<p>I know some students are being offered packages that include loans putting them at risk of not being approved for similar amounts all 4 years. Extended family may be able/willing to help them out later on, but if they do so, either by paying off existing loans or contributing cash to cover an upcoming year of school - unless it is already the student's senior year, isn't this outside contribution going to negatively impact their ability to get financial aid? It will look like additional income, correct?</p>
<p>If grandparents or aunts and uncles want to help a student it is best to pay off loans a the end of the educational process so the student gets the maxiumum aid they qualify for - but what if a school's aid package for freshman year doesn't look repeatable for years 2 and 3? If Grandma/Grandpa or Aunt & Uncle step in early won't that subtract from subsequent awards?</p>
<p>It seems to me that situations such as this were so much more theoretical, and much less likely to derail an educational plan when college costs were lower......</p>
<p>Isn’t any such assistance, by definition, part of EFC? In other words, it’s not outside assistance and won’t negatively impact future financial aid. Also, the earlier the better. That will save interest charges and reduce the total debt.</p>
<p>As far as I know any assistance given during the college years is counted as income and therefore reportable and would have a negative impact on the EFC–it would increase it. So I think you are correct Bchan1. And your theory of getting assistance to pay off loans after college also seems plausible in order to avoid impact on fin aid. </p>
<p>I went to a fin aid workshop at our hs last fall and the question of how to handle savings bonds came up. The speaker (who was a FAO) said we should “forget” about them until the student had graduated college and then use them to pay off loans. Seems like a similar scenario to the one you propose.</p>
<p>If granny wants to “lend” you money to help with college now, then that should not impact financial aid. If she decides to forgive the loan as a graduation present, that would be lovely.</p>
<p>From a FAFSA perspective, it seems way to do this would be for the extended family to give the money to the parents of the student. The parents are not required to report money given to them.</p>
<p>If, though, it’s given directly to the student, then FAFSA does require that it be reported as untaxed income to the student. This can affect their aid the following year.</p>
<p>If it is paid directly to the college, then it is still a bill paid on behalf of the student, and would also need to be reported.</p>
<p>If it is a gift to the parents to use as they wish, then it doesn’t show up on the FAFSA.</p>
<p>Oh, yes, and there’s always the “granny loan” program, as pointed out by Swimcatsmom.</p>
<p>This is from finaid. An alternate way is for the relatives to open up a 529 plan in their names and give it the student or the educational institution directly. This will not show in FAFSA or CSS for that matter. Also you have to remember gifts can trigger gift taxes if they are about $13000 a year.</p>
<p>Everything I’ve ever learned about financial aid has indicated that extended family paying off loans at the end is the best. But if a family can’t continue to borrow at the level set freshman year, I see this as a sticky situation. If extended family comes to the rescue early, the kid won’t get the full financial aid they should be awarded because the outside help looks like income for that year - on the other hand if they don’t get outside help they will be priced out of school before they graduate because they can’t borrow any more money.</p>
<p>I’m not aware of any calculator that can really tell a parent if they are likely to be approved for future loans of similar amounts - or at what point they will cross that threshold. It seems the schools are offering what they can, even though that may not make the school affordable for four years, but if the kid is planning to take their relatives up on an offer of assistance it means they are not getting the aid they could and if the relatives don’t continue to come to the rescue they are out of school with no degree.</p>
<p>I can see from the school’s point of view that they’ve put together a certain package, not knowing whether or not extended family will step in to make the college affordable. With the extraordinary costs that are now the norm I see a new grey area where the true affordability of a school may be difficult to gage. The parent is thinking not only about what they can afford per year, but also whether or not the school will continue to be generous and if a family member will come in with X amount of money at some point, how does that impact the other aid numbers and can the child truly afford the school? It seems to me that this whole sorting process was easier when total cost was lower - the ability to juggle and offset other expenses could allow you to “squeak by” with short term sacrifices if things didn’t go the way you’d planned. But if a relative stepping in with a few thousand dollars sophomore year means a 10 or 15 thousand dollar cut in aid junior year, that isn’t a gap you can easily cover - and might mean that the kid drops out of school junior year, right after the school has gained the benefit of freshman retention data for the school.</p>
