Re: college costs

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

Noelle has some ideas.  I guess she's actually saving much more than me at
the moment.

I'll let her chime in.

 > From: Flora  <http://profiles.yahoo.com/flora>
 > Date: Mon, 9 Jun 2014 05:27:40 -0400
 >
 > 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
 > > 
 > > 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.