529 plan count as income

Submitted by Douglas Bauerband on Thu, 2018-01-25 16:35

do you know the answer to this that a client sent to me?

If i decides to put the kids money into college savings accounts, do they still need to report that as savings that they have when they do the FAFSA. Or in a sense is that hidden?

Can you help me with this answer?

Thank you,
Douglas



Submitted by Alan - IRA critic on Fri, 2018-01-26 01:55

  • Are assets counted on the Free Application for Federal Student Aid (FAFSA)?  Yes, but assets in accounts owned by a dependent student or one of their parents are considered parental assets on the FAFSA. Around the first $20,000 of parental assets fall under the asset protection allowance and won’t be counted in the Expected Family Contribution (EFC) calculation. For parents who save more than the allowance, only a maximum of 5.64% of parental assets are counted. This is quite favorable compared to other student assets, which are counted at 20%. Higher EFC means less financial aid.
  • How are distributions treated?  529 plan distributions receive favorable treatment on the FAFSA. Qualified distributions from a student-owned or parent-owned 529 account to pay for this year’s college expenses are not included in the “base-year income” that would reduce financial aid eligibility.

 

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