<p>I am a little perplexed about this and am seeking some early advice. My brother, who does not have children of his own, has offered to pay some of my S's college costs. Right now, S (a HS junior) is looking a some pricey LACs. I have used the college board calculator and estimate that our EFC will be about $20,000. But this is just considering my income and assets, not my brothers. If I add $10,000 in as untaxed income (just a guess as to what my brother might contribute), then the EFC rises by more than $5,000. </p>
<p>Just counting the money as a gift seems to defeat the whole purpose (or at least my brother's purpose), which is to help me send S to college. Is there a more efficient way to structure this?</p>
<p>Yes. Have your S take loans, and then your brother can pay them off after college. </p>
<p>That is very generous of your brother to offer to help!!</p>
<p>I didn't consider gifts as income; I simply considered them as assets once they hit the bank account. Run the numbers that way, and see if it makes a difference.</p>
<p>What if your brother wrote the check to the college without it being in your possession? What would it be considered then?</p>
<p>My parents are contributing $$$ towards my son's tuition. We have given them access to the billing/payment account at the school; they enter their credit card info and the amount they are paying. As it worked out, they made their payment in the fall semester; we (husband and I) paid the balance left in advance of the winter/spring semester. </p>
<p>We fill out FAFSA with only our own household financial info. I do not believe that the school needs to know (or cares) exactly where the money for tuition (and other expenses) is coming from.</p>
<p>Aren't they allowed to give a 12k gift each? Without you declaring it? I say why declare it, it's a gift, you're not declaring his birthday gifts to the kid!</p>
<p>Gift tax on amounts larger than $12k are imposed on the giver, not the recipient. You do not have to declare monetary gifts as the parent of the student, but any monetary gifts to the student do have to be declared. So you can have your brother "gift" you the money, and you can then use it to pay the tuition. It won't count as an asset either if it is not sitting there in the account when you feel out FAFSA. If your son is going to a Profile school, it may be a trickier proposition to avoid mentioning the gift. Strictly speaking, you are supposed to report any amount that relatives might contribute towards education, which is a gray area for most people. In that case, it might be better for you or your son to take out loans and have them repaid. That is something for you to examine.</p>
<p>If your family member pays the university directly, wouldn't you need to include that money on worksheet C where is asks about monies paid on behlaf of the student?? I do not see how that could be avoided. Any one else have experience with it?</p>
<p>If it is a FAFSA school and your brother gives YOU a gift, that is not something that has to be declared, as I read the form.</p>
<p>Thanks for the replies. From what I understand, FAFSA schools are not the problem (unless money from a relative has to be reported as income on a federal tax return--I guess I'll have to look into that). It's the Profile schools, or the ones that consider any resources that might be available to pay for college . . . Well, I am certainly not going to let my brother pay anything if all it does is increase our family's total payment to the college. So really it's a Catch-22 kind of thing -- if I report his contribution, then the purpose for him making the contribution disappears.</p>
<p>Maybe I should just have him send a check to the mortgage company instead of the college?</p>
<p>Having your brother pay down or pay off loans after college will work. It not only helps with paying for college, but helps your kid get a good credit rating, too. Getting loans will also help your S's financial education.</p>
<p>You may want to call the FAFSA support line to make sure....it appears that a question on worksheet B might require the reporting of funds someone else pays towards the college tuition bill. The last question in that section states: "Money received, or paid on your behalf (e.g. bills), not reported elsewhere on this form." Truly, one could interpret this as to include a bill paid on your behalf. The support line could tell you whether they include college tuition as a bill that is paid on your behalf.</p>
<p>To add to my previous post... to protect the funds that your brother intends to give your S for college finances, if he decides to pay off loans, he may want to ensure that money would go to your S if something happened to him (not that anything will!). One way to do that would be to, say, purchase savings bonds with brother as owner, and POD to your son. The bonds would earn interest between purchase and loan payback time, and could be redeemed after your S graduates and the loan payments are to start.</p>
<p>Of course, you'd have to trust your brother to redeem them and count on not having a falling out of any kind between now and then.</p>
<p>Another something to look into is a 529 plan that your brother opens and controls for your S. It's not your son's asset and not yours, either, and could be used for the LAST year's tuition and room and board, so would then not have to be included in a FAFSA.</p>
<p>OK , so the 529"s my parents own for my kids, if I take some out and pay for college, the amount I use for that has to be counted as a gift? And reported on the FAFSA on worksheet B?</p>
<p>For grandparents:</p>
<p>
[quote]
Grandparent-owned 529 accounts are not counted in determining eligibility. Distributions that come out tax-free are not counted, either. For these reasons, your use of 529 plans is much better from a financial aid standpoint than gifting to a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account where the value of the UGMA/UTMA, and any earnings or gains reported on the student's income tax return, are counted heavily in the financial aid determination.
[/quote]
</p>
<p>Grandparents</a> FAQs on 529s - College Savings for grandchildren</p>
<p>I agree...have the student take out a college loan for the amount the brother wants to contribute. This loan would be taken out to pay your EFC or whatever the college computes to be your costs. The loan would be taken out after the finaid process was completed. Your brother could repay the college loan. No one cares who pays off loans as long as someone makes the payments.</p>
<p>Regarding loans: I just looked at the college board's loan repayment calculator, and a $10,000 loan at 6.8 percent interest paid back over ten years will amount to $13,810 total to be repaid (principal plus interest--I wonder if this includes an origination fee). So a loan ends up benefitting the bank almost $4,000, and reduces the amount of help to me by not much less than if I simply reported the money to the college as a gift. And I expect that we will end up with loans of some sort, if S chooses a private LAC with a COA of $50,000+. I doubt that we will be given $30,000 in grants. </p>
<p>Regarding 529 plans: My understanding is that these plans can be helpful at FAFSA-only schools but not so much (if at all) at Profile schools. Someone please correct me if I am wrong about this.</p>
<p>I'm confused...it sounded like your brother was going to give your son the money for college in one lump sum. You know....you can take out a loan and pay it back immediately.</p>
<p>Thumper: But if it's repaid immediately, then wouldn't that count as assistance? Or not? If not, then maybe a loan is a good possibility. I guess I have been assuming that we could not repay the loan until we are done reporting financial info to a college without the college counting the $ as assistance in paying for college.</p>
<p>I'm not sure...you want to be sure that you are not withholding information that you SHOULD be providing to the school. I hate to say it, but if you are seriously hiding money that the schools should hear about, you are being a bit dishonest. You are fortunate to have the help, and if this reduces your child's help, it's because you really don't need as much help.</p>
<p>Having said that, I'll let others weigh in on the options. If money is given as a gift to your child during the school year, your child can use it to pay off Stafford Loans immediately...or Perkins Loans.</p>
<p>Ummm... any loans taken can be paid off when your S starts his senior year. No need to drag out the repayment, as thumper1 mentioned. For that matter, any help from your brother, whether paid directly to you or your son, can come in the year in which your S starts his senior year, and will have no effect on FAFSA and, I assume, PROFILE, since they are calculated using the previous year's income/asset information.</p>