<p>Hello,</p>
<p>I have been searching on the archives but haven’t found a clear answer for this yet.</p>
<p>If a grandparent or other relative want to help with the cost of college, what is the best way to do this from a financial aid perspective?</p>
<p>Option #1 -
Make payment directly to school? Do this count as income for next years financial aid?</p>
<p>Option #2 - Wait until after the student is done with school and pay off a part of the loan at that time so it doesn’t affect them during the school years?</p>
<p>I assume that both of these are better options than giving the money directly to the student or parent because it would be counted as income or an asset?</p>
<p>This money is NOT in a 529, but could be put there if there is an advantage. School is coming in a couple of years so not a lot of time for the money to grow tax free.</p>
<p>Thanks,</p>
<p>djd</p>
<p>Djd, I am not a money-savvy person, so I am no authority on this, but I have been doing as much reading as I can get my hands on about it. First, I would say, if you child would be otherwise eligible for financial aid (I’m talking about needs-based aid here, not merit-based) then I would say do NOT have the grandparents put the money into a 529. Although it would not need to be reported on the FAFSA form, it would need to be on the CSS Profile – which if your child goes almost anywhere other than a state school (and even some of them) you will have to submit the Profile. The money in the account then would offset other institutional aid available to the student and it won’t lower your expected contribution anyway. Also, the rules around disbursements are tricky and confusing when the account is not held by the parents. It could confuse your child’s aid eligibility and their “income” levels for the following year.</p>
<p>Since it’s not already in a 529 the advice I have found in books and online, and heard directly from the college advisor at the high school, is for the student to go ahead and take out what loans they need to to cover costs, and have the grandparents hold on to the money and gift it to student to pay back their loans when they are finished with school. The gift may be taxed (if it’s over the allowable amount) but at the student’s tax rate which will probably be low.</p>