<p>Another thing: even AFTER putting $55,000 into a 529 for their grandkids, grandparents can ALSO pay tuiton DIRECTLY to the school ---- if they do so it doesn't count as a gift that has to be taxed.</p>
<p>yulsie - may I add to your "please let me vent" sentiment? We got our FAFSA in; not fun, but it's done. Now we turn to helping our grandS get the FAFSA info fr 2 divorced parents, one not-too-keen on the whole college thing anyway. That should really by fun! Luckily(?), for his apps, not due til March, so we get to spend another month trying to do it by remote control without all the info. Yum!</p>
<p>don't forget that the 529 beneficiary can be changed to a younger sibling or other grandchild, particularly if grandparents are in a position to pay tuition directly for the older kid</p>
<p>If G'rents pay the tuition directly, then you are still reporting it as bills paid on the student's behalf, so no real help, other than shielding the asset.</p>
<p>Has any one had a situation where monies are paid on behalf of the student and if so, how does th school view it- paying EFC?</p>
<p>When grandparents pay the tuition, the money has to be reported as other income even though it does not show up on the tax forms. Though the asset is shielded, the amount that grandparents pay is included in income for the next year for the student. FAFSA and Profile and all other college financial aid forms want the transactions the half year before for the entire calendar year. Confusing? Well, for the academic year 9/05-6/06, your financial aid is based on your income and assets for 2004. So if grandmom pays $10K of the first term tuition due,say, 9/01/05, that has to be reported as income for the 2005 year, because that is what it is. Since it would be student income, that is how it will be assessed for financial aid purposes. It is very tricky to bypass financial aid for more than a year or two if you report things as they are supposed to be reported.</p>
<p>"Confusing?"</p>
<p>yeah, that's me. I'm glad I don't have to tackle fafsa until next year. I definitely learn a LOT by just reading the posts. Thanks to all for the education.</p>
<p>Bluebayou, this is the watershed year for you. This is the year you make some of the decisions and transactions that will appear next year.</p>
<p>thanks, I think, j-mom. Fortunately for me, "decisions' are few and far between - job was outsourced to SE Asia, so 9 months of unemployment changes the dynamics.</p>
<p>I just learned that 529's don't count if owned by a grandparent. Does the grand have to set it up originally, or can a 529 for a student 4-5 years away from college be transferred from the parent to a grandparent? thanks</p>
<p>The 529 owned by g'rents strategy only works the first year, thereafter, you will need to report the amount paid on behalf of your student by others. I guess you could take loans for everything & then use the 529 to pay them off after graduation, that's really cutting a fine line ethically.</p>
<p>I am not sure you can pay off educational loans with the 529. One purpose of the 529 is to leave a paper trail. The benefit of lower state taxes (and if you itemize deducitions that brings down that benefit lower) and the ability to get around estate taxes is why grandparents use this vehicle. The biggest abuses or cheats I have seen in financial aid are unreported contributions from grandparents, noncustodial parents and unreported and underreported small businesses.</p>
<p>Yeah, I wasn't too sure about the ethics part. To be frank, I originally thought we wouldn't qualify for any aid and thus put all financial aid issues out of my thoughts until I found this thread. I even thought at some point we might have to sell our home.. that's how naive I was about the whole matter. It's only theoretical anyway since we do own a 529 and have always planned to use it as it was intended.</p>
<p>Here's what I wish we had done, what we did, and what we will do in the future since our efc is a couple thousand less than college cost; our kid is going to start college next year.</p>
<p>In 2002, I wish we had sold all mutual funds and converted all regular IRA's to Roth IRAs. We should have put enough of the mutual fund sale proceeds into money markets to pay the taxes and bought replacement funds with the rest. We would have paid lots in taxes and increased our income that year, but would have reduced our non-retirement asset base significantly. Also, it would have bumped up our base on the mutual funds, so that if we have to sell some to fund college, it wouldn't increase our current income as much. It is important to have done this early since Emory (and who else?) asks for tax forms 2 years back.</p>
<p>In 2002, I wish I would have looked at the FAFSA and the College Board worksheet. As soon as I did, I realized that we had not done some important things. If we had done that in 2002, we probably would have seriously considered having my wife quit her job and go back to school for several years for additional education/degree/certification. When all is said and done, we are in that interesting (and distressing!) situation in which her take-home is about what we would have gotten in additional financial aid if she wasn't working. But, too late now...</p>
<p>Here's what we did that helped: We paid off everything we owed on everything using our home equity line of credit in late 2004. That simply transferred our debt from one line of credit to another, but it reduced our efc since it reduces our house net worth.</p>
