Are savings accounts in the parents’ name a huge detriment to obtaining financial aid for college, or is financial aid based primarily on income? Should savings be applied to a mortgage to avoid losing much-needed assistance?
Savings in the child's name will be assessed at the high rate of 20% (or more). Savings/assets in your name will be assessed at the low rate of 5.6% after the first $40,000 or so (your asset protection allowance). Some private colleges will only assess the net equity in your home. You can find this out by merely asking each college whether or not they require an Institutional Financial Aid Form (CCS Profile) in addition to the FAFSA. If they do, they will assess your home also. If they only require the FAFSA... the FAFSA does not take the home into consideration. All this is fully documented on the FAFSA instruction forms.

It is said that colleges will negotiate or discount tuition. Is this true? What degree of success are parents experiencing in this area?
Colleges will deny that they "negotiate" with parents, but the fact is that if the school wants the child, they may sweeten their initial aid offer during the "Appeals Process." Your odds are improved if the school really wants the student, because of a special skill or talent or scholastic achievement. Often times there are "Special Circumstances" that the family is experiencing that should be presented, by letter, directly to the financial aid director or officer at the college. In effect, you are asking the college to use "Professional Judgment" based on this information to reconsider its initial offer. Special Circumstances may be another reason for the Financial Aid Award to be "negotiated" through the appeals process. How he or she views your specific situation and what action is taken is at the discretion of the individual financial aid director.

My son has a full scholarship from a public college in our state. I called to ask you about how to file his taxes, but I lost my notes on the answer you gave me. He had all tuition, room and board paid by the scholarship and two checks totaling $1,096 were sent to the house. He paid approximately $300 for books out of the money sent home. Your organization told me his tuition was not taxable but the rest is and he has to declare it. I need to know what forms are now required.
Have him complete IRS Form 1040. On line 7 (Wages, Tips, Salary, etc) have him include the taxable scholarships with his other income at the far right column. On the dotted line (after the word W-2) on line 7, write in SCH and the amount of the taxable scholarships, i.e., SCH $2,000. There are no other forms that are needed.

Can my daughter claim independent status now? She will be having a child in July. She plans to go back to college in September full time. Can she fill out the FAFSA now claiming independence? Does her permanent address matter? Can I still claim her as a dependent for tax purposes? (She would get no need-based aid if she were a dependent on the FAFSA.)
Call the college she will be attending and tell them of your daughter's situation; they may tell her to complete the FAFSA out now. If not wait until she has the child before signing the FAFSA. She will be considered Independent if she will provide over half of the support for the child. The address should not matter. As for your taxes, you can claim your daughter (and grandchild) if you provide more than half of their support and you meet the other tests. However, it may be difficult to show that you provide more than half support for your daughter while she provides over half support for her child. It is best to consult your tax adviser.