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OTOH, if I was able to set up a 529 in HER name as owner, with me as custodian, financial aid formulas would penalize her for having more assets.

I believe that they adjusted it so that UTMA 529s are not penalized anymore. (the 529 assets are treated as parental assets)

This is where funding a retirement account would be preferable...
Well - slightly preferable - it'd be 0% instead of 5.6%.
But then I *think* a withdrawal would be considered as income when calculating contribution for the following year.
(IOW, use the Roth to save up money and use the Roth contributions for the last year of school.)
But I'll strongly encourage you to find more reliable source than a semi-anonymous message board poster. :)
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