CFP Education Planning

Question 1

FAFSA

Answer 1

Free Application for Federal Student Aid

Question 2

Students are considered independent if they are

Answer 2

-Over 23
-Married
-Working on a Masters or a Doctorate
-Legal dependents other than a spouse
-Veteran of the US Armed Forces

Question 3

Federal Pell Grant

Answer 3

Strictly needs based

Only students that have not earned a bachelors or professional degree qualify

Question 4

Stafford Loan / Federal Direct Loans

Answer 4

Primary type of financial aid provided by the US Dept of Education

Student loan

6 month grace period after leaving school or falling below PT

Subsidized (paid for while student is in school) NEEDS BASED
Unsubsidized NOT NEEDS BASED

Question 5

Parent Loans for Undergraduate Students (PLUS)

Answer 5

Is a loan for parents to pay for their children’s undergraduate studies

NOT needs based

NOT subsidized

Question 6

Grad PLUS loan (PLUS Direct)

Answer 6

a graduate or professional student enrolled at least half-time

must be in a program leading to degree/certificate

dependent on credit score

begin making pymts 6 months after you graduate

Question 7

Federal Perkins Loan Program

Answer 7

Expired on 9/30/2017

Exceptionally low EFC amounts

Needs Based

Question 8

Campus-Based Financial Aid:
Federal Supplemental Education Opportunity Grant (FSEOG)

Answer 8

Awarded to students with very low EFC

FSEOG is NEEDS based

Question 9

Federal Work Study

Answer 9

On or off campus employment to help pay education expenses

Question 10

Income Based Repayment (IBR)

Answer 10

Monthly student loan repayment of 10-15% of discretionary income with

remaining debt forgiveness after 25 years

Stafford Loans and most other Federal loans are eligible for IBR

PLUS loans are not eligible

Question 11

Pay as You Earn Repayment (PAYE)

Answer 11

Available if the borrower has a high debt-income ratio

monthly payment 10% discretionary

remaining debt forgiveness after 20 years

Only Direct Federal loans and PLUS loans to graduate student are eligible

Question 12

Graduated Repayment

Answer 12

Loan paid over 10 years

Starting off lower than the Standard Repayment Plan

Increase every 2 years

More interest, but advantageous for entry -level job

Question 13

Extended Repayment

Answer 13

Available when the loan balance is over $30,000

Can be either fixed or graduated, are are payable over 25 years

Question 14

Income Contingent Repayment

Answer 14

Similar to Pay As You Earn

Except 20% of discretionary income or payment amount on a fixed payment over 12 years

Loan balances after 25 years will be forgiven

Question 15

Qualified State Tuition Plans

Answer 15

Prepaid tuition

Savings plans (529)

529A ABLE Accounts

Question 16

Coverdell Education Savings Accounts

Answer 16

Asset of the parent

Limited to $2,000 per year / per beneficiary

Phase Out MFJ $190-220K
Phase Out Single $95-110

Grow tax-deferred

Private education OK elementary/secondary

No contributions beyond age 18

Must be used by age 30

Question 17

Roth IRA

Answer 17

Limited to $6,500 per year

Limited to $7,500 if age 50 or over

NOT tax deductible

Grow TAX DEFERRED

59.5 years

Contributions can be withdrawn without tax consequences

Question 18

Series EE Savings Bonds

Answer 18

Sold at face value

$25 minimum purchase

$10,000 annual maximum

Treasury Direct online

Bond slowly increases in value over 30 years based on fixed rate

Redeemable after one year with 3 month interest penalty if redeemed in less than 5 yrs

No FED tax on interest until redeemed

TAX free if redeemed for education

TUITION ONLY

Question 19

Uniform Gift to Minor’s Act

Answer 19

Asset of the CHILD!

Interest/Dividends/Cap Gains –> Kiddie tax

Child < 19, unearned income, parent’s tax brackets

Child > 19, child’s tax bracket (unless student)

Question 20

Prepaid tuition

Answer 20

In-state college at today’s cost

PRO: lock-in

CON: Only earn a return equal to tuition inflation
Scholarship, not use credits
State school only
NO room and board

Question 21

529 Plan

Answer 21

Appreciation is tax-free

$85,000 per year with no gift tax consequences (170k couple)

State income tax deduction

No AGi limits

Can change beneficiary at any time

CON: 10% penalty if not used for qualified education
EXCEPTIONS: death, disability, scholarship for beneficiary

Question 22

Provisions added to 529 plans after SECURE Act

Answer 22

-$10,000 may be distributed to pay student loans
-Qualified distributions can be made for apprenticeships that are registered and certified with the Secretary of Labor

Question 23

529A ABLE Accounts

Answer 23

-Achieving a Better Life Experience

assist persons with disabilities (SS disability or SSI)

Contributions may not exceed $17,000 in total per year

Rollovers from 529 are eligible to be rolled to a 529A

Question 24

UTMA may contain

Answer 24

Real Estate
Stocks
Mutual Funds
Bonds

Question 25

UGMA

Answer 25

Stocks
Mutual Funds
Bonds

Question 26

Student Loan Interest deduction is limited to

Answer 26

Limited to $2,500

Tuition/Room/Board/Supplies

Question 27

Tuition deduction repealed as of

Answer 27

For tax years beginning AFTER 2020

Question 28

Lifetime Learning Credit

Answer 28

20% of up to $10,000 in qualified expenses per year

Max per family is $2,000 per year

Question 29

American Opportunity Credit

Answer 29

2011 and after

100% of the first $2000
25% of the next $2000

For a max of $2500

PER STUDENT

Must be paid DIRECTLY to the university

Question 30

Can someone claim both the AOTC and the LLC for the same child in the same year?

Answer 30

NO

Question 31

Can someone claim both the AOTC or the LLC for the same expense paid by a qualified tuition program?

Answer 31

NO

Question 32

Employee education deductibility

Answer 32

Up to $5,250

Question 33

Both the AOTC and the LLC only qualify if fees are paid

Answer 33

Directly to a University

ROOM AND BOARD DOES NOT COUNT

Question 34

How are distributions for education from an IRA handled?

Answer 34

Taxable

BUT

not subject to 10% penalty