We will have a senior applying in the fall. Grandma has set aside around $100K for college expenses in a savings account in her name. If our EFC is $30K and the FA offer comes in right around there, what happens if Grandma contributes $25K (1/4 of the total) for freshman year? What would happen to our EFC for sophomore year? Would it increase due to her gift?
Although our family income is around $120K, we have very little savings and quite a bit of debt due to two catastrophic events (long story). We would have to depend on Grandma’s contribution and perhaps take out a small loan if necessary. After hearing all the sad stories about affordability, we are trying to prepare for unexpected outcomes while giving our S as many options as possible.
If Grandma gifts YOU, the parents, the money and you pay the school, then it won’t affect FAFSA. If Grandma writes the checks to the school, then it will affect FAFSA.
However, your income is already too high to get any free money from FAFSA application anyway.
Fafsa only schools don’t meet need. The school may cost $50k, and you may get NOTHING…then what?
@mom2collegekids - I’m not sure…this is why I’m asking. Our in state options are under $30K and that’s without merit money, which he has a good shot at getting.
We’ve also tried the Net Price Calculator for some of the reaches he’s interested in, and they have been coming in at $20K - $30K.
Obviously, if it came back $50K, we’d have to take that school off the table.
Are you assuming the school will closely look at the check to verify the account holder? How would the school know the source of the funds?
The FA representative from a well known and ranked University gave a presentation several years ago at D’s HS. Her pet peeves was that they had no way of knowing if ‘a rich uncle was paying the bills’ for a student whose parents had FA level income. This particular University used the CSS-Profile in addition to the FAFSA.
They expect honesty on the CSS and FAFSA forms. If the benefactor pays tuition on behalf of a student, there is a place on the forms for the student to report that for the following year. If the benefactor gifts the money to the parents and the parents pay, that is ‘hidden’ from the Financial Aid gods and the student might receive need based aid. Of course, the parents could use the money to put in a new swimming pool too as once given, the benefactor loses control of how the money is spent.
If the money is gifted to the parents for the express purpose of assisting the student (which is true, no matter what twoinanddone says about purchasing a pool instead) the ethical thing is to report it on the FAFSA as funds contributed on the student’s behalf. Financial aid is for people who need the money; not for students who are fortunate to have generous grandparents.
Please note that we are not trying to do anything unethical or dishonest. My main concern is that if ds gets into one off his top schools, all of which are expensive, we will have the funds for his freshman year if it’s close to our EFC due to Grandma’s contribution. However, let’s say the EFC doubles the next year to $50K because of that gift. Even with her generous gift, we would not have enough in our own savings to cover the $25K difference.
That’s primarily what we’re wondering. I’m reading all these threads about kids who got into their dream school only to find out that they can’t afford it or that they haven’t talked to their parents about the financing issues. I want us to go into this with eyes wide open about all the possible outcomes. He knows that if the money doesn’t work out, he will have to choose a less expensive option.
@mommdc - The money is in Grandma’s own savings account, not in the name of the student.
Might be cleaner for you to establish a 529 plan with you as the owner and your son as beneficiary. Grandma can contribute now. The funds will be considered parental assets for FAFSA purposes, but that is a lot more beneficial than $25K/year being considered as student income.
I think you have to consider that if you have an EFC of $25000, you may not be getting that much need based FA and that’s the only thing that would change with a direct contribution from grandmother. It is really hard to say how school A would change its aid versus school B. The only think that can be calculated is FAFSA: if G’ma gives the money to student or directly pays the tuition, the EFC for FAFSA will go up (may not matter as you may not be getting federal need based aid anyway, but it will go up)
Just have grandmother give the money to you (parent) and you pay the tuition. Nothing illegal about it, nothing to report. Lucky child. Don’t buy a pool to make @KKmama happy that you are ethical.
MiddKid is correct in post 9. There is NO PLACE on the FAFSA for gifts to the parents to be reported. So…have grandma gift the money to the parents (she can gift $14,000 to mom, and $14,000 to dad easily). Parents then pay the college bills with the money. That is perfectly allowable.
If the money is paid to the college, it must be reported as money paid on the student’s behalf on the next FAFSA.
In a situation where a grandparent or other relative is holding college money in a bank account, the account can be designated as a “POD” (Payable on Death) account to avoid the scenario where, God forbid, something does happen to Grandma and access to the money is lost. The student is named as the POD beneficiary and receives the account assets upon the death of the account holder, without having to mess with probate.
Ok, so can anyone link to the IRS or whatever that says this is a bad idea for grandparents to pay on a kid’s behalf? My DMIL says she will pay “whatever DGD 16 needs” toward school aside from what we have saved (which is about 60000). Our EFC is essentially full pay at most schools. DMIL is pretty financially savvy and has more than she can realistically use in her lifetime in savings and 401K.
Kamdcsmom, there is a question on the FAFSA and Profile. It is about money paid on behalf of,the student. The bill from the bursar is in the student name. If the grandparent pays this bill, they are paying a bill on behalf of the student.
This amount must then be included on the FAFSA and Profile…and it IS counted.