Financial Help From Grandparents
Financial Help From Grandparents

Many parents of high school students are losing jobs, going longer than ever before between jobs, or simply unable to find work of any kind in this still very difficult U.S. job market. Financial contributions to college funding from grandparents are now many times a financial necessity rather than just some nice, extra student “spending money” that it once was.

Parents who never thought for years they would want or actually need to apply for financial college aid are now doing just that. Many parents have little or no clue as to how monies from grandparents, both past and present, will affect their bottom-line college expenses.

Many grandparents send their grandchildren generous checks for birthdays, holidays, and even for “good report cards,” instructing both the parents and their grandchildren that this is “money to be used later for college.” These checks tend to become larger in many cases when the children are in high school, with college years approaching sooner. Parents of high school students often are so caught up in their own financial struggles and attempts to save and plan for college that they often just deposit these checks into an account in their child’s name, never thinking of the crucial need for scrutinizing and allocating these funds just as they would their own personal funds they are earmarking for college. With a hefty 20% of the child’s assets counted as resources by colleges, having monies directly in the child’s name is a tremendous disadvantage that will reduce the amount of college financial aid the family is awarded. Armed with knowledge of this common pitfall, parents can move funds that were placed in their children’s names in prior years well in advance.

There is another common gift-giving method (and mistake) many grandparents make once their grandchildren are already enrolled in college. Many grandparents love to write checks directly to their grandchild’s college, feeling very proud and more “in control” of the direct financial assistance they truly want to provide for their grandchildren. Grandparents want to feel loved and needed in their advancing years. Many times as people get older they can experience a form of memory loss. It is important to remind grandparents repeatedly that sending checks directly to the colleges is the wrong way to provide maximum financial assistance. Checks written directly to the college are counted as untaxed income to the child. This can reduce financial aid eligibility by 50 cents on the dollar for the student.

Those grandparents who make those college-intended gift checks payable to the parent’s name are a step closer in the right direction. Even those monies are assessed at 5.65% when applying for college financial aid. However, 123College Advisors can effectively assist in directing families into accounts that provide no assessment of the grandparent gift monies. Thus placing the families in the best possible position to receive the maximum amount of college financial assistance possibly available.

Instead of college planning monies from grandparents being nothing more than a side topic that was often discussed by financial advisors to parents only when questions arose, this topic now is best addressed to all parents of college-bound high school students. In our prevailing economic times, many college students would not be in college at all without the generous financial help provided by their loving grandparents. Perhaps there is no greater thank-you to the grandparents than for these funds to be used to their maximum potential.