<p>So my fiance will be attending a private college for their PA program. With tuition in the 50k+ range we were worried about paying the tuition each semester just so that she would be able to attend. The school made her sign a contract for her to not work during the program making the budget even tighter. Her mother however came up with an idea of contacting her Uncle to help pay for school.</p>
<pre><code> After putting together the cost of living expenses and tuition we feel we have a pretty close idea of how much we need for each year. When we asked her Uncle he was more than happy to assist her in paying for school.
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<p>She will need about 35000$ in tuition assistance a year and about 9000$ in living expenses per year for a total of 44000$.</p>
<pre><code> Now for the actual questions...
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<p>1) Should we have her uncle "gift" the living expenses to her tax free each year?
2) Should her uncle pay the tuition bill directly or give her the money for the tuition as a loan and have her pay the tuition?
3) Should her Uncle give the money to her in "installments" and give a bit each time tuition is due each of the trimesters?
4) If her Uncle does loan her the money what interest rate should he be giving her?
5) Should we just go see a financial advisor?
6) If she receives the full amount from her Uncle as a loan will she have to report that on next years FAFSA as income and therefore probably lose her FAFSA loan?</p>
<p>Any help will be greatly appreciated since this is the place to find people who have real life experience in these kinds of situations.</p>
<p>I, too, would have it written up as a loan as Mom2collegekids has suggested, and make sure the paperwork is completed, and signed/notarized with a fair interest rate (neglible in this climate) assessed and paid each year. </p>
<p>No that is not something that needs to be reported for income tax filing. There are gift tax issues that the UNCLE, not the recipient may have to deal with, but with the way they are, the chances of running afoul on that are minor. Uncle’s accountant should be apprised and should advise.</p>
<p>Does the uncle want the money back? If he doesn’t, I think it’s best for him to pay the tuition directly to the school. That way, it doesn’t affect limitations on gifts or inheritance. (Tuition is not subject to gift tax if paid to the school.)</p>
<p>Anyone who is attending a participating school who hasnt already maxed out their loans will be eligible to take out a Stafford loan.
She will not qualify for a subsidized loan, but she can still get a loan.
She also can earn $2,000-$3,000 summers.</p>
<p>4kidsdad and emeraldkity4: it is fairly typical for PA schools to forbid the graduate phase students (years 4 and 5) from having an outside job. Classes in the 4th year often run 10 hours per day, and clinical rotations during the 5th are 40+ per week. The summers between years three and four, and four and five are not vacation time, but school time. Study time is needed on top of those hours, so the students are pretty maxed out.</p>
<p>That makes earning your own way through PA school very difficult, unless you enter the graduate phase after working (and saving) for several years in a medical field.</p>
<p>: it is fairly typical for PA schools to forbid the graduate phase students (years 4 and 5) from having an outside job</p>
<p>I havent researched them myself, the kids we knew in a PA program already had an undergrad degree and one was working as an EMT, the other was a paramedic.
I realize post grad programs may be year round- but was not aware that undergrad programs were- how interesting!</p>
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<li>If Uncle gifts the money to her, yes, it is reportable on FAFSA and PROFILE</li>
<li> Both giving the money directly to the school or giving it to her to pay the school makes the the amounts reportable for financial aid.
3.It’s up to Uncle how he wants to do, but it should be set up as a loan with proper documentation and interest payable. How much he gives, when, does not matter as long as it’s on time for the bill to be paid.</li>
<li>Interest rate should be Prime plus one. Really 3.75% woud be good, as it is the STafford subsidized loan.</li>
<li> Should talk to his accountant. Be aware not all financial advisors know the intricacies of FAFSA and college aid, but will know Uncle’s situation.</li>
<li>No. Loans don’t have to be reported which is the whole point of doing this up as a loan rather than have Uncle pay her or the school.</li>
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<p>There are certain programs that forbid part timers. They do not want to hear that a student has job obligations, so they will not accept anyone working part time even. My son’s SO had that issue as a definite impediment for the programs she wanted. The program that accepted her want to see her hours each term and will work with her employer.</p>
<p>If gift tax is a problem for the uncle, can you do a loan that is forgiven at certain rate over time so that it does not go over the limit each year after graduation? BTW, the last year can definitely be a gift directly to the school since you don’t need to file anything after the last year (assuming no grad school).</p>
<p>I find this school issue strange. My older son had to sign paperwork for his PhD program that he wouldn’t work an outside job. However, the PhD is fully funded. I think it’s unfair for a school to put forth this req’t w/o funding the program.</p>
<p>If the uncle does not expect to be paid back, just take the money as a loan with an open payback schedule, zero interest, and have your uncle gift you $12,000 annually, starting after you graduate, until the loan is done. $12,000 is the most you can gift to anyone in one year without incurring taxes.</p>
<p>He should also leave to you a sum equal to the remainder of your debt in the unfortunate event he passes before you pay back him/his-estate.</p>
<p>If the OP is selected for an audit, things have to check out. A loan is often not considered a loan if there are not clear terms of repayment,market rate of interest or other reasonable measure charged, and all of this documented. If you are going to go through all of this, you should do it completely legitimately, because otherwise it could be deemed a gift rather than a loan. There are stipulations on all of this. </p>
<p>Estate taxes are usually not an issue unless much larger sums are in play. the $12K a year per person to exempt from gift tax is the easy way out, but going by the letter of the law, it is highly likely the whole kit and kaboodle will be fine in terms of lifetime gift taxes without having to be stuck with that. The uncle’s accountant, however, should be involved in all of this as he would know best how all of those types of tax implications can come into play and the ramifications of them. </p>
<p>So do have a legitimate interest rate, and also do the right thing and pay the interest, at least , of the loan each year. It can make a big difference if an audit comes around. It’s nice to have every i dotted and t crossed. We are talking the federal government here, so it would be wise to have everything in order. I feel that the OP and others like him/her are fortunate to have this loophole, so don’t make a mockery of it and do due diligence.</p>
<p>Mom2collegekids, some of these programs require an extensive amount of field work making it virtually impossible to work. My friend’s DD is in a grad program that gives zero in stipends, and she works close to a 40 hour week, really more since her work location is over an hour away. No real choice as to where she gets assigned either. There is no way she could have anything but the most flexible of jobs, and even then, that would be a tough go. These programs are very competitive and they only want the students that they know will be likely to complete them, and having an outside job simply does not leave the hours the program needs. </p>
<p>My son’s SO’s place of work is also a place where such programs require the field work, so she wanted to integrate that into her course work, so she can continue to earn money, take advantage of the tuition reimbursement program there, and continue to get seniority, as it is a prize place for the sort of work she wants to do. And it’s local to the school, so if all the pieces could be put together, it could make the entire situation manageable financially with no loans. But those heading the program were recalcitrant about committing to assigning her to that facility, as they want complete authority as to how they do things and not have a student preassigned as she would have to be if she kept her job there. That they are agreeing is really quite the thing, as they did not have to do so. They had way more students applying than they had seats Other schools just flat out refused. She’s been working on doing this for 3 years now and finally got accepted and the terms in place.</p>
<p>It will be worthwhile since she’ll have a great job and a lot of opportunities at reasonably high pay, including good benefits and opportunities for part time work as well as moving up. She’ll have been at the workplace for 8 years by the time she completes her master’s and that means great benefits and seniority as well as a high prestige place of work.</p>