College 529 plans and tuition (rent, student loan, how much)

[ACWhite]

Hi everyone,

I am willing to do whatever web research is needed, but thought I would start here to see if anyone has advice to offer. I have a relative (not my child) who will be transferring to a Virginia university in January and I would like to help with tuition. I've heard about 529 plans but don't know much about them, and don't know if there is a version that would help here.

I want to help him avoid having to take out as much in loans but don't want to jeopardize any eligibility that he might have for student aid.

Anyone have a similar experience?

[ChristineVA]

529 plans are not for those just starting to attend college. The need to be purchased early. The last shot at making them somewhat worth it is the middle school years.

At this point, you could just offer to pay when his tuition bill comes in.

I just paid my daughter's bill today online so I think they are just now coming out. Or you could help him pay his rent/boarding/books.

[ACWhite]

Thanks, Christine. Anyone know about the financial aid angle?

[marie5v]

How much exactly did you want to help out? Tuition is one thing - room and board is a whole other thing. You could, say, pay rent or utilities, books, etc. There are so many expenses. As for financial aid, I don't see how it could make a difference if he doesn't put it down on his aid application.

[ACWhite]

Thanks, Marie. He is going to live with another relative, so he asked for tuition help when I asked him what would help--the amount I want to keep private for now. But I would obviously be open to structuring whatever ultimately is done in a way that works best.

We don't want to lie on applications, so I was wondering if anyone with experience with financial aid knew how help from a non-parent relative on tuition would affect eligibility for work-study, grants, loans, scholarships, or other potential financial aid for which he might otherwise qualify. Also, it's my understanding that at least some of these programs consider all the expenses (rent, books, etc.) when calculating need, and if that's true, then helping with these other expenses would be seen the same as helping with tuition. But not having experience with this kind of thing, I can definitely use help from those who have recently been through it, if anyone has.

[shamrock847]

Regarding financial aid eligibility, it really depends on the school. Some want to know about any support from any source, some only consider help from parents, and others are in between. In many cases, outside support from anywhere will reduce eligibility for need based scholarships (to maximize the funds available for the most needy students), but not impact loan eligibility or merit based scholarships. In general, the trend has been towards schools taking a broader look at support from all sources when making need based scholarship/grant decisions.

Eligibility for certain types of federal aid often has different rules than the rules individual schools have for administering aid from their own endowments or other sources. There is really no one size fits all answer.

[shamrock847]

One way to get around it would be for the student to take out loans and then for you to pay them off when they graduate. That also has the advantage of forcing them to have "skin in the game."

[ACWhite]

Thanks, Shamrock. Couldn't "rep" you because I have to spread more around first.

[ChristineVA]

Here's my limited experience with financial aid.

The student and/or parent fills out the FAFSA in January-March timeframe. Financial aid is determined by what is filled out on the form--most specifically it would be the parents' income as reported to the IRS plus other assets. Nowhere on the form do I remember a block stating "is Aunt Bea contributing any money to your tuition?"

His financial aid package has most likely already been offerered. We got our offer several months ago. If my DD's grandparents wanted to throw some money her way, it would not matter one iota.

So don't worry about that. The student accepts the financial aid and they are usually given a check to deposit. From that, they pay their tuition bill and rent/books and other expenses. My coworker's kids buy EVERYTHING with financial aid and they have to make it last through the year to pay their rent.

Find out what the aid is covering and you can make up the difference. If he's already accepted the full amount of his student loan, that money will be coming to him very soon.

Edited to add: He can accept it for less. So if they offer him $10,000 and he knows you are going to give him $5,000, he can just accept $5,000 from the financial aid offer.

[ACWhite]

thanks