This is episode 27, and today we are talking about How To Keep A Grand Parents Gifts To College Savings From Affecting Your Childs Financial Aid.
If you are lucky, your parents are still around to help guide you through the difficult task of raising children. If you are really lucky, your child has grandparents that like to contribute to their college savings. Problem is, if not planned well, such help could actually hurt your child’s chances at federal aid in the long run. So to make sure that grandma and grandpa’s contributions get the most bang for their buck, here are a few quick tips:
1) Savings bonds are out, & 529 plans are in – While originally the preferred vehicle for grandparents, the savings bond that is given to a child will be assessed heavily when you file the FAFSA. In fact, it is assessed at 20 percent of value. Better to tell grandparents to send the money they were going to give to a designated 529 plan set up in the PARENTS NAME.
2) Keep 529 plans in parents name, never in a grandparents name – the federal government got wise to the fact, that some clever families were putting 529 plans in grandparents names and not the parents to avoid them being assessed. The FAFSA now asks about this, and these plans are assessed at a whipping 50 percent of their value! All it takes is one plan worth $10,000 to kill any chances junior might have had at getting a Pell grant.
3) Never give a child money directly – Any reported income to a child is assessed at a higher rate than it is for a parent when filing the FAFSA. To avoid a penalty, make sure that money for children only go to designated accounts, never to the child. Otherwise, it’s better off if grandparents buy actual gifts for college that junior will need, such as bedding, lifestyle items, or study aids.
Have a problem with financial aid or scholarships? go ahead and send JR a tweet @ CollegeCashMan or call him at 831-275-0182. Thanks for listening to JR’s Two Minute Financial Aid Tips at http://www.collegemoneyman.com
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