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Changes Coming to the Free Application For Student Aid (FAFSA) Part 3 of 4

Changes Coming to the Free Application For Student Aid (FAFSA) Part 3 of 4

June 11, 2021

Good News For Grandparents!

Good news in a change affecting grandparent or non-parent owned 529 Accounts. Currently, parents are supposed to indicate on the FAFSA if anyone outside the immediate family has given money to the school or to the child to pay for college costs. This includes withdrawals from 529 accounts owned by grandparents or other family members. This financial assistance is considered untaxed income for the student. The FAFSA assesses this untaxed income at up to 50%, which is a steep price. (The FAFSA has never penalized a student if grandparents or others have simply saved for a child’s future college years. It became an issue only when that money is withdrawn and used to pay for college expenses.)

With the new changes, the FAFSA will not consider whether non-parents have helped pay for college costs starting with the application for the 2023–2024 school year. This means that money paid out of non-parental 529 accounts will NOT count as income for the child and therefore WILL NOT reduce their eligibility for student aid.

 Watch in the coming days for more information on other important changes being made to this critical component of college funding.

 Have additional questions regarding this or any other planning topic? Contact me for your no-obligation, no fee consultation.