My son is a junior who will be applying to 1-2 in state schools and 2-3 Ivy Leagues – and I’m trying to figure out how to pay for it. Thanks to a big raise in the last year, we now make $125,000 with little savings, $90Kish in retirement accounts and $150,000 in home equity. My grandparents saved a significant amount of money to help pay for my two kids’ education. But they died. Currently, the money is held in bonds. Approximately $80K is in my mom’s name/my name as co-owners. Similarly, another $80K is in my mom’s name and my kids’ names. (They have $80K each). The bonds were purchased prior to 1989. They originated in my grandparents name and over the years the names have been transferred from one person to the next.
My question is how can I best use this money as my grandparents intended? From what I read from the Ivies, based on our income and personal savings, we should expect a significant discount from the Ivy schools. But how can we use the bonds to pay for our portion of the cost, instead of the Ivy leagues taking it all and still leaving us with the bill we would have had otherwise? My grandparents would have rather we spend it on vacation, cars, etc than the school just sucking it away.
P.S. My parents are also in a higher tax bracket than we are, so cashing bonds in their name would be at a higher rate than mine/my kids.
Interesting attitude. So basically by the transitive property, the school should pay for your vacations and cars?
Are you saying you don’t want to use any of the bonds to pay for college costs?
The bonds in your name will be assessed at about 5.6% of their value annually,ml eating plenty to pay some of your family contribution. Bonds on your kid’s names will be 20%. Still leaving money that can be used towards your contribution.
If your kid is lucky enough to be accepted to an Ivy League school, or Stanford, the student will receive some need based aid as well.
Try running the net price calculators and see what you get.
But bottom line…those bonds are an asset…and they will be counted.
But how can we use the bonds to pay for our portion of the cost, instead of the Ivy leagues taking it all and still leaving us with the bill we would have had otherwise?
This part is confusing - you believe the Ivy would charge $160k PLUS your calculated portion?
Any school…the ivies included…will calculate your family contribution. To be honest, they don’t care where it comes from. They just expect it to be paid. Lucky you that you actually have those bonds to help you with your family contribution.
I’m guessing that the grandparents set these up to help pay for something for your kids…probably their education. It sounds like the grandparents are still a,I’ve. Ask them what their intent was.
Colleges don’t take your money upfront so the idea that they are going to suck 160K out of you all at once is a misperception of how it works.
You need to run the financial aid calculators. You will have the option of deciding HOW to fund your share of college costs, i.e. borrow, pay out of current income, or cash in a portion of your equity (bonds, savings, etc) to pay for it. Colleges aren’t going to say, “oh you have bonds, give them to us”. These assets are like any other- keep them, liquidate them, do whatever you want, but the fair market value becomes part of your calculation of what you own and therefore, how much you can afford to pay for college.
Grandparents assets are not part of the calculation. So I guess part of your question is that if the bonds are in your mom’s name, do they get counted- and the answer is no. Assets in your child’s name get assessed at a higher rate (which is fair- if a kid has money, presumably it’s to pay for college) than yours does (since you have other needs- retirement, for example).
Does this help???
Blossom is correct. Accounts in grandparents’ names are not put on your financial aid application forms.
Sorry, I missed that earlier.
But spending the money from grandparent’s IS reportable.
If the money never existed, let’s say I would be responsible for $20K/year. My grandparents (the student’s great-grandparents) wanted to help me pay for that $20K/year. I am wondering if the school sees it, they’d say “Hey. Now you owe $40K/year.” Their money would go toward that extra $20k to the school - not me helping to pay for the $20K that I would have qualified for on my own.
I would absolutely like to spend as much of the bond $$$ as possible to cover our costs. Is spending grandparents $$$ ALL reportable? If they cashed in $10K at a time and gifted me that per year, would that help?
I am sorry, I see both:
“My grandparents saved a significant amount of money to help pay for my two kids’ education.”
and
“My grandparents would have rather we spend it on vacation, cars, etc than the school just sucking it away.”
Heck, I’d rather keep my home equity than pay it to a college too!
And I’d rather go on vacation and buy my kids cars (we have two and we aren’t getting my son one any time soon) than pay for his college.
But the EFC is not allowing that.
So, OP should:
- run the Net Price Calculators for the “1-2 in state schools and 2-3 Ivy Leagues”, knowing that they are just ballpark figures
- get a handle on EFC estimates - with each bond staying as a bond with 50% for you for the one 80K bond, and 50% for your child for their 80K bond, and with cashing those out
- note that if grandma (your mother) doesn’t mind, she could pay tuition directly to the college, and there would be no gift tax or any other consideration, and though you and your son would have to list the bonds/bond money on CSS Profile and FAFSA forms, grandma paying would not be counted
I’m sure there are more experienced people out there who know about this. I would suggest a CPA or a lawyer, or a financial aid expert.
There are lines on the FAFSA for “parents’ current investments” and “student’s current investments”. That is where the bonds would be listed, if they were not cashed out. Cash, savings, and checking accounts are listed separately.
Would you consider shifting both your portion and your children’s portions of your bonds to your mother only? That would not have to be reported at all, and would get your child maximum FA.
(I am not commenting on the ethics of this, most of us are trying to get the maximum FA we can - perhaps the OP could have put it a better way than “vacations and cars” - or maybe something is not all it seems…)
This isn’t the question you asked, but if “1-2 in state schools and 2-3 Ivy Leagues” is the total extent of your child’s college applications list, I’d encourage you to search for some more schools that will offer your son merit money. Any student who is in range for schools like the Ivy Leagues is also going to be able to find schools that will offer non-need-based money.
