529 Plan Strategy: Use it all upfront or spread across 4 years for better FAFSA aid?

I'd use it all upfront. FAFSA looks at your assets each year so if you've spent all your 529 by junior year you'll look poorer on paper and maybe get more aid.

This is a common question with a somewhat complex answer. With the new FAFSA for 2025-2026, parent-owned 529 plans are now completely removed from the asset calculations (they used to count up to 5.64%). However, distributions from a 529 can still affect your aid eligibility in future years because they count as student income when withdrawn, and student income is assessed at 50% on FAFSA. A few considerations: 1. Parent assets affect SAI much less than student income in the formula 2. Student income (including 529 distributions) from two years prior counts on current FAFSA 3. If you deplete the 529 early, those withdrawals will show as income for the first couple years' FAFSA calculations From a purely strategic perspective, I'd recommend a hybrid approach - use more in years 1 and 4, less in years 2 and 3, because of the two-year prior income lookback.

my son got more aid junior and senior year after we used up most of his college fund. our EFC dropped like $4000! but evry family situation is different.

The advice to front-load 529 spending was more valuable under the old FAFSA formula. With the 2025-2026 FAFSA changes, parent-owned 529 plans are no longer counted as assets in the SAI calculation, but withdrawals still count as student income (with the two-year lookback). Here's what I'd recommend based on FAFSA's current formula: 1. Calculate how withdrawals in different years would affect your Student Aid Index 2. Consider which years your student might need more aid (typically later years when upper-level courses and housing costs increase) 3. Remember that for freshman year FAFSA (2025-2026), income from 2023 is what counts If you're having trouble getting specific answers from the financial aid office, you might want to try using Claimyr (claimyr.com) to get through to Federal Student Aid agents directly. They have a video demo at https://youtu.be/TbC8dZQWYNQ showing how it works. I used it last month when I kept getting disconnected trying to verify how 529 withdrawals would affect my daughter's aid calculation.

I'm in the same boat with my twins starting college next year! We have about $45K total in 529s and I've been STRESSING over how to use it. After talking to our financial advisor, we decided to use about 1/3 of it each year for the first three years. The reasoning was that: 1) The FAFSA formula changed for 2025-2026 and 529 plans owned by parents aren't counted as assets anymore 2) BUT any withdrawals count as student income on a later FAFSA with the 2-year lookback 3) Senior year doesn't matter for FAFSA purposes since they'll be graduating So we're putting more toward freshman year, less for sophomore/junior, and then whatever's needed for senior year. It's SUCH a headache trying to figure out the optimal strategy!!

just use the 529 $ when u need it and stop overthinking it. the fafsa is gonna screw u no matter what lol

Honestly the new FAFSA is such a NIGHTMARE this year I've given up trying to game the system. My daughter just started college and I've spent HOURS trying to figure out how to optimize her financial aid. Just when I thought I understood the formula, they changed everything for this year!!! We had a 529 with about $35,000 and decided to just use it evenly across all 4 years because: 1) We don't qualify for need-based aid anyway because they count our home equity on the CSS Profile (which most private schools use) 2) The formula is so complicated that any strategy we try could be rendered useless if they change the rules AGAIN 3) I'd rather have predictable expenses each year than gamble on getting more aid later BUT... that's just our situation. If your income is lower or you're only applying to schools that just use FAFSA (not CSS Profile), your strategy might be different!!!!

After reviewing all the advice here, let me summarize the optimal 529 strategy for most families under the current FAFSA rules: 1. Remember that parent-owned 529 plans are no longer counted as assets on FAFSA (as of 2025-2026) 2. 529 withdrawals count as student income on the FAFSA filed two years later (50% assessment rate) 3. For optimal strategy: - Use modest 529 withdrawals for freshman year (will show on junior year FAFSA) - Use modest withdrawals for sophomore year (will show on senior year FAFSA) - Use larger withdrawals for junior year (won't affect undergraduate FAFSA) - Use remaining funds for senior year (won't affect undergraduate FAFSA) 4. Always accept subsidized loans before using 529 funds to pay tuition 5. Consider holding some 529 funds for graduate school if that's in the plans Does this help clarify things?

This is such a timely discussion! I'm a college financial aid officer and see families struggle with this decision all the time. One thing I'd add to the excellent advice already given is to consider your daughter's intended major and career path. If she's planning on graduate school, keeping some 529 funds for that might be wise since grad students have different aid eligibility rules. Also, don't forget that 529 funds can be used for required textbooks and supplies, not just tuition and room/board - this can help stretch the money further regardless of which timing strategy you choose. The key is running the numbers for YOUR specific situation rather than following a one-size-fits-all approach. Every family's income, assets, and school choices create different optimal strategies.

As someone who just went through this exact decision last year, I wanted to share what actually happened vs. what we planned. We had about $30K in 529 funds and decided to front-load it based on old advice we found online. BIG MISTAKE! What we learned the hard way: 1) The 529 withdrawals showed up as student income on this year's FAFSA and reduced our aid package by about $6,000 2) We could have gotten more subsidized loans if we'd used those first instead of the 529 money 3) Now for junior/senior year we'll have less 529 funds available when costs typically go up If I could do it over, I'd follow the strategy Luca outlined - use LESS 529 money in early years, more in later years. The new FAFSA rules really do change everything. Don't make the same mistake we did by following outdated advice! Run the numbers for your specific situation or talk to the financial aid office at your daughter's school - they can usually walk you through scenarios.

As a parent who's been researching this extensively, I want to echo what Tami shared about the importance of understanding the new FAFSA rules. I've been diving deep into this topic and found that many online resources still reference the old formula where 529 assets were assessed at 5.64%. One additional consideration I haven't seen mentioned yet: if your daughter qualifies for work-study, that income is excluded from the FAFSA calculation, unlike 529 withdrawals which count as student income. So it might be worth factoring in potential work-study earnings when deciding how much 529 money to use each year. Also, for families in similar situations, I'd suggest creating a 4-year cash flow projection that includes estimated aid packages, loan limits, and 529 withdrawal timing. It's tedious but helps visualize the true cost impact of different strategies. The financial aid landscape has gotten so complex that what seems logical (use savings first) often isn't optimal anymore.

This thread has been incredibly enlightening! As a newcomer to this community, I'm amazed by the depth of knowledge everyone has shared about 529 strategies under the new FAFSA rules. I'm in a similar situation with my son starting college in fall 2025, and honestly, I was completely unaware that the formula had changed so dramatically this year. Reading through everyone's experiences, especially Tami's cautionary tale about front-loading and losing $6,000 in aid, has been a real wake-up call. I was actually leaning toward using most of our 529 funds upfront based on older advice I'd found online. Now I realize I need to completely rethink our approach. A few questions for the group: Has anyone here successfully used the Federal Student Aid phone service (or that Claimyr service QuantumQueen mentioned) to get official confirmation on how the 2-year lookback for 529 withdrawals works? And for those who've implemented the "use less early, more later" strategy - are you finding that schools' aid offices are helpful in modeling different scenarios? Thanks to everyone who's shared their real experiences here. It's saving families like mine from making costly mistakes!