We’ve had a family member offer to make payments to the school loan that D will need to take out each year. They cannot commit to a certain amount each month or year but want to help out when and in the amounts they can. They do not want to wait until after she finishes school. I don’t expect they’ll be paying it off each year; if the total loan amount is $5000, I think they might make a couple payments of a $500-$1000 each year to help out. Is there any down-side to this? Fees of any sort? Will the finaid department at the school she chooses decrease her grant $$ if they become aware that the grandparents are helping out? Is there a better way to do it?
There are no fees if any payments are made towards the loan early, so you won’t need to worry about that aspect.
If the loans are in the student’s name, these will be considered payments made on her behalf and need to be reported on FAFSA. If the money is given to you, and you make the payments, no problem.
Also, make sure the payments are directed to the unsubsidized loans. You can direct payments wherever you want if the loan in not in default.
Do I understand correctly, have the monies given to me and make the payment myself rather than have them pay it directly? The loans will be in her name, not mine. Where are loan payments reported on FAFSA please?
NEPats. There is a line on the FAFSA for “money paid on your behalf” in the student section. If the loans are in the student name, and someone else pays them…that is money being paid on behalf of the student. The amount would go there on next year’s FAFSA.
BUT if the relative gives you the money, and you pay…then this won’t be on the student FAFSA at all.
Thank you for explaining. I appreciate it. Can I also assume there is no way for a finaid dept to know when/how/where loans are being paid? I don’t know if it would even matter but I don’t want to take any chances with our grant $$.
You are correct NEPats, the financial aid office will have no clue when/how/where the loans are being paid.