What is the best way to give grandkids $ of future education?

[Dash man]

Suppose the student takes loans to finance their education. Then, after the student graduates, the grandparents pay off the loan. Is that taxable income to the student? If not, that sounds like the best plan.

No, that’s what we did with one son. He needed incentives to graduate.

 

[Bigdawg]

Suppose the student takes loans to finance their education. Then, after the student graduates, the grandparents pay off the loan. Is that taxable income to the student? If not, that sounds like the best plan.

I like this idea along with Koolau's. We will help pay (after the fact) any good debt for quality BA/BS, MBA, etc...

We started gift trust accounts for our kids (UTMA's??) when they were little @ $50/month that they could use at age 21. Kid #1 used our GI Bill for awhile then dropped out and turned 21 while in boot camp. When he got out he blew 80% of the fund (maybe 25K) on Vegas, etc... Our DD used our GI Bill for school and has not touched her trust money. That money has almost doubled for her in 4.5 years since her 21st birthday. She has began converting it to ROTH and doing well. DS does not regret blowing most of his. He thoroughly enjoyed the experiences. He is doing very well career wise and investment wise now.

 

[rk911]

...When the kids/parents/grand parents find out a major in Theater Studies qualifies the kid to apply for 5 positions out of 200 similar graduates - or to drive a cab, it's too late...

or, as Dave Ramsey likes to say..."German Polka History". i like your approach. we have no kids ourselves but my nephew just got married so...

 

[Rambler]

for grandkids, i would suggest helping them pay off student loans after they get a "good" education. Since it's my money, i get to decide what "good" means. If their major includes the word "studies" in it, they're on their own. If their major implies a c*reer path within it (engineering, biology, chemistry, education, etc. Etc.) then i'm all in - if they graduate and get a j*b.

Once they go through the fafsa process and pick a "reasonable" school and see how much they have to borrow, hopefully they will base at least some of their decisions on what their education will actually cost (someone.) if they are unaware that grams and gramps might be willing to kick in at some point, they be a bit less free with someone else's money.

I've known too many families who more or less let their kids pick a school and a major that sounded "cool" and then were willing to pay for the kid's expenses. When the kids/parents/grand parents find out a major in theater studies qualifies the kid to apply for 5 positions out of 200 similar graduates - or to drive a cab, it's too late. I think kids should be on the hook for as much as possible and w*rk as much as possible so they will appreciate their education. Then old grams and gramps can step in and help save the day when the kids are getting started in the real world.

Just my opinion and i'm sure i'm a minority opinion on this subject. By the way, that's how we did it with our kids. It was rather successful if i say so myself. The kids are successful and had relatively little debt for us to help them pay. Ymmv

exactly!

 

[RetireeRobert]

For grandkids, I would suggest helping them pay off student loans AFTER they get a "good" education. Since it's my money, I get to decide what "good" means. If their major includes the word "studies" in it, they're on their own. If their major implies a c*reer path within it (engineering, biology, chemistry, education, etc. etc.) then I'm all in - if they graduate and get a j*b.

Once they go through the FAFSA process and pick a "reasonable" school and see how much they have to borrow, hopefully they will base at least some of their decisions on what their education will actually cost (someone.) If they are unaware that Grams and Gramps MIGHT be willing to kick in at some point, they be a bit less free with someone else's money...........


Just my opinion and I'm sure I'm a minority opinion on this subject. B

Actually, that is darn good advice. Wish i had thought of it.

 

[misanman]

I would suggest helping them pay off student loans AFTER they get a "good" education.

Or lobby for the government to forgive them.

 

[SecondCor521]

I believe that can be avoided by simply paying the school directly.

Nope. Paying the school directly avoids gift and estate taxes, but doesn't avoid FAFSA impact. At least for now.

The "FAFSA Simplification Act" was enacted into law as part of the CAA (Consolidated Appropriations Act). The FAFSA Simplification Act reworks a great deal of the FAFSA landscape. It takes effect with the 2023/2024 aid year. Note that due to prior-prior rules, this means that 2021 tax returns are the first tax returns that will be involved in the new process.

 

[SecondCor521]

Note that one advantage of a UTMA is that you can transfer assets (not just cash) to the UTMA, and possibly take advantage of "tax gain harvesting". (This is taking capital gains in the account each year up to the top of the child's 0% bracket).

[...]

Unfortunately, that amount given WILL raise the student's EFC amount by 50% of the gift.

Removed some stuff [...].

When tax gain harvesting inside a kid's UTMA, be aware of the so-called "Kiddie Tax". Roughly speaking, any unearned income above $2,200 is taxed at the parent's rate.

Thanks for the second part. I was considering that as a strategy and hadn't included the 50% FAFSA haircut in my notes. Now I have.

 

[MarieIG]

Not going to do 529s.

I will cross that bridge when I get there, if I am still around. Providing for my spouse and our retirements are my first priorities.

None of my kiddos had to take out a loan for school. We paid for HS; and for college for anyone who wanted to go (with the exception of son #5 who was covered via the military).

If my grandchildren have a decent major and are doing well in school; (pending a discussion with DH - and meeting other obligations ) I would be open to assist.