Of course, if he’d be perfectly happy with the in state options, then no need to do this. But it would be another way to save money.
WV- I think you need to run a few of the price calculators on college’s websites to get a handle on your situation.
There is a difference between your mom owning an asset- a bond, worth 40K for the sake of argument- which is a reality which you do not need to divulge on your financial aid applications, vs. your mom GIVING you 10K per year for four years, which is a reportable event on your application (if she gives it to you a month before you file your FAFSA it will show up as 10K in your checking account, or 10K in a money market account, or whatever). The financial aid calculation does not distinguish between cash you own which you intend to use to pay for college, vs. cash you own which you intend to use to go to Paris for the week. Cash is cash and you will have to report that you own it.
I do understand what you are saying (I think) which is- given the choice, what is the most efficient use of the money your grandparents saved for your kids education (correct me if this is not your question).
So if the bonds really are in your mom’s name and are her property- it might be the case (obviously i don’t know your exact situation, but this is a hypothesis for you to test) that keeping them in her name, applying for financial aid, presumably getting the maximum award which is likely to include loans, and then having your mom help your kids pay off the loans on an accelerated timetable with the funds from the bonds once you’ve sold them, is the best use of the funds. If they really are in the kids names- depending on how the bonds are registered and held- you won’t have that option- you’ll have to report them as your kids assets.
But in no case will a college expect you to liquidate the bonds all at once to pay for Freshman year; whether they are your assets or your kids, only a percentage of the value is assumed to be “available” to pay your share.
Am I close to answering your question or have I misunderstood something here? And you absolutely need to see the physical bond (or a statement if they are being held in a brokerage account) to make sure you are dealing with accurate information. A grandparent telling you “the bonds are for you and your kids” doesn’t mean that bond is actually registered to your kid (or likely- in a custodial account since your kids are minors).
What taxes have you been paying on the bonds up until now and in whose name? That’s a place to start if you don’t physically have a certificate in your possession…
It’s tricky because the bonds are in your mom’s name also.
What type of account are they in?
In general, any securities in your name would be considered assets so the college will take 5.6%“cut” of it, UNLESS the bonds are in a retirement account.
Securities in the student’s name would be assessed at a 20% rate.
When you convert any asset into cash, it will probably increase your income, which means that next year’s EFC goes up.
From a “keeping the EFC low” pov, the best arrangement would probably be for your mom to hold the bonds in her name and pay the bills. I don’t know what impact that would have on her taxes though.
Also the suggestion to look at schools that award merit is very good.
The question I would ask is this: what is the law regarding joint ownership of bonds? Does it mean that your child and your mom each own half? Or does it mean that they both own the full amount jointly? This is a question for a lawyer.
Also, I understand your question, and, no, colleges will not view the bonds as simply money to pay your EFC that you would have had if you excluded the bonds. It now is money you have available to pay for college, and it will be counted.
BTW, do you mean savings bonds that are in a safe dep box? Or investment bonds?
Brantly, until the OP clarifies ownership I think the most likely scenario is that the bonds are held in a custodial account for the minor child with the parent or grandparent as custodian, i.e. the child’s assets. I don’t think the bonds are likely to be held jointly (like a married couple would- each having 50% ownership). These kids are minors with assets they own but are kept in a custodial account with an adult named custodian.
If grandma owns the bonds (but they were transferred to her by the previous generation “for the benefit of the grandchild” than easy-peasy. Kid applies for financial aid, takes a package which is likely to include loans, after graduation when the payments start, grandma liquidates the bond and pays off the loan.
Not advocating this mind you- just pointing out that the titling of the asset is very relevant here.
I apologize for the vacations and cars comment. I don’t think it came out as intended. The bonds are US EE Savings bonds purchased in the mid to late 1980s in various denominations from $500-10,000. Under the “to”: it has my mom’s name. Then an address, a bar code of sorts. Then it says at the bottom OR (child’s name, or my name). When we’ve cashed them previously over the years, we paid taxes on the interest accumulated.
And yes, I realize that if he does not get in, it will be a moot point. I live in a small disadvantaged city where most people expect him to go Ivy League. Our original thoughts were to stay in state. There, I know that all of his credits will transfer. The schools here have been sending him to our local university since he was 12 for math. Those credits will transfer to the state school, as well as all the AP/Dual Enrollment credits. Ivy League (or similar) probably will not accept them. But, our in state costs have risen a total of $10-15K per year in the last 5ish years. If he could get an Ivy League degree more cheaply than in-state, it is definitely something to strongly consider.
I would just like to get all my ducks in a row before the official application process begins.
Don’t just look at Ivy League. Look at all colleges that meet 100% of need. Google that phrase – “colleges that meet 100% of need” – to get a list. Almost all of them are top-flight colleges.
http://talk.collegeconfidential.com/financial-aid-scholarships/1678964-links-to-popular-threads-on-scholarships-and-lower-cost-colleges.html#latest
Right. Take a look at the links in this thread. If your student truly has the stats to be a competitive applicant for an Ivy, there are other schools where he might garner significant merit aid that would really bring those costs down.
He sounds gifted. Possibly look at meets full need that also grants merit.
About paper bonds that are not physically in your possesion, even though you have your name on it, I don’t know if that is considered yours. Legally your mom could cash those out at any time, no need to notify you. I think since her name is on first, she pays the taxes on the interest as well regardless of who cashes it. Worth asking a professional.