<p>Jamimon,
Thanks for the prompt reply. I had a feeling that was the way it was treated. :( I don't think the extra amount should be totally ignored by the school, but I was hoping it might be treated as income, for instance, instead of taking the whole amount away and leaving us with the same bottom-line bill (assuming our EFC is less than half the tuition, and the college fully meets need, etc.).</p>
<p>Nope, not income, and it is not treated as income by the IRS either as it is a job related perk, so at least you get the full dollar value. However, any excess merit aid you have over tuition and college expenses such as books, supplies, will have to be reported for taxes. Room and board are not considered college expenses for tax purposes.</p>
<p>Back from Case visit. This is what the financial aid counselor told me. 1) GPA for retaining your scholarship is a 2.5 your freshman year
2) GPA to retain your scholarship in following years 3.0
3) GPA for scholarship purposes is figured out at the end of the year so it will not be taken away if your GPA falls under a 3.0 one semester.
4) If you lose your scholarship there will be no chance to reinstate it (however, he did say depending upon your EFC then some of the money offered in your financial aid package could be awarded as grant money instead of the merit but probably nowhere near your initial merit scholarship).
5) 85% - 90% of the students keep their scholarships.</p>
<p>He did mention that congress was more than likely going to pass a bill so that the Stafford loan (we were talking about subsidized so this is what I'm referring to) in your sophmore year will be $4,500 next year instead of the $3,500. Forgot to ask if it will also be increasing your junior & senior year.</p>
<p>A question: I initially told Case (when we enrolled on line) that I did not want the $2625 subsidized Stafford loan (only one offered) this year because we didn't want any loans until we needed them when my other son will be starting college in two years. He suggested that we take the loan (which by the way was reduced by $500 because my son was given a scholarship at school from a bank) for $2125 and to put it into our savings account and keep the money if we don't use it this year or possibly the next. He said that he has seen so many families who didn't want loans need more help in their junior & senior years and you can't go back & get these loans later. Does this seem like a good idea? He said that if we still have the money and don't use it then we could go ahead and just pay the loan in full at the end of my son's senior year.</p>
<p>My son plans on getting his master's on Case's five year plan. Did not even go into what that entails financially. As soon as he gets his masters he does plan on getting a PhD.</p>
<p>Comments? Advice?</p>
<p>Well, it is a good idea in that no interest is accruing, but if you are applying for financial aid, 5.6% of it will be assessed against your financial aid, and any interest earned on it will be taxed and be counted as earnings! That's financial aid for you. But it is still a bird in hand, and any liquidity equals flexibility. If you have any loans out for any reason, credit card, automobile, etc you might want to bank it there. Just make sure you don't nibble at it like a mouse on a cheese wedge as it can disappear quickly. And do not put it in an account in your kid's name or it will be assessed a whopping 35% next year. Ah, all the planning and thought that has to go into what to do with cash when applying for FA.</p>
<p>I have to laugh at "any interest earned on it will be taxed and be counted as earnings!" I think the interest rate on our savings account is like 0.002%! I could have the money in there for a hundred years and get $5.00 in interest (if I'm lucky:)). Everybodies been complaining about the low interest paid on savings accounts - may be helpful after all. Of course with my luck the interest rate of savings accounts will go up to 4% next year - wishful thinking.</p>
<p>No car loans, credit card debt, or any loans (other than a house payment). We took everyone's advice and bought a new car with some of our savings so that we don't have to worry about car payments for the next six years at least. I have been working part-time for the last two years and we saved my paychecks so that is how we had enough to buy the car.</p>
<p>My mother & father gave each of my boys about $10,000 over the years in savings bonds & some of them are mature & some are not. Initially I wanted to keep the bonds and just pay the boys portion, but they are going to have to be assessed the whopping 35% each & every year. Do you think it would be better to take son #1's $10,000 to pay off this years EFC and then I would keep the $10,000 I was going to pay? Is this even legal? I am not sure why it wouldn't be, but I feel guilty that so many people don't have any money for college and I really wanted my kids to keep this $10,000 for their retirement fund. We all know that it is VERY hard to put away that amount of money when you are young and it would take probably three times that to equal the same amount later. I really am at a loss....</p>
<p>Any college guide discussing finances for college will address the issue of putting money in a kid's account by telling you "don't" and "spend it down". So would any advisor. Some of the schools are beginning to see the lunacy of assessing the 35% on the kids' accounts where you are just nailing the uninformed families, but federal methodology, FAFSA and most of the school still do use that method.</p>
<p>Thanks for all your help jamimom. All of this just seems so wrong because I feel that it is like somewhat akin to lying by omission. I guess we need to think about what to do with my 16 year olds bonds now. </p>
<p>Do you know (please just answer this if you know offhand) if we use son #1's bonds to pay for his education this year because it would be spent towards his education would he have to claim this as income? Most of it would be spent towards R&B - does that make a difference? Thanks for any help you can give me.</p>
<p>Those bonds should have been reported as assets. You don't have to report the expenditure of assest as income. And if they were reported as your assets and and you spend them on his behalf there is not a problem either as parents are permitted to use their income and assets for their children without reporting it since the whole ball of wax is taken into consideration. It is any OUTSIDE income or payment that has to be reported. Like if grandmom pays $5000 of tuition. We start getting into a gray area when grandmom gifts money or gives gifts like a computer for the kid. Where room and board is differentiated from other college expenses is that any grants and scholarships that exceed those expenses have to be reported for tax purposed. The reason for this is that room and board are not considered college expenses by the IRS whereas a computer is, books are, lab fees are, commuting costs are.</p>
