Why does FAFSA ignore mortgage/medical debt and penalize 529 savings?

OMG SAME!! We have been savng in 529 since our twins were babies and now its like we should have just blown the money on vacations or whatever. The whole system is rigged against responsible parents who make sacrifices and save. My cousins didnt save at ALL and their kids are getting way more aid than mine even though we make similar money!

I understand your frustration, but there are some misconceptions about how FAFSA works in your post. Let me clarify: 1) While FAFSA doesn't directly consider debt like medical bills or mortgages, the system is designed to account for necessary expenses through income protection allowances. These allowances essentially recognize that families need a portion of their income for basic living expenses before contributing to education costs. 2) Regarding 529 plans, there's good news - the 2024-2025 FAFSA changes actually reduced the impact of parent-owned 529 plans. They're now assessed at a maximum of 5.64% in the SAI calculation. This means only a small percentage of your savings affects aid eligibility. Additionally, if your medical expenses exceeded 11% of your Income Protection Allowance, you can request a Professional Judgment review from your daughter's school's financial aid office. They have the authority to adjust your SAI based on extraordinary circumstances like medical debt.

The system is absolutely broken. They claim they want students to go to college but then punish the families who actually PLANNED for it! And then ignoring debt? My friend has a similar income to me but leases 2 luxury cars and lives in a giant house with a massive mortgage while I drive a 2012 Toyota and live modestly. Guess who gets more aid? THEM! It's a joke.

I was in the exact same situation last year with my son! I spent hours trying to get through to someone at Federal Student Aid to explain this ridiculous system and kept getting disconnected or waiting for hours. Finally found this service called Claimyr (claimyr.com) that got me connected to an actual FAFSA agent in under 20 minutes. They have a video showing how it works: https://youtu.be/TbC8dZQWYNQ The agent couldn't change the formula obviously, but they did explain how to document special circumstances for the financial aid office, which helped us get some adjustments. Worth a try if you're hitting walls trying to get answers.

About your 529 concerns: remember that the money is still YOURS and will be used for your daughter's education. If you hadn't saved, you might get a slightly lower SAI, but then you'd be scrambling to pay the costs that your 529 will now cover comfortably. Think of it this way - you're in a much better position overall having those savings than not having them, even if it increases your SAI somewhat. As for debt, while I agree it seems unfair on the surface, implementing a debt consideration would create massive loopholes. People could take on strategic debt right before filing FAFSA to artificially lower their contribution amount. The system isn't perfect, but there are practical reasons for these policies.

tbh the system is designed to help truly low income families not ppl in the middle who feel entitled to aid. if you saved for 18 yrs thats awesome but why should you get the same aid as someone who literally couldn't save anything? the 529 is literally going to pay for college so your complaining about nothing

hey have u considered taking the money out of the 529 and putting it somewhere else before filling out fafsa? my cousin did that and got way more aid but i dunno if its legal lol

The FAFSA system is imperfect but there are some practical reasons for its design: 1) On debt consideration: It would be extremely complex and costly to verify and evaluate all types of debt. How would they distinguish between a mortgage on a modest home versus a luxury mansion? Or medical debt versus optional cosmetic procedures? The administrative burden would be enormous. 2) On 529 plans: While it seems unfair, remember that the FAFSA formula only counts about 5.64% of parent-owned assets in the calculation. So if you have $50,000 in a 529, only about $2,820 of that is affecting your SAI. Plus, grandparent-owned 529s no longer impact FAFSA eligibility at all under the new rules. If your medical debt is substantial, definitely contact each school's financial aid office for a professional judgment review. They have the authority to make adjustments that the standard FAFSA cannot.

I completely understand your frustration - I'm going through the same thing as a first-time FAFSA filer! What really helped me was learning that there are actually some newer changes that work in our favor. The 2024-25 FAFSA simplified the formula and reduced the asset assessment rate. Also, I discovered that if you have significant medical expenses (sounds like you definitely do), you can submit documentation directly to each college's financial aid office for what's called a "special circumstances review" - they can actually override the FAFSA calculation. One thing that gave me some peace of mind: I talked to a financial aid counselor who explained that families who saved in 529s typically end up in a much better financial position overall, even with the slightly higher SAI. The small percentage they assess on your savings is usually way less than the loans you'd otherwise need. Hang in there - the system isn't perfect but there are people at the schools who can help with situations like yours!