Did Saving for College Hurt Your Chance of Aid?

Most of us think that saving for college is the right thing to do. From the time our kids are young, many of us – including the grandparents, aunts and uncles – are making contributions to a college fund. It’s rare that anyone can put aside the whole cost of college, but we assume that even a small amount saved will be useful in defraying the out of pocket cost.

The truth:  these savings may actually hurt your chances of getting college aid. You read that correctly: the 529 plans and other assets are actually counted against you in the financial aid process. They reduce the amount of aid you qualify for, and increase your out of pocket costs.  This effect is magnified at the more elite schools, which require you to complete the CSS Profile form in addition to the FAFSA.

Says Forbes blogger, Troy Onink: “Your home equity will count on the CSS Profile, but not the FAFSA. If your child owns a 529 college savings account, it will be treated way more favorably on the FAFSA than the Profile. Assets in retirement plans don’t count, but last year’s retirement contributions do. They get added back to your income for aid calculation purposes.” (From:http://www.forbes.com/sites/troyonink/2014/02/14/how-assets-hurt-college-ai…).Additionally, retirement account values are not a part of the CSS formula, but colleges will consider the balances when determining your financial “resiliency” after your students graduate college.

It’s important to look at your college financing strategies holistically, with all of your assets and contributions weighed against what you need in aid to make your child’s attendance possible.