I can’t seem to find a clear answer regarding reporting of 529s on a the FAFSA specifically regarding a student who is applying to graduate school. Based on the questions my son is considered an independent. The 529 I set up for him is owned by me, he is the beneficiary. It is not clear cut if he needs to report it under his assets since I’m the actual owner. Does anyone know the definitive answer? Obviously I would prefer not to report it under his assets.
I believe he has to report it because he is the beneficiary.
Will he be using these 529 funds to pay for grad school?
If he doesn’t own it, it’s not his asset. It doesn’t matter if he’s the beneficiary. That could be changed in a minute. A 529 is only reported on FAFSA for an independent student if the account is owned by the student or the student’s spouse.
Thanks @BelknapPoint so he does NOT report it for his first year.
So an additional question from me. What happens the following year? I’ve never had or used a 529 so I really don’t know! Will this grad student need to report any amount paid on his behalf with that 529 the second year?
To @bvgas123 just an FYI…for grad school there really isn’t need based aid like,there is in undergrad school. No Pellgrants…all loans are UNsubsidized. Most grad school aid comes in the form of merit aid based on the strength of the grad school application. It comes in the form of assistantships, grants, scholarships, sometimes work study, and loans.
So…even a $0 EFC won’t necessarily net your grad school student any financial aid.
A 529 account that is not owned by an independent student or his/her spouse is never reported on FAFSA as an asset.
Whether or not any funds from such a 529 account, used for the benefit of the independent student, need to be reported on the student’s FAFSA as untaxed income is a different matter. If the 529 account is not owned by a parent (or the student or the student’s spouse), it’s pretty clear that distributions made for the benefit of the student need to be reported as untaxed income in FAFSA question 45.j. The instructions for question 45.j. seem to indicate that distributions from a parent-owned 529 account, for an independent student where parent financial information is not reported on the FAFSA, also need to be reported here as untaxed income:
Money received, or paid on your behalf (e.g., bills), not reported elsewhere on this form. This includes money that you received from a parent or other person whose financial information is not reported on this form and that is not part of a legal child support agreement. See Notes page 9.
However, the notes for question 45.j. on page 9 go on to say this about distributions from a parent-owned 529:
*Money received, or paid on your behalf, also includes distributions to you (the student beneficiary) from a 529 plan that is *owned by someone other than you or your parents/b. You must include these distribution amounts in question 45j.
These conflicting instructions regarding funds from a parent-owned 529 account received by an independent student create a gray area that may have to be addressed by the school.
Boy…that’s as clear as mud.
But really for grad school…how much difference is this going to make since need based aid at the grad school level…is quite not common. And federally funded need based aid? None.
You are right. In most grad student situations where parent financials are not reported on FAFSA, it probably makes no difference.