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[quote=Anonymous][quote=Anonymous]We've been playing around with various schools' net price calculators and it seems that our EFC goes up significantly when we put in 529 data. But had we put that money in, say, a Roth IRA instead, that money wouldn't be lumped in with our assets. [b]Or had we saved nothing at all, the schools would be picking up more of the bill.[/b] So freaking frustrating.[/quote]

I'd be interested in seeing your numbers. Your EFC is based primarily on your income.

Note: [b]The 529 is considered a PARENT asset, not a student asset.[/b] That makes a big difference in how it is treated by FAFSA.

http://www.thecollegesolution.com/will-your-savings-hurt-your-financial-aid-chances/

http://www.thecollegesolution.com/dont-fall-for-these-4-financial-aid-myths/

http://www.collegeconfidential.com/ants/

[i]Does This Mean We Should’t Save, or Spend What Assets We HAVE Saved?

This discussion won’t cover specific strategies for asset deployment before applying for financial aid, but rather address the basic question of "ant vs. grasshopper" – is it better to not save at all, and hope for the best at financial aid time? In general, the answer is "no" – it is indeed better to save for anticipated college expenses, even if these assets will be "taxed" by the financial aid process. There are several reasons why this is the case.

First, assets in the parent’s name are just one part of the EFC calculation, and a relatively modest one at that. Parental savings are "available" to pay college expenses at a rate of 6%, which means that a $50,000 nest egg would increase the EFC by just $3,000. While this is substantial, it is not nearly as big an impact as parental income (salaries, business earnings, etc.) Income is calculated at a much higher percentage, and except for low-income, high-asset families, is likely to be the bigger factor in their EFC.

Second, while assets usually take many years to accumulate, a family won’t know about eligibility for financial aid until the college years are quite close – a "no asset" strategy could backfire if, due to a job promotion, family income goes up enough to make financial aid unlikely.

Third, financial aid is often a mixed blessing – at most colleges, a signficant portion of the aid may come in the form of student loans. While sometimes these may have better terms or a lower interest rate than would be available to a typical borrower, they are still loans which must be paid back.

Finally, a family that attempts to minimize liquid assets in the hope of qualifying for more aid is leaving itself vulnerable to many kinds of misfortune unrelated to college: unanticipated job loss, unreimbursed medical expenses, temporary disability, etc. Most financial advisors recommend having at least six months of family income in an easy-to-access, liquid account to handle emergencies of this type. A family without savings is in a precarious situation – while some families may find themselves in this situation because of circumstances beyond their control, it is foolhardy for a family to consciously plan to minimize savings.[/i][/quote]

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