With Thanksgiving and Giving Tuesday behind us and the end of the year only a month away, grandparents might be thinking about boosting up their grandchildren’s college savings accounts before 2022. It’s important to know that there are a few exciting changes to FAFSA rules for grandparent-held 529 accounts that will be happening in the near future.
So what are these changes? The major change is that students will not be required to report any cash support they receive, including funds they receive from grandparent-held 529 accounts. This means that grandparent 529 dollars won’t be counted at all and students will not have to count 529 distributions from grandparents as untaxed student income the next year. This is exciting news for both parties involved, allowing grandparents to contribute to help cover the high costs of higher education without impacting students’ financial aid opportunities.
Even with this new proposed change in place, grandparent-held 529 dollars are still being used on the CSS profile, another financial aid form used by private institutions. It is unclear how this will play out in the future, so stay tuned for updates. The new FAFSA form is currently being constructed and is said to be released later than the October 1 deadline, so it’s important to keep an eye out for when this new rule will apply to your situation and plan. We will continue to follow the FAFSA changes for you, and be sure to report any further changes as they arise.
At Sherman Wealth, we believe 529 plans are a great way to save for your children’s and grandchildren’s college expenses or K-12 private school tuition, while also receiving favorable tax benefits. If you aren’t quite sure what a 529 is or how to start one, be sure to check out our previous blogs discussing the components of 529 plans, as well as how and why you should start saving for your children’s or grandchildren’s education as soon as possible. If you have any questions about 529 plans and family contributions, email us at email@example.com or schedule a complimentary 30-minute consultation here.