FAFSA update needed - discovered 529 plan after aid offers arrived - will this hurt?

Ugh this happened to me last year with my kids. The 529 rules changed with the FAFSA Simplification Act. You DO need to report it but it depends who owns the account. If the grandparents own it, it doesnt count as an asset on the FAFSA anymore (it used to). But distributions will count as student income which impacts aid eligibility for the following year. Youll need to submit a correction to your FAFSA like ASAP.

Financial aid counselor here. You need to understand two things: 1) Asset reporting and 2) Correction timing. With the 2024-2025 FAFSA, grandparent-owned 529 plans are NO LONGER reported as assets. This is a major change from previous years. However, if distributions are made, they do NOT count as student income either (another big change). This was fixed with the FAFSA Simplification Act. Regarding corrections: Yes, you need to submit a correction if you're adding assets that should have been reported (like a parent-owned 529). Log in to studentaid.gov, go to your FAFSA, and select "Make FAFSA Corrections." Each school will automatically receive the updated information and recalculate aid as needed. If the 529 is truly grandparent-owned and not parent-owned, no correction is needed for the asset itself.

congrats on the free money lol. wish my kid had rich grandparents.

Actually, you should double-check WHO is listed as the account owner. Sometimes grandparents set these up but put the parent as the actual account owner for legal reasons. If your ex or YOU are listed as the owner (not just the beneficiary), then it IS reportable as a parent asset. You'd need to ask them for the account statements to verify.

I went through this exact situation last year. Here's what happened: we discovered a grandparent 529 after submitting FAFSA. I called the financial aid offices directly at each school where my son had been accepted. Each school had a different procedure - some wanted a formal FAFSA correction, others just wanted documentation of the 529 ownership emailed to them. My advice: Call the financial aid offices at the schools where your daughter has received packages. Be upfront about the situation. They deal with this CONSTANTLY and can tell you exactly what they need. The worst thing is to ignore it and have them discover it later, which could trigger a verification audit. One more thing - I tried calling Federal Student Aid for clarification but spent HOURS on hold and never got through. Super frustrating.

What about impact on the CSS Profile? A bunch of private schools we applied to required that too, and I think they DO still count grandparent 529s in their methodology...

For what it's worth, I went through something similar and the impact on aid wasn't as bad as I feared. The SAI calculation for parent assets only counts around 5.64% of assets above the Asset Protection Allowance, so even if it does need to be reported, it might only change your SAI by a relatively small amount. A $27,000 asset might only increase your SAI by about $1,500 (very rough estimate). But definitely clarify the ownership situation first!

As someone who just went through this process with my twins, I wanted to add that timing matters here too. If the grandparents are planning to make distributions for fall semester, you might want to coordinate with them about WHEN they make those payments. Even though grandparent 529 distributions don't count as student income anymore under the new FAFSA rules, some schools still track them internally for their own aid calculations. My suggestion would be to have them pay directly to the school rather than to you or your daughter, and keep all the documentation. Also, if they have $27k saved, they might be able to spread payments across multiple years to help with cash flow and avoid any potential issues with individual school policies. Just make sure to get clarity on the account ownership first - that's really the key piece that determines everything else!