RE: college costs

[Robert <http://dummy.us.eu.org/robert>]

 > From: ", Flora" <http://www.state.vt.us/~Flora.>
 > Date: Sat, 7 Jun 2014 00:27:22 +0000
 >
 > Sorry it has taken me so long to respond. There is a lot going on right now 
 > with work, Tim having guard duty, me having to get Holly on the bus in the 
 > morning (going to work late and getting home late), and all of Holly's 
 > activities. 
 > 
 > I hadn't thought much of the tax issue until you brought it up. 
 > 
 > On the IRS website, the tuition you pay for someone is not a taxable gift.
 > 
 > http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes#1

Right.  That's for pure gifts (i.e., not an explicit nor implied loan).
Also, apparently, the payment has to be made directly to the college or
university with no intermediary.

 > I've learned that the 529 doesn't really work for paying back student loans.

OK.

 > Both Nick and Xander each qualify for the below loans: 
 > Direct Subsidized Stafford Loan 3,500.00 (for the 2014/2015 school year)
 > Direct Unsubsidized Stafford Loan 2,000.00 (for the 2014/2015 school year)
 > 
 > In addition I was looking at The Vermont Advantage Student Loan:
 > 
 > http://services.vsac.org/wps/wcm/connect/vsac/vsac/pay+for+college/funding+sources/loans/vsac_pay_fundingsources_loans_vsacfixedrateprivateeducationloanattributes
 > 
 > Also, I called UMASS Amherst Financial Aid office regarding whether a higher 
 > EFC would affect Xander?s financial aid. They responded with, ?It may.? That 
 > was the only answer that they would give me. They said that we would need to 
 > fill out the fafsa again in January and it would be determined after that. 
 > Although, the financial award letters that we received for both kids said that 
 > the awards are renewable for four years. Our EFC would increase if our income 
 > increases, as well as if money is received or paid on behalf of a student.

OK.  That's a very strange feedback loop.

Do you have any ideas about what interest rate you're looking forward to
if (when?) you take out a student loan?

 > Also, I was told that bills are due August 10th at UMASS Amherst. I asked how 
 > Xander can become a MA resident. It doesn't look like a possibility. 
 > http://www.umass.edu/dean_students/undergraduateresidency/

Good to know.

 > Do you think that setting up a "pool loan" is the best option? How would it 
 > work? What would the expectations and responsibilities be on all sides?

Actually, I was reading further that, unless there are several parties
contributing, having a "pool loan" is not really better than just a plain
'ol loan.

 > Let me know what you think.

I was also discussing with Noelle the option of max'ing out a non-taxable
gift contribution as "joint givers".  See, for example,
http://www.efile.com/tax/estate-gift-tax/ .  That would effectively allow
us to make a loan of $26,000 per year.

And, now that I think about it, if loans (in the form of a gift) were made
directly to Alex and Nicholas, it could be to up $26,000 for each.  The
terms of the loan could be made very flexible, then, since these would be
"gifts" and the IRS doesn't have to be involved at all.

Do you know how lending directly to the students would affect fafsa grants
and loans?  (That seems a bit murky right now.)

Have you talked with The Parents about this?  Just curious.

 > Cc: http://www.gmail.com/~flora; Noelle; http://profiles.yahoo.com/flora
 > Subject: RE: college costs
 > 
 > To: ", Flora" <http://www.state.vt.us/~Flora.>
 > 
 >  > From: ", Flora" <http://www.state.vt.us/~Flora.>
 >  > Date: Sun, 1 Jun 2014 17:23:55 +0000
 >  >
 >  > What about opening a 529 plan? I'm not sure exactly how it would work, but 
 >  > you
 >  > could open one for each Nick and Xander as a beneficiary. It could then be 
 >  > used
 >  > to help pay for their college when they graduate.
 > 
 > According to
 > 
 >  http://en.wikipedia.org/wiki/529_plan#Gift_tax_considerations ,
 > 
 > it looks like it would be subject to the same tax restrictions as a
 > "gift", unless Alex and/or Nick were attending the college in Ca.
 > That would, then, limit the loan to $14,000/year.
 > 
 > The alternative would be to set up a "pool loan", as I said before:
 > 
 >  
 >  http://www.thefiscaltimes.com/Articles/2013/07/16/How-A-Family-Loan-Pool-Helps-With-College-Costs
 >  
 > 
 > In that case, there's essentially a 1.4% premium (which is a lot less than
 > taxing the full amount).  (1.4% is the inflation rate; the interest is
 > essentially pegged to the inflation rate.)
 > 
 > Does my analysis seem correct to you?
 > 
 > What do you think?
 > 
 >  > https://www.nysaves.org/content/home.html
 >  >
 >  > https://www.scholarshare.com/
 >  >

 >  > Cc: http://www.gmail.com/~flora; Noelle; http://profiles.yahoo.com/flora
 >  > Subject: RE: college costs
 >  >
 >  > To: ", Flora" <http://www.state.vt.us/~Flora.>
 >  >
 >  > I tried a cursory search on the web to see if there were tools, but I
 >  > didn't see anything like this.
 >  >
 >  > But, like my other email said, getting "outside help" from family members
 >  > can complicate matters.