Where to report 529 plan distributions on 2025-2026 FAFSA? Confusing parent asset vs. student income

The good news is that with the 2024-2025 FAFSA changes (which carry through to 2025-2026), 529 plans owned by grandparents no longer negatively impact financial aid eligibility! This is a HUGE improvement over the old system. Here's what you need to know: 1. You DO NOT report grandparent-owned 529 plan distributions as student income anymore 2. Only 529 plans owned by the parent or dependent student should be reported as assets on the FAFSA 3. Since the account belongs to the grandparent (not you or your daughter), you don't need to include it anywhere on the FAFSA This is different from the old FAFSA rules where grandparent 529 distributions were counted as untaxed income to the student (which could reduce aid by up to 50% of the distribution amount).

i think u still report it as untaxed income. we had to do this last yr for my son and it lowered his pell grant by like $2000

This can be really confusing, I went through this last year. Here's what you need to understand: - If YOUR NAME is on the 529 account (as owner): It counts as a parent asset and only impacts aid by a maximum of 5.64% of the account value - If YOUR DAUGHTER'S NAME is on the 529 account: It counts as a student asset and impacts aid by 20% of the value - If GRANDPARENT owns the 529 account: With the simplified FAFSA, you don't report it at all! The key is WHO OWNS the account, not who benefits from it. Since your daughter's grandparent owns it, you're in the clear. Don't report it anywhere on the FAFSA.

Been trying to connect with FSA for 3 days to ask this exact question! Finally got through using Claimyr (claimyr.com) - they connect you directly to an agent without the crazy wait times. There's a video showing how it works: https://youtu.be/TbC8dZQWYNQ The agent confirmed what others are saying - grandparent-owned 529 plans are NOT reported on the FAFSA as of the 2024-2025 form. This is part of the FAFSA Simplification Act changes. Saved me from making a big mistake on our application!

THIS IS ALL WRONG!!! You absolutely DO report it as untaxed income to the student! I'm a financial aid counselor and the regulations clearly state that any money paid on behalf of the student counts as support. The 529 money went to pay for college, right? Then it's part of her untaxed income! DON'T LISTEN TO THESE PEOPLE TELLING YOU TO LEAVE IT OFF!!!

One important detail nobody has mentioned - while the FEDERAL aid calculations (FAFSA) no longer count grandparent 529 distributions, some private colleges that require the CSS Profile may still ask about and count these funds in their institutional aid calculations. If your daughter is applying to private colleges that use the CSS Profile, you might need to report it there.

So glad I stumbled on this thread bc I was super confused abt the same thing!!! My grandma has a 529 for me and we couldnt figure out where to put it on fafsa. When I called the financial aid office at my school they said dont include it at all, but I wasnt sure if that was right. Makes way more sense now.

My son's girlfriend's dad works in financial aid and he says if the money went directly to the school from the 529 plan then the school already has record of it and will factor it in regardless of what the FAFSA says. Is that true?? Seems unfair.

Thank you all for the helpful information! Just to summarize what I understand now: 1. Since my father-in-law owns the 529 plan (not me or my daughter), we don't report it anywhere on the FAFSA 2. This is a recent change with the simplified FAFSA that started with 2024-2025 applications 3. I should check if the private colleges my daughter is applying to use the CSS Profile and if they have different rules This makes a huge difference - we were worried her aid would be reduced significantly because of these funds. Really appreciate all your help!

Just wanted to add one more helpful tip for anyone dealing with this situation - make sure to keep good records of the 529 distributions even though you don't report them on the FAFSA. The IRS may still require documentation for tax purposes, and some schools might ask for verification of education expenses. Also, if your daughter receives any tax documents (like a 1099-Q) related to the 529 distribution, don't panic - this is just for tax reporting and doesn't mean it needs to go on the FAFSA. The tax treatment and FAFSA treatment are completely separate under the new rules.

As someone who just went through this exact situation with my twin daughters last year, I can confirm what others have said - grandparent-owned 529 distributions are NOT reported on the FAFSA under the new simplified rules. However, I'd recommend double-checking one thing that helped us avoid confusion: make sure the 529 distribution was actually paid directly from the grandparent's account. If your father-in-law transferred money to you first and then you paid the school, that could potentially be treated differently. But if the payment went directly from his 529 plan to the university (which sounds like your situation), then you're all set - don't report it anywhere on the FAFSA. This change has been a game-changer for families like ours who were previously penalized for grandparent generosity!

As a parent who just completed the 2024-2025 FAFSA and is now preparing for 2025-2026, I can confirm everything others have said about grandparent-owned 529 plans. The simplified FAFSA has been such a relief in this area! One thing I'd add from my experience is to make sure you understand the timing of distributions if you're planning future withdrawals. Since these no longer count as student income, there's no longer a strategic advantage to waiting until after filing the FAFSA to take distributions from grandparent 529s (which was the old workaround). You can now time the distributions based purely on when you need the funds for educational expenses. Also, if your daughter has siblings who might benefit from the same 529 plan in future years, this rule change makes family financial planning much simpler. No more complicated calculations about how distributions might affect each child's aid eligibility!

