<p>My youngest brother is graduating in a few weeks from high school. My parents earn aproximately $75,000 combined. He is deffering college to work the next year to save for tuition so he can enroll next year or perhaps during the spring. The issue that I am most concerned about is severe tax debt my Father owes from student loans from the 80’s, yes the 80’s. He has horrific credit and has many many many outstanding creditors, he doesn’t care one bit. My mother has separated herself financially from him for decades. The IRS confiscates whatever tax returns she gets every year to pay my fathers debt, my father will claim a 3 on his W2 and owe more each year. He really doesn’t care and gets alot of his pay garnished. Without going into further detail of my parents finances, how can my brother get this situation factored into his eligibility for financial aid? He has not filed a FAFSA.</p>
<p>In particular the Hope tax grant he is effectively ineligible for, due to whatever tax credits he would earn on the first $4000 of school fees/books would be applied to my fathers very old debts. Now that the credit has been expanded to 4 year that could equate into my brother paying back $10,000 of my fathers IRS debt. Can this type of situation be factored in by an aid administrator? can the IRS be petioned to divert the funds to his school ? Any advice would be appreciated.</p>
<p>I’m not a tax expert…but I would think a couple of things. First, I doubt that your brother will qualify for any federally funded financial aid UNTIL the debt to the government is paid. I also don’t think loans will be available…for obvious reasons…bad credit risk. </p>
<p>I would suggest contacting a tax EXPERT to figure this all out. There must be some way to plan the repayment of this debt other than having wages garnished and tax refunds taken. A repayment plan sounds essential…and running up additional debt sounds like a horribly bad idea.</p>
<p>and running up additional debt sounds like a horribly bad idea.</p>
<p>the old man doesn’t care, he will throw a fit whenever fianances are brought up. He was essentially out of work for a decade, doin odd jobs to get by. He won’t submit to any plan, and even if he did would be 100% unreliable to pay it. He got sued a few years ago, went to court and agreed to pay $500 per month for 3 months for an outstanding bill. Signed paperworked that would effectively triple his debt if he missed a payment, and didn’t pay a dime. That’s just a droplet of the financial disaster he is. The people who created the financial crisis have nothing on him. He could never balance a check book and still can’t. More incompetance than anything he never bought a bunch a stuff beyond his means, just was dead broke and always assumed he would land a good job soon and be able to pay it back, but he never got that good job his poor credit I’m sure played a part in it. </p>
<p>There is a tax plan with the IRS to pay the $50,000 in interest from the 80’s loan, it’s that my mother pays like $50 a month and gets zero tax return. Paying back that debt is irrelevant, having it factored into the EFC for my brother is. Anyways just hoping somebody else has input on " deliquent parents " and the implications for aid.</p>
<p>Unfortunately your brother may need to look at community college or something similar. I’m sure one of the FA officers who sometimes post here will clarify but it is my understanding as thumper1 has said, that you cannot qualify for federal financial aid when you owe the government money. It just doesn’t work that way. Regardless of the relationship between your parents financially or with your brother, your parents are considered responsible custodians in terms of FA.</p>
<p>I’m not 100% sure, and hopefully kelsmom or NikkiL will chime in, but as far as I know, your brother isn’t barred from federal aid due to your father’s debt. Also, IRS debt is not the same as defaulted student loans. It sounds like his wages and refunds were garnished for student loan debt but he also has unpaid taxes. He would not be a candidate for a Plus loan, but the sins of the father shouldn’t affect the son’s access to federal loans as Stafford loans are issued only in the student’s name and no cosignor is needed.</p>
<p>The Hope tax credit cannot be paid to the school. You say that your mom has severed ties financially, but it sounds like she still files a joint return. Your mother may be considered an innocent spouse and, if so, she could file a form 8379 with the IRS to recover the portion of the refund due to her instead of having it all going toward repaying debt. Alternatively, if your brother has been working full-time, he could take the Hope credit on his own return if your parents will not claim him as a dependent. See IRS Pub 970 for details:
[Publication</a> 970 (2008), Tax Benefits for Education](<a href=“http://www.irs.gov/publications/p970/ch02.html#en_US_publink100020810]Publication”>http://www.irs.gov/publications/p970/ch02.html#en_US_publink100020810)</p>