This Mistake Could Cost You $25,000 in College Aid
529 college savings mistake: learn how to avoid losing financial aid money. The same tuition savings can cost you thousands in college aid — here's why. Andy and Pearl Lockwood walk through exactly how a 529 is counted.
Here is the part most families never hear: the same $100,000 in a 529 college savings account is treated one way on the FAFSA and a far harsher way on the CSS Profile. On the FAFSA it costs roughly $5,600 of eligibility. Counted as a student asset on the CSS Profile, the penalty jumps to $25,000.
Same money. Same family. Wildly different financial aid outcome — decided entirely by whose asset it is and which form the college uses. If you are saving for college and have a Class of 2027 or 2028 student, listen before you move a dollar.
IN THIS EPISODE
• How a 529 college savings account is actually counted for financial aid, and why the answer changes depending on the college.
• The FAFSA math: for every $100,000 saved in a 529, roughly $5,600 of aid eligibility disappears.
• The CSS Profile penalty: the same $100,000 as a student asset costs $25,000 — 25% instead of 5.64%.
• Why CSS Profile colleges judge your savings harder.
• Qualified higher education expenses — what a 529 can actually pay for.
• The cost-basis trap: selling at a large gain can wipe out your aid benefit for that year.
• The accounts exempt from the financial aid ledger — IRAs, 403(b), SEP, qualified annuities.
• Why this is powerful for a minority of families, and why you need a qualified financial planner first.
ABOUT LOCKWOOD COLLEGE PREP
Andy Lockwood and Pearl Lockwood run Lockwood College Prep in Glen Head, Long Island, working with families nationwide on college admissions, the college essay, and financial aid. Their P4 system — Plan, Path, Position, Pay Wholesale — helps families pick a college that fits and pay far less than sticker price.
Work with Andy and Pearl: https://LockwoodCollegePrep.com
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0:00 – LCP intro
0:34 – Welcome to College Coffee Talk
2:26 – What a 529 college savings account really is
4:22 – Is a 529 good or bad for financial aid?
6:04 – Why CSS Profile colleges judge a 529 harder
7:56 – The $100,000 question: what saving actually costs you
9:48 – Qualified higher education expenses
11:42 – Weighing the cost against the aid benefit
13:24 – Low cost basis, big gain, and the year your aid disappears
15:14 – The exempt accounts: IRAs, 403(b), SEP, annuities
17:04 – Why you need a qualified financial planner
18:04 – When it works it's powerful — but it's a minority of families
20:45 – Applying to generous colleges
22:34 – Drumroll: $176
24:25 – Paying $120,000 for warmer weather and football
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