FAFSA--Do I report loan assistance
February 19, 2015 11:39 AM Subscribe
Parents helped pay off a student loan this past year. Does this need to be reported on a student's FAFSA?
Two scenarios:
1) Parent "A" takes on a student's monthly loan payment and pays off the minimum balance each month.
2) Parent "B" pays a one-time lump sum of money to pay off a different student loan.
One of the parents is the co-signer on the loans.
Do either of these things need to be reported on the FAFSA? It is possible that Parent A will continue to pay the minimum balance for the surviving loan throughout the next school year; Parent B will no longer be providing any financial assistance.
Two scenarios:
1) Parent "A" takes on a student's monthly loan payment and pays off the minimum balance each month.
2) Parent "B" pays a one-time lump sum of money to pay off a different student loan.
One of the parents is the co-signer on the loans.
Do either of these things need to be reported on the FAFSA? It is possible that Parent A will continue to pay the minimum balance for the surviving loan throughout the next school year; Parent B will no longer be providing any financial assistance.
FYI regarding the gift tax: the yearly exclusion is 14K, but this doesn't mean (as many assume) that gift taxes are due to the party giving gifts in excess of that limit. Rather, what that means is that if someone gifts you more than 14K in a calendar year, they have to file a Form 709 and report the gifts, but they almost certainly will not have to pay gift taxes. The gift tax doesn't actually kick in until the lifetime limit is reached, which is around 5.3M, I think. Can't comment on the FAFSA, though -- just trying to preempt an all-too-common misconception. There are also additional rules regarding gifts related to educational expenses which in some cases makes them exempt from that annual exclusion.
posted by un petit cadeau at 12:30 PM on February 19, 2015 [1 favorite]
posted by un petit cadeau at 12:30 PM on February 19, 2015 [1 favorite]
Step 2, Question 45j says:
Money received, or paid on your behalf (e.g., bills), not reported elsewhere on this form
This does not include any payments/gifts from parents whose information will be reported on the form.
So, if the parents are included on the FAFSA (student is under 24, etc.), then it doesn't need to be included. If the parents aren't included on the FAFSA, then it may be includable. There is the argument that because the parent is the cosigner, they aren't paying the student's bills but rather their own. I don't think that's an unreasonable position to take, but different people may disagree.
posted by melissasaurus at 1:38 PM on February 19, 2015
Money received, or paid on your behalf (e.g., bills), not reported elsewhere on this form
This does not include any payments/gifts from parents whose information will be reported on the form.
So, if the parents are included on the FAFSA (student is under 24, etc.), then it doesn't need to be included. If the parents aren't included on the FAFSA, then it may be includable. There is the argument that because the parent is the cosigner, they aren't paying the student's bills but rather their own. I don't think that's an unreasonable position to take, but different people may disagree.
posted by melissasaurus at 1:38 PM on February 19, 2015
rockindata was probably assuming that a gift was made from Mom and Dad to Son, which could be up to $28,000 without any tax form having to be filed.
posted by yclipse at 3:49 AM on February 20, 2015
posted by yclipse at 3:49 AM on February 20, 2015
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posted by rockindata at 12:17 PM on February 19, 2015