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  • Grandparent 529 to qualify financial aid?

    WCI brushes off most physicians from qualifying for financial aid for child’s college, but from I’ve read unless household income is +$350,000 with single child, I should be filling out the forms to see how much my child will qualify when going to college.

    Owning a 529 will hurt my child’s chances for qualifying FA. Was told to have grandparent own 529 instead, and use that money two years into college as FA looks at income two years prior.

    thoughts on this? Or is it assumed that that the FA amount will be too negligible for any physician salary (household income of $200,000?)

  • #2
    You are confusing income with assets.
    https://www.savingforcollege.com/art...s-on-the-fafsa
    529 is an asset, using the 529 is income.
    Yes, grandparent 529 is a sheltered asset, You bank account and Efund aren’t sheltered,

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    • #3
      Not commenting on your child's ability to get financial aid, but a grandparent or other third party owned 529 can be far more detrimental to financial aid.
      • A parent or student owned (UTMA) 529 is considered a parental asset and only assessed at a maximum rate of 5.64% towards the expected financial contribution (EFC). Such 529 distributions are not included as either parental or student income income.
      • A distribution from a grandparent or other third party owned 529 is considered untaxed income to the student and assessed at a maximum rate of 50% towards the EFC. Such 529 assets are considered the third party's assets and not those of the parent or student.
      Since FAFSA now uses the prior prior year's income, the best strategy is to have 50% of 529 assets owned by the parent and/or student and 50% by a third party such as a grandparent. Then use the parent's/student's 529 first and the third party 529 last.

      For and undergrad example, use the parent's/student's 529 at least for the Freshman year and the fall sophomore semester and the third party 529 anytime after 1/1 of the sophomore school year. For any post-graduate studies use the third party 529 after 1/1 of the 2nd prior year.

      Comment


      • #4
        Originally posted by kev777zero View Post
        WCI brushes off most physicians from qualifying for financial aid for child’s college, but from I’ve read unless household income is +$350,000 with single child, I should be filling out the forms to see how much my child will qualify when going to college.

        Owning a 529 will hurt my child’s chances for qualifying FA. Was told to have grandparent own 529 instead, and use that money two years into college as FA looks at income two years prior.

        thoughts on this? Or is it assumed that that the FA amount will be too negligible for any physician salary (household income of $200,000?)
        I have a daughter going to college so I know the bar is too high to get a penny in FA. Unless you have 5+ kids or have a 60K family income the chances of getting financial aid is pretty much none.

        But if you feel like filling out forms and wasting time, go ahead.

        Comment


        • #5
          Originally posted by spiritrider View Post
          A parent or student owned (UTMA) 529 is considered a parental asset and only assessed at a maximum rate of 5.64% towards the expected financial contribution (EFC). Such 529 distributions are not included as either parental or student income income.
          Are you sure about this? My understanding is parent owned 529 has the 5.64% rate but if it's student owned (or student UTMA) the rate is 20%, not 5.64%, so if you're really going for financial aid you don't want the student to have an UTMA account or be the owner of the 529

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          • #6
            Originally posted by spiritrider View Post
            Not commenting on your child's ability to get financial aid, but a grandparent or other third party owned 529 can be far more detrimental to financial aid.
            • A parent or student owned (UTMA) 529 is considered a parental asset and only assessed at a maximum rate of 5.64% towards the expected financial contribution (EFC). Such 529 distributions are not included as either parental or student income income.
            • A distribution from a grandparent or other third party owned 529 is considered untaxed income to the student and assessed at a maximum rate of 50% towards the EFC. Such 529 assets are considered the third party's assets and not those of the parent or student.
            Since FAFSA now uses the prior prior year's income, the best strategy is to have 50% of 529 assets owned by the parent and/or student and 50% by a third party such as a grandparent. Then use the parent's/student's 529 first and the third party 529 last.

            For and undergrad example, use the parent's/student's 529 at least for the Freshman year and the fall sophomore semester and the third party 529 anytime after 1/1 of the sophomore school year. For any post-graduate studies use the third party 529 after 1/1 of the 2nd prior year.
            Thanks! I’m a little bit confused here - can’t we just stick with using student /parent 529 the whole time rather than using grandparent 529?

            initially I was thinking of getting grandparent (my father) to open 529 and I just gift him my child’s college fund, but if it’s worse doing so I’d just open one myself.

            Comment


            • #7
              Originally posted by JBME View Post
              Are you sure about this? My understanding is parent owned 529 has the 5.64% rate but if it's student owned (or student UTMA) the rate is 20%, not 5.64%, so if you're really going for financial aid you don't want the student to have an UTMA account or be the owner of the 529
              Yes, I am certain about this.

              Ordinary assets owned by the student either in a UTMA custodial account or their own account opened after the age of majority are considered student assets for FAFSA purposes.

              529 accounts owned by a parent or the student (either a UTMA 529 custodial account or their their own account opened after the age of majority) are all considered parental assets for FAFSA purposes.

              Comment


              • #8
                Originally posted by kev777zero View Post
                Thanks! I’m a little bit confused here - can’t we just stick with using student /parent 529 the whole time rather than using grandparent 529?

                initially I was thinking of getting grandparent (my father) to open 529 and I just gift him my child’s college fund, but if it’s worse doing so I’d just open one myself.
                Student/parental 529 accounts are assessed as parental assets and assessed a maximum rate of 5.64%. Their distribution is not assessed. Third party 529 account distributions after 1/1 of the second to last year are not assessed as assets or distributions.

