<p>Nuts! So essentially our 'share' on an EFC of $10K would actually be $17K since the $7K comes from our investment for college tuition? Does seem unfair! Maybe that state school (U of IL) isn't such a bad deal after all (except for the TAs and the 30,000 bodies).</p>
<p>In Iowa, the state allows a deduction from your income of $2230 per child per taxpayer. So a couple with two children can deduct $8920. However, you need to set up four accounts (one for each parent and each child). As soon as the 529 became available, we transferred our 'college' savings out of a mutual fund and into the 529. Our plan is to continue to contribute to the 529 to get the tax benefit (as described in the initial post). </p>
<p>I sort of recall either the FAFSE or the PROFILE asking for assets held by parents for siblings; I'm not sure how much of that account was held against our older child for financial aid purposes.</p>
<p>chocoholic:</p>
<p>I know if a grandparent pays the tuition bill directly to the school, there is NO impact on your US taxes; it's a great generation tax skipping mechanism for kids who don't qualify for need-based aid. However, many schools will consider that another source of funds in finaid calculations. (sorry, I don't know if the impact is the same if an aunt/uncle pays the bill.)</p>
<p>BookMom -</p>
<p>Yeah. Seems unfair. I choose to view the $7,000 (or whatever) prepaid tuition money as akin to a loan I took out in the past and have already paid in full, rather than I loan I might otherwise be forced to take out now. (I don't even want to think I might have gotten that money as a grant had I not had the prepaid tuition funds- if I do, I realize I am, essentially, being penalized for having saved for college).</p>
<p>bluebayou, it's even easier than that. Google "529 loophole" and click on the first link that comes up.</p>
<p>ctymom:</p>
<p>I'm aware of grandparent's owning 529 plans, but I was just responding to chocoholic's query with an out-of-country relative. </p>
<p>But, since you raise the point, yes, grandparents can also sponsor 529s and obtain a state tax deduction in those states that provide one for such plans. So, it is definitely worth considering, even if gp is gonna pay tuition for their grandkids.</p>
<p>But, a 529 owned by gp is considered the student's/parent's asset in private school finaid calcs, so the possibility of finaid is reduced. Therefore, if a student has any chance at any need-based aid, depending on the tax deduction available to gp, the collective family maybe better off applying as a Frosh w/o a 529, and let grandparents pay any difference in the efc (assumes finaid exceeds tax deduction). Of course, gp's tuition payments will count against year 2 finaid, but at least a student receives one year of some need money.</p>
<p>Or, do I understand it incorrectly?</p>
<p>Bluebayou, we do not qualify for any need-based aid this year. My in-laws, who live in another country, want to pay a sizeable amount towards my D's tuition over the next 4 years. My question is, if they sent this money directly to the school, would that be reported as income for my D or us? Do you know how i can find out more?
Thanks</p>
<p>choc:;</p>
<p>I'm almost positive that paying school tuition directly is not subject to gift taxes, regardless of amount.</p>
<p>But, the FAFSA and Profile will ask you about money paid on behalf of the student, so if the g'rents are only paying a portion, your financial aid will drop the next year.</p>
<p>Great links, blue
Thank you.
We may let them do this for 2 years, and then when D is a junior, S will be entering college as a freshman, and we may want to take advantage of financial aid during those 2 years of overlap. Like let the g'rents pay towards first 2 years of D's college, and last 2 years of S's college. Does that make sense?</p>
<p>Just a question. Do 401(k), in my case, 403(b) savings have to be reported on the FAFSA and are they taken into account when determining EFC? I see my retirement going down the drain.</p>
<p>I don't believe that retire savings have any impact on your EFC. At least not 401K. FAFSA does not even ask that question.</p>
<p>Retirement funds in a qualifed retirement plan or 401K do not have to reported, though some schools are considering asking about them and if they are way high, expecting something from that source. COntributions made to the retirement fund if subracted from your income for tax purposes during the year in question do, however, have to be added back into the income for the year.</p>