<p>Don't you have to declare the full value of your child's bonds regardless of whether they are cashed or not? We bought bonds for our child when she was young and she still had them the beginning of her senior yr. She wound up cashing some to pay for car insurance and then later a new transmission. We were told that she would be assessed 35% of the bonds' full value (not just the face value) whether she cashed them or not. </p>
<p>We asked around and discovered that many people only report the face value of the bonds or the amount they paid (1/2 the face value) believing that they don't need to use full value until they are cashed. Now I'm not sure if we did the right thing on FAFSA. We were told to use one of those bond calculator programs to figure the full amount.</p>
<p>Savings bonds are supposed to be reported at estimated market value. It does not have to be exact if you cannot come up with such a figure. The change in value each year would be tatamount to change in any stocks' or bonds' market value. The market value is the amount you would get if you should sell that bond on that day before its maturity date. If you google "bonds" and "fafsa" , there are a number of sites that go into this.</p>
<p>Jamimom - yes, we did report them at market value (I think it was on usbonds.gov or something like that). Thanks so much for all your help.</p>
<p>jerzgrlmom - some of my son's bonds had actually matured and were worth more than the face value. Did you go to the program where you actually put in the savings bond number on the bond with the amount & date purchased? </p>
<p>For FAFSA purposes if you put in the full amount of the bond you will be assessed 35% on an amount that you don't have. For example my parents got my sons a bond for $5,000 maybe 5 years ago. She paid $2,500 for the bond but right now it is valued at about $3,500. We will be assessed on $3,500 not $5,000 which is quite a difference.</p>
<p>On the other side of the coin, say that the bond had matured several years ago. The amount will now be over the face value because of accrued interest and you should be assessed the 35% on that new value.</p>
<p>I have no idea if schools check this, but I would certainly make sure you do it right. In either case, it could be bad news if the colleges find out if you did it wrong & change your fin aid package to one you don't think you could afford now or in the other case find out maybe you could have gotten more grant money, etc. I have heard that colleges can make you pay later (say in the students senior year) for mistakes you made when you filed.</p>
<p>Maybe I'm confusing gov savings bonds (EE) with other types of bonds that are bought and sold on the open market. I don't see how it's ok to give an estimated figure for the EE bonds when there's a definite value on a given day (in this case, I believe you're supposed to use 1/1 or the day you fill out the FAFSA). It's not like you're "selling" EE bonds at the going rate but rather the value if you cashed them in on 1/1 . Then we report the aggregate value of these bonds (including interest earned) at that point. I just don't see how people say it's a $1000 bond but I only paid $500, so it's worth $500. Actually, it's often worth more than double that... Is the FAFSA really that lenient? Do people really do that?</p>
<p>BTW mominsearch, this is really just a general question. Your bond question just made me think of it because I've heard parents argue this at school meetings and such. Seems there's quite a variety of opinions and people are usually telling me I'm interpreting it wrong. That you only have to declare what you paid until you cash the bonds. I was beginning to believe that I misunderstood. I'm just trying to understand the legality of it.</p>
<p>mominsearch,
Thanks. I think your last note explained it just the way I thought it worked. I had forgotten to mention the case where a bond is worth less than face value (since my daughter's bonds were held a long time and had matured). In that case, you are right. The value is less than face value. Seems you handled it the same way we did on the FAFSA. In answer to your question, yes we did input each bond's #. What a cool program. Very efficient. Easy recordkeeping. I actually did it for all my kids' bonds. My middle child cashed his in and used the $ last summer to pay for a program at Brown. Now he's broke.</p>
<p>If a kid still has bonds in his name, he's assessed 35% of the value of the bonds (including interest earned up to that point). If he cashes them, is the amount considered INCOME?</p>
<p>Guess bottom line is don't buy bonds in kid's name. Lesson learned the hard way in our case. And yes, many of these bonds were from grandparents and uncles.</p>
<p>Plantree - i would encourage you & your son to look into Olin College in Needham. MA. Happy Hunting!</p>
<p>Jerzgrimmom, cashing the bonds does not income make beyond the realized appreciation between the reported face value of the bond and the amount realized.</p>
<p>If I'm not mistaken when my son cashes them in he will have to pay taxes on the interest he earned only (not the full amount of the bond). The bonds won't be considered as income if we use them for college purposes. Correct? I think we need to get a tax accountant in on this (LOL).</p>
<p>Mominsearch, it depends on the bond. There are bonds that are tax free to certain extents depending on the terms of the bond and when it was purchased, particularly if the proceeds are used for college. Just google the type of bond and college for a site that can go into the specifics if your tax advisor cannot. But regardless of your tax situation, you do not need to report the cashing in of the bond as an asset on FAFSA beyond the increase in value since the prior year when your reported its market value and any interest you received. You are just converting one asset (the bond), into another (cash) and if you spend it (poof!), it's gone. It is advisable to drain the student's accounts first as they are assessed a whopping 35% vs 5.6 of family assets, and that's why you have those bonds anyways.</p>