CSS Profile

Q&A: Grandparent’s generosity could affect financial aid

February 9, 2026 By Liz Weston 2 Comments

Dear Liz: You wrote in a recent column that grandparents could pay tuition directly to a school, and it would not trigger a gift tax return. That’s true, but my daughters have told me — and two private, expensive, and not excessively generous universities have verified — that my paying $20,000 in tuition would decrease my grandchildren’s financial aid package by $10,000 to $20,000. I would appreciate your comments.

Answer: How about, “No good deed goes unpunished — at least at private, expensive and not excessively generous universities?”

The vast majority of colleges use the Free Application for Federal Student Aid or FAFSA to determine financial need. The FAFSA was revised a few years ago so that it no longer counts cash gifts from grandparents or other non-custodial relatives. The same is true for withdrawals from 529 college savings plans owned by non-custodial relatives. Before the change, such gifts and withdrawals would be counted as untaxed student income, which had a huge negative effect on financial aid. Now, the money has no impact at all — except at schools that haven’t adopted these changes.

About 200 private colleges and universities use an additional tool, the College Scholarship Service (CSS) Profile, which can still factor in help from grandparents and other relatives. Typically, though, the maximum reduction would be 50%, not dollar for dollar.

Why “Get scholarships!” is bad advice

April 22, 2015 By Liz Weston

We had a great Twitter chat today about preparing financially for college, hosted by Experian. (You’ll find the tweets using #creditchat.)

I was distressed, though, that many believe people should look for scholarships as a way to reduce college costs. That’s not how it usually works.

If you have financial need, colleges typically deduct the amount of so-called “outside” scholarships from the free aid such as grants and their own scholarships that they otherwise would give you. Schools don’t have to reduce the loan portion of your package unless your outside scholarships exceed the grants and other free aid they were planning to bestow.

They’re not just being mean. It’s what federal financial aid rules require, according to FinAid. If you don’t have financial need, outside scholarships could reduce the merit aid a school would otherwise give you.

Does that mean you shouldn’t search and compete for outside scholarships? No. But it’s certainly not a reliable solution to the college affordability problem.

A better approach for students and families is to look for generous schools. Colleges themselves are the greatest source of scholarships, but most don’t meet 100 percent of their students’ financial need. Some meet 70 percent or less. If you want a better deal, look for schools that consistently meet 90 percent or more of their students’ need. College Board and College Data are among the sites that can help you find this information.

What will you pay for college? Probably more than you think

November 18, 2014 By Liz Weston

I recently used the College Board’s “estimated family contribution” calculator to see how much we’ll be expected to pay when our (currently pre-teen) daughter heads off to college.

The answer? Roughly half our annual incomes. Each year.

No colleges actually charge the amount we’d theoretically be expected to pay. So our out-of-pocket costs would be somewhat less. But the exercise drives home how important it is to run these numbers, early and often, if you want a college education for your kids that doesn’t bankrupt you, and them.

Because I know how the formulas work, I was able to tweak some numbers to lower our EFC. Moving more money into retirement accounts and using savings to pay down the mortgage helped a lot with the federal formula, and helped some with the institutional formula (which, unlike the federal, counts home equity). We still wouldn’t get any need-based help from most colleges but could get some breaks if our daughter gets into one of the most-expensive elite schools. (The total cost of the average public college is $20,000 to $25,000; $40,000 for privates and $60,000 for elites.)

If we didn’t have a fat college savings account, we likely would steer our daughter toward public schools or privates willing to offer merit scholarships to reduce the total cost. It’s much better to start a college search knowing what you can afford than to have to tell your kid, dream school acceptance letter in her hand, that you can’t send her there. Or worse, that you will–and then never be able to retire.

For more about how financial aid formulas work, read my Reuters column this week: “A guide to figuring out the real cost of college.”