<p>I know of no formula that allows a parent on a tight budget to accurately asses all these variables…</p>
<p>Mazewanderer, any distributions from a 529 for the benefit of the student (no matter who the owner is) now has to be reported on the FAFSA as untaxed income to the student. This is something that has recently changed. Kelsmom posted that information here a few months ago.</p>
<p>So it can definitely affect their aid for the following year.</p>
<p>Swimcatsmom - great solution! And fair. I didn’t think that giving the money, even to the parent, could be overlooked as an asset, but personal loan forgiveness shouldn’t violate any rules and let families better calculate their true cost.</p>
<p>Extended family assistance aside, are there calculators that will give a parent an idea of when they’ve maxed out their PLUS loan availability? I’ve read they’re approving many parents who didn’t think they’d get approved, but how do they know if they’d get approved a second year? It seems risky to me to go forward if this is at all in doubt, but perhaps two years in there is some change of circumstance (sale of property etc) that would make the maybe affordable option into something doable. Again, the higher price tag that is now the norm makes this a much more complicated equation…</p>
<p>Grandparent-owned 529s are not reported on FAFSA, but they are reported on CSS if the student is the beneficiary. </p>
<p>Contributions to 529s fall under the Generation-Skipping Transfer Tax (GSTT) regulations, which includes a provision applicable only to Section 529 plans. Each grandparent may contribute up to five years worth of annual exclusion gifts in one year ($13000 X 5 = $65,000 per grandparent). Also, it’s the giver who has to be concerned about estate taxes, not the recipient.</p>
<p>Rentof2, about distributions from 529. I have one and my daughter is the beneficiary. I included it in my profile and fafsa assets so it’s part of my eccentric for freshman year. When we use it first to pay for the first semester of freshman year, my daughter has to include it in her income for when we do it all over again for sophomore year? That makes no sense. Its like being penalized for saving for college. Its not a regular 529, but PA TAP where you freeze price of credits at value at time of investment.</p>
<p>Pink Cadillac, hopefully Kelsmom will weigh in on this since she’s the expert, but what I was referring to was only concerning 529s where the owner is not the student or the parent – as in cases where a grandparent, aunt or uncle might be the owner and the student is the beneficiary.</p>
<p>In any case, it doesn’t relate to your question since you are talking about a parent-owned 529. It is just reported as a parent asset. You do not also report distributions used to pay your daughter’s college expenses. You are right, that would be like counting it twice. If the 529 is not owned by the student or that parent though, then my understanding from that thread from last year is that it does have to be reported as a gift – untaxed income – to the student.</p>
<p>Contributions to 529s fall under the Generation-Skipping Transfer Tax (GSTT) regulations, which includes a provision applicable only to Section 529 plans. Each grandparent may contribute up to five years’ worth of annual exclusion gifts in one year ($13000 X 5 = $65,000 per grandparent). Also, it’s the giver who has to be concerned about estate taxes, not the recipient</p>
<p>Vball – may I ask what you are referring to? Section 529(c)(5)(B) can result in GST if their is a CHANGE in the 529 plan beneficiary. The regulations specifically provide that if the gift is less than the annual exclusion amount the transfer to the 529 account is not subject to the GST.</p>
<p>P.S. I really hope there are not a lot of kids getting need based financial aid whose grandparents are worried about federak estate tax (only applicable to estates over 5million)</p>
<p>Anything done after the filing of FA paperwork spring of junior year will not get reported anywhere. So, if you need to do anything that has to get reported, wait until then.</p>
<p>@rentof2 - can you please post the link to Kelsmom’s info?</p>
<p>Thinking about this literally, does it mean whenever I pay my own kid’s tuition from 529 (or any other source, for that matter), he has to report the amount on 44j of the FAFSA? FWIW, my ex-wife actually fills out the FAFSA and I have never seen it.</p>
<p>I wasn’t specifically referring to the gift limit with reference to a change in beneficiary. If grandma gives Kid #1 a gift of $65,000 in a 529 and then changes beneficiary to Kid #2, this is a gift to Kid #2 and looks like it would need to be reported as such to the IRS. I’m not sure that makes sense since the original gift was already reported as such, but then again a lot of IRS rules don’t make sense.</p>
<p>I should have said it’s the giver who has to be concerned about gift taxes, not estate taxes.</p>