way of encouraging college savings. Some states even give you a generous tax deduction or credit on your state taxes.</p>
<p>f8,</p>
<p>You are way a head of the game, in terms of saving and learning about the process. If you follow this forum for the next month you will learn much about the pitfalls and problems regarding financial aid from many perspectives. Starting a couple weeks ago, this is the time of year when students and parents are getting the fin aid packages and there are lots of questions and situations to learn from. </p>
<p>As vballmom stated, the rules (formal and informal) are ever evolving. Consequently, we are all learners on this forum.</p>
<p>Thanks for the kudos. DH and I are very grateful that we graduated from selective, expensive private schools with no debt. He’s in academia, so though our income is what most would call “upper middle class,” we do not have the income most of our college classmates have. I have been a stay at home mom for about 7 of the last 14 years. Still, we have the goal of providing our kids with debt-free educations just as we had (gulp). Yes, I know college costs have FAR outpaced inflation in the 25 years since graduated, and therefore our parents had a much easier time paying for college, but we want to make a go of it. I am just afraid that we will fall into that category of “They saved a whole lot for college, they make good money, so their EFC is $50K.” I am reading up on how to possibly qualify for grant aid from an expensive, needs-based private school (e.g. reading the K. Chany book) but the learning curve is somewhat mind-numbing. A couple of great schools we’re focusing on as “examples” of where we’d love our kids to attend say something akin to: 82% of people in our income bracket receive aid and the average award is $23K. Sigh… any chance that could be us? If so, we’re just fine. If not…discomfort and lower standard of living for sure.</p>
<p>vballmom is right…no need/advantage to change ownership of 529’s (obviously I did not do this since I misquoted the rules!). Sorry for the misinformation!</p>
<p>No worries. Thanks for your input. Just wish we had a better handle on our chances. It’s hard to make decisions with little idea of how generous schools might be.</p>