<p>Here's what we will do in the future: We will pay everything for college using the line of credit until it's completely used up. We will likely get very little need-based aid this year, but by using the line of credit, we fill reduce our efc each year since our house net worth will decline. We won't cash in any mutual funds if we can avoid it since any net gain would add to our income of that year. By the time my kid gets to her 3rd year, we should have a substantially reduced efc.</p>
<p>Best advice--get a job at a high-end institution that provides tuition waivers to employee kids!</p>
<p>I started financial college planning the day after our son was born. Four years ago I become a full time financial services guy after leaving the high tech industry. I started the fafsa Nov '01, 5 months before his acceptance in April '02. I did all types of projections and scenarios, I was also shocked. </p>
<p>I'd like to relate this story, about 20-25 years ago in my life.</p>
<p>I have a close relative (ivy leaguer, ph.d) who once worked with the Federal Reserve Bank, New York and then later with Major NYC Banks. I asked him, Why did your bank lose so much money? He paused and thought carefully for a few seconds and said, The bank is made of people. People make decisions. Some of those decisions were correct based on the known facts and assumptions at that time. The facts and assumptions changed, making the original decision now wrong. Some of the decisions were wrong outright because the original facts and assumptions were wrong, and we didnt know about it until later, and too late to do much about it. </p>
<p>I replied incrediously, Basically, you are telling me, that Banks are guessing.</p>
<p>Sighing, he said, We have a wealth of information at our disposal, most of it is pretty statistical. Lets say, that because we have better information and analysis, we like to think we make better decisions. We like to think we hire smart and intelligent people.</p>
<p>And, the bank still lost money!? I replied.</p>
<p>Yep. Oh, Well. He said, resuming our meal.</p>
<p>Wall Street Journal, Feb 9, Living Section, Last Column.
To new for WSJ to post online. </p>
<p>Nutshell: Pres. Bush proposes to change the student loan consolidation program from fixed interest calculation to variable interest because of high costs and unsustainable national deficit. </p>
<p>Comment: If you wonder why it is getting harder to get FA in your FEFL-Stafford and PLUS programs, think about this. If you the bank, knows that with a high degree of certainty, that interest rates will go up substantially, and that the money that you currently lending out (Stafford, PLUS, Consolidations) costs you more money than your own borrowing costs (banking customer deposits)... Would want to continue to lose money and lend to lose even more money?</p>
<p>Our Consolidation's current rate is 4%, fixed. 25 years, no fees, without incentives. Possibly 3.75%-3.50% fixed, with performance incentives. For advance planning purposes, the average approval time is 6 weeks (says bank), ours took 16 weeks. Rates change July 01. The door is creaking.</p>
<p>How do they figure the value of your home? We bought our house ten years ago and it's doubled in market value. We still have a mortgage on it. Do they look at your equity in it or it's market value? </p>
<p>Does anyone have experience with two or more kids in college at the same time? How do they divide up your EFC? Does the first kid pay the full EFC at their school and the second kid gets the need-based aid or do they divide the EFC equally? What happens when one school is a meets full need school and the other isn't?</p>
<p>EFC is the total annual amount you are expected to contribute,and regardless of how many children you have in college, your EFC total would stay the same, but per child it would be divvied by # of kids in at the same time. </p>
<p>I don't believe that FAFSA looks at home equity/appraised value etc., but the CSS and other College profiles may. But I could be wrong on this.</p>
<p>Roger Dooley, administrator on CC says
[quote]
your best bet is to check with the financial aid office of each school to which you are applying to find out what they need and the due dates for each item. Just about all schools will want the FAFSA results. Some private schools may want the CSS Profile; a few schools even have "custom" questions on the profile. Many colleges have their own financial aid application form, too. A few may require copies of tax returns to be filed with the other paperwork.</p>
<p>The key thing is not to assume anything - check with the aid office, and if something isn't clear, keep asking until they clarify it.
[/quote]
</p>
<p>Lesson learned for financail aid:</p>
<p>College owe nobody any thing. I found it beneficail to contact the financail aid people early on as in my case it was probably the most important factor. They were all very helpful and honest about what will be our chances. </p>
<p>In my small observation I found that finaancial aid can vary from school to school. Financail aid favours the school and if school wants they can offer zero parent contribution if they want the kid in their pool. This game is played by Ivy school also. Financial aid means also that one may lend an opportunity to pursue their Ecs in the field of interests and work and get paid at the same time. </p>
<p>Good luck to all. :)</p>
<p>I know the EFC is divided between the students in a family, but does anyone have experience with how they do that? I'll have multiple children in college at the same time and I'm curious how colleges work that out.</p>