Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

ChFC HS 300: Financial Planning: Process and Environment > Ch.7 - Education Planning Applications & Ch.8 - Debt Management Applications > Flashcards

Ch.7 - Education Planning Applications & Ch.8 - Debt Management Applications Flashcards

Previously Module 8

1
Q

College cost have historically risen by a rate higher than the…

A

customer price index.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the 5 inputs needed to calculate College Funding Requirements

A 
– Rate of return on investments
– Education inflation rate (hard to determine)
– Current cost of one year of school
– Duration of college education
– Number of years until matriculation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

This type of investment vehicle it’s considered free from default risk.

A

US Savings bond (Series EE and Series I)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Bonds are tax-free if you redeem them for…

A

Education purposes and you have income below certain threshold.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What type of bond has a fixed interest rate which makes them not as useful when considering inflation?

A

Series EE

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is a Section 529 plan?

A

Education savings funding vehicle that is handled by the state.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Section 529 plans are tax-free if used for…

A

education expenses.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

This investment vehicle is the most attractive too conservative investors since the investment guarantees to pay for tuition.

A

Section 529

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

A Section 529 plan, contributions are allowed regardless of…

A

income.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Are the contributions to a Section 529 plan deducted for federal income tax purposes?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

The rate of return for a Section 529 plan is based on the investments selected by…

A

the account owner.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

This investment vehicle for education allows a limit of $2000 per year and for contributions.

A

Coverdell Education Savings Account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Is there any restrictions as to who can contribute to the Coverdell account?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Who controls the investments and withdrawls with a Coverdell Education Savings Account?

A

The owner of the account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

This educational credit, up to $2,500 is allowed for expenses that you incur for the first four years of post-secondary education.

A

American Opportunity Tax Credit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What educational contributions phase-out after your AGI exceeds a certain level?

A

– Coverdell
– American Opportunity Tax Credit
– Lifetime Learning Credit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

The American Opportunity tax credit is only available for students that are enrolled…

A

at least half-time for one academic period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

This text credit is for expenses incurred for education, for an unlimited number of years, available to any student, with a maximum credit of $2,000.

A

Lifetime Learning Credit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Government provides funds for education through the…

A

Department of Education.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Your ability to receive federal aid depends on 3 things what are they?

A

– Expected Family Contribution (how much your family makes)
– Student aid report
– Cost of attendance (tuition)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Do your grades affect the amount of money you’ll get for financial aid?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What are the four needs-based bonds offered by the government?

A
  1. Federal Pell Grants
  2. Supplemental Educational Opportunity Grants
  3. Federal Perkins Loan
  4. Subsidize Stanford Student Loans
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

This is the primary grant program for undergraduate full-time and part-time students, amount dependent on need.

A

Federal Pell Grants

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

This grant program is administered by the aid office at each school for undergraduate students only with an extreme financial need.
(FSEOG)