This thread has been incredibly helpful! I'm dealing with a similar situation for my son's 2025-2026 FAFSA. We have about $8,000 in distributions from his grandmother's 529 plan that went directly to his college last semester. I was panicking thinking we'd have to report it as untaxed income and potentially lose thousands in aid eligibility. It's amazing how much this FAFSA Simplification Act has improved things for families with grandparent-owned 529s. I remember helping my older daughter with her FAFSA a few years ago under the old rules, and we had to strategically time distributions to minimize the impact on her aid. Now my son doesn't have to worry about that at all. One question though - does anyone know if this same rule applies to great-grandparent owned 529 plans? My son's great-grandmother also has a small 529 account for him, and I want to make sure I understand how to handle that if we use it next year.

As a newcomer to this community, I want to say thank you to everyone who contributed to this discussion! I was actually searching for information about this exact topic for my nephew's FAFSA, and finding this thread has been incredibly valuable. The clarity around the FAFSA Simplification Act changes regarding grandparent-owned 529 plans is so helpful. It's reassuring to see multiple people confirming that these distributions no longer count as student income - what a positive change for families! I had been dreading having to navigate the complicated timing strategies I'd read about from previous years. One thing that really stands out to me from reading through all these responses is how much this policy change has simplified financial planning for multi-generational education funding. It seems like it removes a significant barrier that was previously discouraging grandparents from contributing to their grandchildren's education expenses. I'll definitely be bookmarking this discussion and sharing it with other family members who are in similar situations. Thanks again to everyone for sharing your knowledge and experiences!

As someone who just went through this process for the first time with my daughter's 2024-2025 FAFSA, I can add my voice to confirm what everyone else has shared - grandparent-owned 529 distributions are NOT reported anywhere on the simplified FAFSA. What really helped me understand this was realizing that the key question is "who owns the account" not "who benefits from it" or "who received the money." Since my mother-in-law owns the 529 plan (even though my daughter is the beneficiary), we didn't report the $15,000 distribution anywhere on the FAFSA. I was initially skeptical because it seemed too good to be true after hearing horror stories from other parents about losing aid due to grandparent 529s under the old rules. But I called the Federal Student Aid office directly and they confirmed this change is real and intentional - they specifically wanted to stop penalizing families for grandparent generosity. One practical tip: I kept a simple spreadsheet tracking which 529 accounts are owned by whom in our family, since we have multiple grandparents with accounts for different grandchildren. This helped me stay organized about what to report vs. what not to report on each child's FAFSA. Hope this helps other families navigate this much-improved process!

As a newcomer to this community, I want to thank everyone for this incredibly informative discussion! I'm currently helping my stepson with his 2025-2026 FAFSA, and we have a grandparent-owned 529 plan situation that had me completely confused until I found this thread. Reading through all these experiences has been so reassuring. We withdrew $9,500 from his grandfather's 529 plan last fall, and I was panicking about how to report it. The fact that multiple people have confirmed this doesn't get reported anywhere on the FAFSA under the new simplified rules is such a relief! I especially appreciate the practical tips shared here - like keeping organized records for tax purposes even though we don't report it on FAFSA, and understanding that the key factor is account ownership rather than who benefits. The spreadsheet idea for tracking multiple family 529 accounts is brilliant too. It's wonderful to see how the FAFSA Simplification Act has actually made things better for families instead of more complicated. This policy change seems like such a win for encouraging grandparent involvement in education funding without the previous penalties. Thanks again to everyone who shared their knowledge and experiences - this community is incredibly helpful for navigating these complex financial aid questions!

As a newcomer to this community, I want to express my gratitude for this incredibly thorough and helpful discussion! I'm currently navigating my first FAFSA experience with my daughter for 2025-2026, and we have a very similar situation with her great-aunt's 529 plan. We used about $7,200 from the account last year for her tuition, and I was completely lost about how to handle this on the FAFSA. After reading through everyone's experiences and explanations, I now understand that since my daughter's great-aunt owns the 529 plan (not us), we don't need to report these distributions anywhere on the FAFSA under the simplified rules. What really helps is seeing so many different family situations - grandparents, great-grandparents, and now great-aunts - all being treated the same way under these new rules. The key insight that it's about account ownership rather than family relationship or who benefits makes so much sense. I'm also really appreciating the practical advice shared here about keeping good records for tax purposes and understanding the difference between FAFSA reporting and tax reporting. This community has made what felt like an overwhelming process so much more manageable. Thank you all for sharing your knowledge and experiences - it's making a real difference for families like mine who are new to this process!