Parental college loans to children - effect on FAFSA

Paying for College
1

<p>How do personal (no interest) college loans we provide to our children affect FAFSA results and financial aid? Are these loans reported on the FAFSA form? Are these loans looked at differently than outright gifts to help them pay for college? Does it matter whether we pay their bills directly (with the expectation to be paid back after college) or loan them the money to pay their bills themselves? Thanks.</p>

2

<p>Are you talking about dependent students? The parent is expected to contribute, so money you give or loan to a dependent student (by financial aid definition of dependent) is not a factor.</p>

3

<p>I am talking about dependent students. In order to clarify my questions, I just checked the FAFSA. There’s a question under the category Untaxed Income, item j, “Money received or paid on your behalf (e.g., bills), not reported elsewhere on this form.” Won’t my kids have to report money we’ve loaned them to pay college bills, or college bills we’ve paid directly (as a loan)? I guess I’m wondering whether FAFSA looks differently on parental loans than on parental gift aid. If it does need to be reported for “item j,” how will it affect our kids’ financial pictures(FAFSA) and our EFC? Is there a certain way we need to handle this?</p>

4

<p>What Kelsmom said is correct (she is a financial aid officer so hers is good advice to follow). Parents of dependent students are expected to be paying for college so that is not reportable for FAFSA.</p>

<p>[Completing</a> the FAFSA 08-09/The Application Questions(42)](<a href=“http://studentaid.ed.gov/students/publications/completing_fafsa/2009_2010/ques3-3.html]Completing”>http://studentaid.ed.gov/students/publications/completing_fafsa/2009_2010/ques3-3.html)</p>

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5

<p>Also, look at the rules regarding deducting interest on college loans. Not deductible if the money is borrowed from parents, or from other relatives.</p>

6

<p>Thanks to all for the information you’ve provided. I believe my questions have been answered.</p>

7

<p>Note: A loan to a child is not an asset you have to report as a parent.</p>