Q. In order to help a grandchild with his tuition, the advice I’ve received is to pay the amount directly to the institution, thereby shielding that amount from the parent/child’s assets. Do you agree?
A. Yikes! No! Wait!
We do not agree.
Funds being paid to a college from someone other than the student or their parents are specifically asked for on the Free Application for Federal Student Aid (FAFSA) and are counted as untaxed income, said Steven Sirot, Co-Founder, College Benefits Research Group (CBRG).
Sirot said like student assets, untaxed student income will have a significant impact on the Expected Family Contribution (EFC) calculation.
“It would be preferable for the grandparent to gift the funds directly to the parent, and they can use the funds to pay the college bills if they wish,” Sirot said. “Even though the gifted assets to the parents would still be counted, it would have a much lower impact on the financial aid calculation than if the student had the assets in their name, and most certainly better than the gift being counted as income to the student.”
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