<p>I read somewhere that <em>some</em> colleges do look at payments made by someone other than the parent(s) or student, and in the subsequent year’s FA award they will add that amount as a “student resource” … I guess assuming the student can expect to receive it each year.</p>
<p>Unless getting around the gift tax is an issue, I would suggest not having grandma (or whoever) send the money directly to the school. Of course, you could ask the school how they would treat such a payment, and if they would not count it as a student resource for subsequent years, then I guess it would be fine.</p>
<p>I think the easiest thing is to just give money to the parents (or custodial parent) and skip all the loan business. Loans without standard interest rates, or where interest isn’t collected, get all sloppy with the gift tax too. </p>
<p>On the other hand, gift tax isn’t really an issue anyway unless you’re dealing with a potentially sizable estate… in which case we’re probably not talking about FA kids.</p>