Niche College Scholarship Blog


Pay Attention to Big Changes in FAFSA, 529s, Financial Aid

Pay Attention to Big Changes in FAFSA, 529s, Financial Aid
Susan Dutca-Lovell

Understanding the financial aid process, much less filing a FAFSA, can be tedious and daunting. With over 130 questions and requiring more than 30 minutes to complete, students may procrastinate, or completely avoid completing a FAFSA. With pending changes for the upcoming years - such as an earlier deadline - some experts claim the process won't necessarily get easier or more affordable, if not done correctly. Terry Savage, an expert writer for the Chicago Tribune, claims the new FAFSA will be more "intrusive than federal tax forms because it not only asks about income but also the assets of parents and students." Savage outlines some tips and general information on how to prepare for the changes, including early application and knowing the logistics of 529s, financial aid, and FAFSA:

  • Earlier application dates: Many people can recall the last-minute rush to apply for FAFSA and the anxiety that accompanies it. A big change in the FAFSA for 2017-2018 academic year is the earlier application. Students will be able to file as early as October 1, 2016, as opposed to January 1, 2017. Additionally, you will be able to use a FAFSA retrieval tool to directly and electronically access tax information from the IRS, after filing a 2015 tax return. The income you will report on your 2015 return will, in turn, affect your financial aid for the 2017-2018 academic year.
  • 529 Plans: 529 plans are college savings accounts that are exempt from federal taxes and were designed to help taxpayers set aside funds for a designated beneficiary. While any U.S. citizen or resident alien of at least 18 years old may open a 529 account, beneficiaries are typically children, grandchildren or younger relatives. Assets in a 529 plan owned by either the student or their parents count as need-based aid but plans owned by grandparents or other people do not count as assets. If money is withdrawn from the accounts of grandparents or other relatives, there is a penalty in the following year's financial aid package. Savage recommends you do not withdraw from your 529 account until your junior year in college, after filing the FAFSA for that year. Withdrawing from the 529 is not penalized so long as you are paying for "qualified expenses," including tuition, room and board, books, and other miscellaneous fees. Withdrawing from a grandparent-owned 529 plan is considered direct income to the beneficiary. There is a 10 percent penalty and taxes for withdrawing money to cover any other costs, unless the student receives a scholarship, dies, or is disabled.
  • Family assets preferred over child assets in financial aid scheme: UTMA custodial accounts are considered student assets - such as property, real estate, fine art, or future inheritances - which could have a large impact on financial aid eligibility. However a custodial 529 plan of a dependent student is treated as a parent's asset on the FAFSA - meaning less impact on the dependent students' financial aid eligibility. It is recommended that custodial accounts be spent for the child's benefit prior to the FAFSA filing year or transferred into the custodial 529 account.
  • Income-driven assets: In addition to providing all income information on the FAFSA through parents' tax returns, assets such as capital gains also count as income. Savage notes that "selling stocks and taking gains" the year before filing can impact what the student will receive in financial aid. For example, taking $3,000 in capital losses can reduce parental income, Savage states. The result of student income will reduce financial aid on a "dollar-for-dollar basis" which consequentially may become a disincentive for students to work and support their education.
  • Take the time this winter break to review the FAFSA changes so as to be better prepared and gain the most in financial aid for your college education.

    Credit is attributed to Terry Savage and the experts at the Federal Student Aid website. Savage is one of the country's most prominent advisers and a best-selling author on personal finance, corporate boardrooms, academia, the markets, and the economy. Federal Student Aid ( is a free website and source of information provided by the office of the U.S. Department of Education.

Comments (16)
Martavious S 1/16/2016
I'm 17 years old looking for scholarship money, I currently have a 3.3 GPA. My mom raised me as a single parent. I'm looking for all scholarships I qualify for.
Fjolla qorrolli 1/8/2016
In need of Scholarship please
elexia s 1/5/2016
western illinois university macomb il student freshman year now. need help with aid for next yesr
Tina 1/5/2016
In Response to MN. For the upcoming Summer/Fall school year (2016), file the FAFSA now. You will be required to add parent AND student information under certain rules. You have to read the info on the FAFSA regarding it.
abdalla ibrahim 1/4/2016
I want help in my education
wazir Rehman 1/2/2016
I'm studying in master I'm poor affected from military operations in fata region of Pakistan
Ahmed mohammed 1/1/2016
Hi my name is ahmed I am 21 years old I am from yemen I want scholarship to study in your collage be cause I dont have enough mony
margaret anolfo 12/30/2015
kind of worried a bou how they will ask about her life insurance she has from her dads pssing, that she will be a ble to acess at eighteen. It currently is in her name, I am not allowed to acces it or even put it into trust accounts, and it seems they should not even count that as income as it is for her future living expenses. Are they al lowed to even ask about it? I would think not. I m thinking its one of the last holy places you can have your money sit wih ut interference from the governemtnn. The state tax folks treid to ask me about it and then backed up and said it was ok if I didn't list it while filling out froms for payment plans. So th ey ask, but they say I don't have to p ut it down when I asked if Ii had to. That seems crazy.
ZL 12/29/2015
Thanks for the information!
Maminul Islam 12/25/2015
its best for me.
Steve pena 12/23/2015
I'm already a FAFSA account member
MN 12/23/2015
When is the right time to apply for FAFSA? And will it be better to do it alone or with a parent on the side ?
Mt 12/23/2015
Good information
Alexus T 12/22/2015
How can i get help?
Betul Gokce 12/22/2015
Master history program
Betul Gokce 12/22/2015
We make it simple and match you to college scholarships you qualify for.