<p>If student gets merit aid plus fin aid (fed loans, work-study) to attend college, but parents still cannot cover EFC completely on their own (out of savings and don't want a private institutional loan) and an extended family member either gives or loans parents some of the extra money needed, how will that "gift" or "family loan" be viewed by FAO the following year?</p>
<p>On the one hand, families are asked to list any money given by outside family to student to fund education, but it seems to me that this could be interpreted a couple of ways. If parents take out private loans to fund part or all of EFC (after their fin award has been determined), then that money, as far as I know, isn't taken into account before fin aid package is awarded the following year--parents don't know what the aid will be and therefore do not know what the shortfall will be a head of time. Could the family "loan" or contribution also be viewed like a private institutional loan and therefore not counted against the families award the following year? (I hope I am making myself clear here.)</p>
<p>If it is a gift, it will become a vicious circle because you will have to include it next year when you file the financial aid forms. This could result in you getting less financial aid in subsequent years</p>
<p>If it’s a loan, it shouldn’t count. My H’s niece faced this situation. Her parents borrowed their EFC from other family members. That wasn’t considered a “gift”. It was considered the same as when parents take out loans from anywhere to cover EFC.</p>
<p>Whether the family members later decide to cancel the debt (years from now), that’s irrelevant to the present situation. My MIL cancelled her loan to my SIL when the SIL’s H lost his job (after niece graduated).</p>
<p>So if it is a loan, then it doesn’t have to be declared, then the FAO will never know about it. So since no one will know about it, then it could really be anything–loan or gift. I’m just playing devil’s advocate her. If it is a “hand shake” agreement, it could be anything.</p>
<p>mom2collegekids–in your niece’s case, was there a written loan agreement or a verbal agreement?</p>
<p>My SIL had a verbal agreement with my MIL (who later cancelled the loan when the hubby became unemployed after the niece graduated.)</p>
<p>My SIL also has written agreements with a couple of siblings who lent money to help with EFC.</p>
<p>However, for FA purposes, she didn’t have to declare any of these loans. This isn’t really any different from when people put their EFC’s on their credit cards or by using a Home Equity acct. You don’t declare that for FA purposes as any kind of income or financial help from elsewhere. </p>
<p>* So since no one will know about it, then it could really be anything–loan or gift. I’m just playing devil’s advocate here. If it is a “hand shake” agreement, it could be anything.</p>
<p>*</p>
<p>I agree that this is probably an area where “gifts” are probably not always honestly reported on FA paperwork. There have been people posting here on CC that say that they have a granny or a rich uncle that is helping with college costs. Who knows if they are reporting any of that.</p>
<p>If the extended family member gave a monetary gift under the $13000 /yr limit to the parents and not the student would that still have an effect on the future financial aid?</p>
<p>I think, if I recall, that a gift to the parents is not reported on FAFSA, isn’t the “cash from other sources” XXXed out on the parent part of the FAFSA?</p>
<p>** I have not paid attention to this detail for a few years, but I recall this discussion from the past</p>
<p>But the “gift” or “loan” wouldn’t necessarily be or have to be reported as “income.” Certainly not on a tax return. My in-laws give us about $450 a year for birthday and Christmas gifts. I certainly don’t claim that as “income” on any tax forms.</p>
<p>I could be wrong…but I always thought that money gifts under a certain amount are not taxable. </p>
<p>I don’t think many people are reporting their Christmas or Birthday money on their taxes. And, I don’t know of any newlyweds that are claiming the money haul that they get as gifts, either.</p>
<p>however, I’m not sure what the real rules are.</p>
<p>Gifts of cash given to the student (by someone other than the custodial parents) are reported as untaxed income and the FAFSA instructions are very clear on that point. I don’t see anything in the FAFSA instructions which requires gifts given to parents to be reported as untaxed income under question 92. Although it isn’t specifically excluded, I don’t recall ever reading that parents should report cash given to them by a family member unless it impacts their AGI. I think this has been discussed in a few threads in the past year, so perhaps a search of the topic will give you a more definitive answer!</p>
<p>* I don’t see anything in the FAFSA instructions which requires gifts given to parents to be reported as untaxed income under question 92. Although it isn’t specifically excluded, I don’t recall ever reading that parents should report cash given to them by a family member unless it impacts their AGI.*</p>
<p>this is just another example of how FAFSA encourages people to find loopholes. So, instead of granny giving cash to gkid for college costs, she gives it to parents…who then, use the money for tuition. Or, instead of giving cash for gifts, give real gifts…not reportable…I wonder if a gift card or pre-paid Visa card is reportable? If not, then there’s a perfect go-around.</p>
<p>I know that FAFSA “requires” kids to report cash gifts, I just doubt many are reporting their Christmas and Bday money from relatives…or graduation money. It’s one of those areas that would be difficult for anyone to really check…especially if the gifts were in cash. </p>
<p>Frankly, it would make more sense if a certain dollar value was excluded from reporting…such $500 per year in gift money. The thought of kids reporting their $100 check from their granny at Christmas is just silly. If the granny had bought the kid an item worth $100, it wouldn’t be reported at all.</p>
<p>sk8rmom is right. The FAFSA asks students about “money paid on their behalf” by people other than their parents, but it does not ask parents that question.</p>
<p>M2CK, there are many “loopholes” in the FAFSA formulas…one only has to read the current NYU-disaster thread. Even Finaid has a “loophole” page, although IIRC they call it “maximizing aid”. As with tax filings, it’s not unethical to follow the current law/instructions AND arrange your finances in order to obtain the best possible outcome because these options exist for everyone. I think that’s one of the reasons why “Paying for College Without Going Broke”, which is updated annually, continues to be a great favorite among savvy parents. </p>
<p>I think the immortal words of Justice Learned Hand regarding taxes could aptly be applied to the financial aid process, "“There is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich and poor; and all do right, for nobody owes any public duty to pay more than the law demands.”…or, in this case, more than colleges demand!</p>