A

Federal Supplemental Education Opportunity Grants

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
This type of federal loan program is when the school lends money to a student and the interest accrues after the student leaves the school.
Federal Perkins Loans
26
This type of government loan program must be paid within 10 years and is the major source of education borrowing.
Subsidize Stafford Student Loans
27
What are the 2 types of loans given to students based on a non-needs-basis?
1. Unsubsidized Stafford Student Loans (must be paid within 10 years) 2. Parent Loans for Undergraduate Students (interest starts the day you get the loan)
28
This loan allows you to borrow the entire cost of your education.
PLUS Loan | FKA: Parent Loans for Undergraduate Students
29
This type of loan program allows graduate students to borrow money.
PLUS Loan | FKA: Parent Loans for Undergraduate Students
30
What are some emergencies that can result in a significant reduction any clients net worth?
– Loss of a job | – Expensive repairs to their car, house, etc.
31
What is the best approach for handling emergencies posing a serious loss?
Insurance.
32
How much of a persons take-home pay or total expenses should the emergency fund be worth?
3 to 6 months of your salary
33
What are some things that can influence the size of your emergency fund?
Age Health Financial situation Being self-employed
34
It may be more appropriate to have a smaller emergency fund if...
1. Home equity line of credit or other sources of low-cost funding is available 2. You have multiple sources of income 3. Stable employment or a skill is in constant demand
35
What are some factors that might make a client increase their emergency fund?
``` – Lack of job security – Downsizing at work – Self-employment – Commission-based job – Economic uncertainty ```
36
An emergency fund should consist of investments that are...
liquid (cash, cash equivalents, treasury bills, short-term CDs, money market mutual funds) assets.
37
If you're considering using an investment as an emergency fund, what are some inappropriate investment ideas?
Real estate Equity mutual funds Collectibles
38
What are the sources for an emergency fund?
Savings accounts Home equity line of credit Laddered CDs that are set to mature more periodically
39
The creation of an emergency fund should take precedence over...
Investing | Retirement
40
Including home equity loans, this is the largest component of your debt.
Mortgage debt
41
Two types of consumer debt.
1. non-revolving credit (car, & education loans, vacation cost) 2. revolving credit (credit cards and store credit line)
42
The most common credit score used in over 75% of credit decisions.
FICO score
43
What are the five factors that are included in your credit score?
1. Payment history 2. The amount owed 3. Years of credit history 4. New credit inquiries 5. Type of credit
44
Auto leases are appropriate for people who...
– Don't like negotiating purchase price – Want to reduce monthly payment and down payments – Plan to retain the car for three years or less
45
What is the money factor formula used to determine the lessor's required monthly return?
Interest Rate / 24
46
Leases can either be _____________ or ______________.
closed-end (the dealer absorbs the loss in value) open-end (consumer absorb the loss in value)
47
A home equity loan is similar to a...
second mortgage.
48
The interest rate on a home equity loan is typically _____________ than the rate charged on other types of loans.
Lower
49
Can the interest on a home equity loan and a home equity line of credit be deducted when you do your taxes?
Yes
50
This type of loan offers more flexibility than a home equity loan.
Home Equity Line of Credit
51
Does a home equity line of credit (HELOC) have a fixed interest rate or a variable interest rate?
Variable
52
The downside of having a home equity line of credit?
The borrower may owe more on their house than its value. | A HELOC usually is issued with a card which makes it easier to spend on non-essential items.
53
Chapter 7 bankruptcy
Chapter 7 – liquidation (straight bankruptcy)
54
What type of course is required for someone applying for bankruptcy?
A credit management course
55
How long does a Chapter 7 remain on your credit report?
10 years
56
Who can initiate Chapter 7 bankruptcy?
The person that owes the money or the creditor.
57
Is a bankruptcy estate formed with a Chapter 7 or Chapter 13?
Chapter 7
58
If you file Chapter 7 what type of assets are liquidated?
Non-exempt assets
59
When you file a Chapter 7 bankruptcy, what are some debts that you cannot eliminate?
Taxes Student loans Alimony Debts from fraud/illegal activity
60
Does someone have to have income in order to qualify for Chapter 13 bankruptcy?
Yes
61
Zero Coupon Bond
Poor inflation hedge. Sold at a discount that pays face.
62
A plan that typically allows parents to purchase tuition credits at current price. These do not guarantee admission, but can usually be transferrable.
Prepaid tuition plan
63
What 2 parts make up the Expected Family Contribution for the FAFSA
Expected Parent Contribution | Expected Student Contribution
64
((12% Uninvested Assets + Net Income) * | 47% (max) and 12% (min)) / Number of Kid
Expected Parent Contribution
65
(20% Uninvested Assets + 50% Net Income)
Expected Student Contribution
66
PAYE (Pay As You Earn)
10% Discretionary income, family size considered, balance forgiven after 20 years, spousal income not included if filing separately, limited availability
67
REPAYE (Revised Pay As You Earn)
10% Discretionary income, family size considered, balance forgiven after 20 or 25 years, spousal debt/income included, broad availability
68
What are types of household debt
Mortgage, auto loan, credit cards, student loans
69
5 C's of Credit
Capacity, Capital, Collateral, Conditions, Character
70
What is the formula for a HELOC loan amount
(Appraisal * 80%) - Balance
71
When is Home Equity Loan interest not deductible?
When the sum of interest and mortgage balance exceeds home value or $100K
72
Chapter 13 bankruptcy
Chapter 13 – repayment plan (3 to 5 years), debt limit
73
Chapter 11 bankruptcy
Chapter 11 - reorganization of debts, no debt limit

ChFC HS 300: Financial Planning: Process and Environment (12 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions