Education Funding

Question 1

What does the EFC formula consider

Answer 1

considers size of the family, number of family members in college at the same time, income, assets, unusual financial burdens such as medical bills and many others.

Question 2

List Financial Aid programs that are need based

Answer 2

-federal pell grants
- SUBSIDIZED Stafford loan ( Fed Direct Loan)
- Federal Perkins Loan
- Federal Supplemental education Opportunity Grant (FSEOG)

Question 3

Financial Aid programs that are Not need based

Answer 3

• UNSUBSIDIZED Stafford Loan
• Parent Loan for Under Grad (PLUS)

Question 4

Education Savings Accounts that are assets of the parent

Answer 4

Prepaid tuition
529
Coverdell
Roth IRA - n/a because FAFSA doesn’t include Retirement accounts
EE savings bond - n/a ^^

Question 5

Education Savings Accounts that are assets of the Child

Answer 5

UTMA

Question 6

Tax advantages of Education Funding & Amounts of advantages

Answer 6

Student loan interest is deductible up to $2,500
Lifetime Learning Credit - $2,000 per family
American Opportunity Tax Credit - $2,500 per student

Question 7

Important considerations of the tax advantages for education funding

Answer 7

• Can claim AOTC and LLC in the same year as 529 is distributed but not for the same expense that the 529 (or qual plan) $ paid for
• Can’t Claim AOTC and LLC on the same child in the same year

Question 8

Rules of the AOTC

Answer 8

-applies to the first 4 years of post-secondary (high school)
- up to $2,500 per Student
- Per student credit is based on the number of dependents on the families tax return
- student activistly has to be paid directly to the university. Qualified expenses do not have to be paid directly to the univ.

Question 9

Rules of the Lifetime Learning Credit

Answer 9

• Up to $2,000 PER FAMILY per year
• Can be claimed for an unlimited # of years
• Paid directly to the eligible institution

Question 10

How much can your employer pay for or reimburse you with out it being included in your income

Answer 10

• Up to $5,250

Question 11

Prepaid Tuition - Benefit & Limit per year

Answer 11

• Pay for college credit in today’s dollar
• None

Question 12

529 Plan - Benefit & Limit per year

Answer 12

• Tax free if used for qualified education expenses
• State Dependent

Question 13

Coverdell ESA - Benefit & Limit per year

Answer 13

• Tax-free growth if used for qualified education expenses
• $2,000

Question 14

Roth IRA - Benefit & Limit per year

Answer 14

• No 10% penalty if used for qualified education expense
• $6,500

Question 15

EE Bond - Benefit & Limit per year

Answer 15

• Interest excluded from income if used for qualified education expenses
• None

Question 16

Student Loan Interest Deduction - Benefit & Limit per year

Answer 16

-Deduct student loan interest before AGI
- $2,500

Question 17

Lifetime Learning Credit - Benefit & Limit per year

Answer 17

• 20% tax credit on $10,000 of education expenses
• $2,000

Question 18

American Opportunity Tax Credit - Benefit & Limit per year

Answer 18

• 100% of first $2,000 and 25% of second $2,000 in expense – Applies to first four years.
• $2,500