                For example, ignoring any earnings. You have $100K in 529 assets to be distribute $25K/year.
                • If all $200K is in and distributed from parental/student 529 accounts. The contributions to the EFC will be; year 1 = 5.64% * $200K, year 2 = * $150K, year 3 = * $100K and year 4 = * 50K.
                • If $100K is in and distributed from parental/student 529 accounts and $100K in third party 529 accounts. The contributions to the EFC will be; year 1 5.64% * $100K, year 2 = * $50K, year 3= $0 and year 4 = $0.

                Comment


                • #9
                  Originally posted by kev777zero View Post
                  WCI brushes off most physicians from qualifying for financial aid for child’s college, but from I’ve read unless household income is +$350,000 with single child, I should be filling out the forms to see how much my child will qualify when going to college.

                  Owning a 529 will hurt my child’s chances for qualifying FA. Was told to have grandparent own 529 instead, and use that money two years into college as FA looks at income two years prior.

                  thoughts on this? Or is it assumed that that the FA amount will be too negligible for any physician salary (household income of $200,000?)
                  I didn't "brush it off", I did the math. Have you? Take the average physician income and run it through the FAFSA. What did it tell you? Here's what it told me:

                  https://www.whitecoatinvestor.com/wh...-aid-planning/

                  Better yet, run YOUR income and assets through the FAFSA and then compare your EFC to the COA at your child's school. I bet the EFC came out higher, didn't it?

                  At any rate, the grandparent's 529 work-around is a great one if you're one of the few here whose kids aren't disqualified by virtue of your income and assets.

                  Helping those who wear the white coat get a fair shake on Wall Street since 2011

                  Comment


                  • #10
                    Originally posted by Kamban View Post

                    I have a daughter going to college so I know the bar is too high to get a penny in FA. Unless you have 5+ kids or have a 60K family income the chances of getting financial aid is pretty much none.

                    But if you feel like filling out forms and wasting time, go ahead.
                    My daughter is telling me I'm going to have to do it just for her to be eligible for merit scholarships. I don't want HER to know what's on that form, much less the school. Now that I'm thinking about it, I'm going to email her favorite school and find out if they really do require it. I understand some do and some don't.
                    Helping those who wear the white coat get a fair shake on Wall Street since 2011

                    Comment


                    • #11
                      Originally posted by The White Coat Investor View Post

                      My daughter is telling me I'm going to have to do it just for her to be eligible for merit scholarships. I don't want HER to know what's on that form, much less the school. Now that I'm thinking about it, I'm going to email her favorite school and find out if they really do require it. I understand some do and some don't.
                      Smart choice on checking. I would not limit it to just her favorite school. Email is one way, but it’s not foolproof. The in’s and out’s are university admissions and college or department controlled. Often a separate application is required and some automatic. One email will likely not cover all which she may be eligible. She also may apply for external. You can double check. I would suggest she print out the requirement as part of her search as well as a spreadsheet of what she plans to apply for.
                      Searching for merit scholarships is a great exercise in training good financial habits. Merit scholarships do end up in the Financial Aid systems, both internal and external.

                      This can be more time consuming than the applications. I wish her the best.

                      Comment


                      • #12
                        A lot of times people qualify for loans and consider that financial aid. I think this confuses the picture sometimes.

                        Needing to fill it out for merit-based need is a whole different story. That kind of stinks. I don't really agree with the student need being solely based on parental income but in regards to merit-based aid why does that have anything to do with parent income?

                        Comment


                        • #13
                          A heads up on third party 529 accounts including grandparents. I was not aware of this until today.

                          A series of future simplification changes to the FAFSA had been announced earlier this year. One of those changes was the removal of third-party (e.g. grandparents) cash gifts including 529s from FAFSA reporting.

                          It was scheduled to be released on October 1st 2022 for the 2023/24 school year. It has been delayed at least to the 2024/25 school year.

                          This could mean gifts including from third-party 529 accounts could be able to be made starting 1/1/2022 without impacting federal financial aid. However, you will want to wait for confirmation of inclusion of this change in the 10/1/2023 FAFSA before doing so.

                          Note: This is only a change to FAFSA reporting requirements. The CSS Profile can and does require different reporting. There is no guarantee they will adopt a similar change.

                          Comment


                          • #14
                            Originally posted by Lordosis View Post
                            A lot of times people qualify for loans and consider that financial aid. I think this confuses the picture sometimes.

                            Needing to fill it out for merit-based need is a whole different story. That kind of stinks. I don't really agree with the student need being solely based on parental income but in regards to merit-based aid why does that have anything to do with parent income?
                            It does not. Administration and record keeping. Some are limited by Total Cost of Attendance and some aren't. Some are a one time grant, some are renewable. Some are loans and some are grants.
                            The financial aid office keeps score: Getting internal or external scholarships change the math. I have Gates send an additional $5k and the university frigging returned it!
                            No loans! Hey lady, get it back and reduce the other one. My "voluntary donation" to the university.
                            Financial Aid or "need" have absolutely nothing to do with athletic or merit scholarships. The Financial Aid system is the record keeper.
                            The Presidents Office, athletic department, Gates and two other foundation grants had no access to the FAFSA or need computation.
                            Some are joint checks and some are individual and some just processed within the Fin Aid system. Two university departments and 3 external (no limit) and multiple limits. It gets complicated. It has nothing to do with the "need".

                            Comment


                            • #15
                              Originally posted by Lordosis View Post
                              A lot of times people qualify for loans and consider that financial aid. I think this confuses the picture sometimes.

                              Needing to fill it out for merit-based need is a whole different story. That kind of stinks. I don't really agree with the student need being solely based on parental income but in regards to merit-based aid why does that have anything to do with parent income?

                              I was required by the schools to fill out the FAFSA for both kids because they received merit scholarships even though it was clear there was no point in filing for need based aid. I infer it is to get all the kids’ scholarship data into the same system.

                              Comment

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