Re: college costs

[Flora <http://profiles.yahoo.com/flora>]

Could you gift them during their college senior year and subsequent years until 
their student loans are paid off?

On Jun 8, 2014, at 10:27 PM, ", Flora" <http://www.state.vt.us/~Flora.> wrote:

> Loan or gift? The annual exclusion for gifts remains at $14,000 for 2014 
> according to the IRS.gov website. This would mean that you and Noelle could "
> gift" me up to $28,000. (As well, you could "gift" Tim up to $28,000.) 
> 
> I take back what I said earlier - upon further research, lending directly to 
> the student is reported on the FAFSA. It is considered "cash support". I was 
> looking at the application itself when I responded in my previous email.
> https://studentaid.ed.gov/sites/default/files/2014-15-fafsa.pdf 
> 
> "The student reports any cash support he received, but if dependent he does 
> not count his parentsâ?? support, with one exception: money from a 
> non-custodial parent that is not part of a legal child support agreement is 
> untaxed income to the student. Cash support includes money, gifts, and loans, 
> plus housing, food, clothing, car payments or expenses, medical and dental 
> care, college costs, and money paid to someone else on his behalf." 
> 
> "...a possible workaround is for the grandparent or other third party to give 
> the money to the parents, who can then use to the money to pay the college 
> bills without having to report it as cash support on the FAFSA."
> 
> http://www.fastweb.com/financial-aid/articles/3673-paying-the-college-directly-to-avoid-gift-taxes?page=2
> 
> I did go back and read the Application and Verification Guide for 2013/2014 "
> j. Money received" on page AVG-19. 
> http://www.ifap.ed.gov/fsahandbook/attachments/1314AVG.pdf
> 
> Again, gift or loan? What are the expectations?

> Cc: http://www.gmail.com/~flora; Noelle; http://profiles.yahoo.com/flora
> Subject: RE: college costs
> 
> To: ", Flora" <http://www.state.vt.us/~Flora.>
> 
> Wow, awesome work!  This gives us a lot of options.
> 
> Noelle and I will discuss what we can do and how we'll do it.
> 
> Do you have any preferences?
> 
> A direct loan in the form of a gift, either to you (a.k.a. "the parents")
> or to Alexander and Nicholas seems most appealing, because (1) we could
> offer very favorable terms (0.0% interest and a very long term) and (2) it
> wouldn't affect FAFSA.  (In that case, however, there would be a max
> amount of $26,000 per year per person.  That would probably be enough, it
> looks like.)
> 
> The 529 option seems the least appealing to me since someone would be
> paying interest to some faceless entity.
> 
>> From: ", Flora" <http://www.state.vt.us/~Flora.>
>> Date: Sun, 8 Jun 2014 21:02:37 +0000
>> 
>> The Direct Subsidized and Direct Unsubsidized Loans both have an interest 
>> rate
>> of 3.86%, with a 1.072% loan fee.
>> https://studentaid.ed.gov/types/loans/subsidized-unsubsidized#
>> subsidized-vs-unsubsidized
>> 
>> The VSAC loan has an interest rate of 5.85%, with a 0% origination fee - 
>> with
>> excellent credit and if you make make principal & interest payments while
>> enrolled.
>> 
>> http://services.vsac.org/wps/wcm/connect/vsac/vsac/pay+for+college/funding+sources/loans/vsac_pay_fundingsources_loans_vsacfixedrateprivateeducationloanattributes
>> 
>> I don't believe that lending directly to the student would affect the FAFSA. 
>> We
>> must report money received or paid on the studentâ??s behalf on the FAFSA, 
>> but
>> not loans. Since we don't have to report loans on the FAFSA, this would not
>> affect financial aid.
>> 
>> I was looking at "ways your relatives can help that will not have an impact 
>> on
>> the student's financial aid package:"
>> The relative can pay the money to the parents, instead of the student. Gifts 
>> to
>> the parents of a dependent student are not reported on the FAFSA. This 
>> website
>> states that this is "due to a quirk in the definition of untaxed income and
>> benefits." A relative can set up a Section 529 College Savings Plan where 
>> they
>> are the account owners and the student is the beneficiary. A gift can be 
>> made
>> to the student after the student graduates.
>> http://www.finaid.org/parents/budgetcutting.phtml
>> 
>> I haven't talked with The Parents about this. They told me to talk directly
>> with you.
>> 

>> 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: 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 Xanderâ??s financial aid. They responded with, â??It may.â?
>>> ? 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.
> 
> --
> http://dummy.us.eu.org/robert
> http://www.
> our-San-Jose-phone-number
>