Impact on financial aid of paying net cost with gift money

[TracyBeth]

Hi, I am hoping someone knows what if any impact there might be on future financial aid if we pay the net cost without getting a parent plus or other loan. My son's grandfather wants to help with that but we don't want it to reduce the amount of financial aid he will get in future years.

[dcandmc]

How many years until your son starts college? At least for need-based financial aid determined by FAFSA, the rules are changing significantly starting with the 2023-2024 academic year. Money provided for education expenses by those other than the student's parents will no longer be reported on FAFSA as untaxed student income. Schools that rely on other reporting formats (like the CSS Profile form) for need-based aid determinations may continue to ask for reporting of gifts like this. So, the short and unhelpful answer is: it depends.

[TracyBeth]

He starts in the fall. And he will be attending a private college that relies on additional information beyond the FAFSA.

[dcandmc]

In that case, with prior-prior reporting, if the grandfather waits until January of your son's sophomore year to provide a gift for educational expenses, none of it will be reported on a financial aid form before your son graduates, assuming he completes his degree requirements in the course of four normal academic years. In other words, if the first gift is made in January 2023, it would need to be reported on financial aid forms for the 2025-2026 academic year, but if your son graduates in four years he will be done after the spring 2025 semester.