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They do ask about gifts from grandparents and others and they do count untaxed income. As a parent of a current university student, I find the advice given - to give to the parents, or better, to offer to pay off the loans later - to be spot on. Personally, I would tell the student to take out loans, if they finish with a degree, I would pay them off, or agree to pay a certain amount. If they don't finish, they are on their own for the debt. But the way FAFSA has it currently set up, giving them help while they are in college just saves the system money. I'm not against that, but having the student graduate without a crushing debt load is better.

And so this is another reason for the grandparents to pay the college directly. It is not reported on the FAFSA because it was not a gift to the student or the parents.

In reading the discussion, though, I am left wondering if people are thinking that the financial aid received will be grants when in reality, the vast majority of financial aid is loans. And a good portion of those loans are not subsidized, so interest accrues from Day 1. Given that, I'd much prefer to see the number of loans reduced before they start to accrue interest, and if having the grandparents' funds counted reduces those loans, I don't see that as a bad thing since it will save the student all that interest money.

I just finished paying for twins to go to college, so my experience is relatively recent.
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