Education Financing Flashcards
List benefits of federal education loans within the context of a client’s overall financial plan.
High return on investment in human capital
Potential low-interest debt
Potential tax benefits
Some corporations may pay debt as an employee benefit
Repayment flexibility
Potential loan forgiveness
Name the four characteristics of a government education loan.
Greater repayment flexibility
Potential loan forgiveness
Lower fees
Lower interest rates (usually)
What two factors determine the actual loan amount a student is eligible to receive each academic year based on the school’s figure for the cost of attendance?
The student’s year in school
Whether the student is considered a dependent or independent student
Identify the U.S. Department of Education’s four income-driven repayment plans.
Revised Pay As You Earn Repayment Plan (REPAYE Plan)
Pay As You Earn Repayment Plan (PAYE Plan)
Income-Based Repayment Plan (IBR Plan)
Income-Contingent Repayment Plan (ICR Plan)
What is the formula to determine financial need?
Financial need = Cost of Attendance (COA) − Expected Family Contribution (EFC)
What is the risk involved with a cash-value life insurance loan.
Loans against policies reduce available death benefit; loans are treated as taxable income if policy lapses or is surrendered, to the extent of gain in policy.
Identify the strategies typically used for financing education.
Government loans (Direct/Stafford Loans, PLUS Loans, Perkins Loans) and grants 529 plans Private and bank loans Personal and family loans Retirement plan loans Cash-value life insurance loans
What strategies may be employed to reduce income during the years that impact FAFSA?
Delay income if possible (delay bonuses; take unpaid leave of absence).
Avoid incurring capital gains. If necessary, perform before FAFSA is relevant or after it is no longer needed.
Harvest capital losses.
