New FAFSA Update Lets Grandparents Help With College Funding

A New Aspect to the FAFSA Process Allows Grandparents to Contribute to College Expenses Without Impacting Financial Aid Eligibility

In a significant development, the Free Application for Federal Student Aid (FAFSA) process now permits grandparents to assist with college expenses through 529 college savings plans without negatively affecting the student’s eligibility for financial aid. Previously, any money distributed from these grandparent-owned accounts would be considered untaxed student income on the FAFSA, potentially reducing the student’s aid. However, a recent simplification of the FAFSA form has introduced a “Student Aid Index” for estimating a family’s financial contribution, drastically reducing the number of questions from 108 to less than 50. As a result, income from grandparent-owned 529 accounts no longer needs to be reported, eliminating the substantial penalty on student aid for such distributions.