Education Planning Flashcards
What is financial aid and limits
used to calculate expected family contribution.
Limits:
- over 23 yrs, married, working on MA or PHD, if has legal dependents other than spouse, veteran
EQ for expected family contribution
tuition/cost - expected = financial need
What are the Financial Aid Programs and their description
- Federal Pell Grant: need based, only for those not with professional or bachelors
- Stafford Loan- student loans, repay after 6mo post grad or below PT (6 hours)
a. Subsidized - need based, int paid by federal gov
b. Unsubsidized - interest. accrue when disbursed - Parent PLUS loans- depends on credit score
- Grad PLUS loan- graduate with 1/2 time eligible, used student credit score, can pay as you go or after 6mo post grad
- Federal Perkins - expired 9/2017, need based for exceptionally low EFC
What are campus financial aids and description
- Federal Supplemental Education opportunity Grant (FSEOG)- award to low EFC
- Federal Work Study- on or off campus employment to pay expenses
What are the different types of repayment
- Income Based- monthly 10-15% payment, debt forgiveness after 25 years, recalculated every year, parent PLUS not eligible
- Pay as you Earn- if borrower has high debt to income ratio, monthly 10%, debt forgiveness 10 yr, parent PLUS not eligible
- Revised Pay as you Earn - only direct Stafford and student PLUS, 10% income payment, forgive 20 years
- Graduated Repayment- paid over 20 years starting lower payment and increases every 2 years, great for those entering workforce
- extended repayment- available when loan balance over 30k
- Income Contingent- 20% of income payment for 12 years, forgive 25 years
What are the tax advantaged plans for Educational Savings and their advantage and disadvantage
- Prepaid Tuition
advantage: lock in tuition cost today
disadvantage - only earn return equal to tuition inflation, child may receive a scholarship - Savings or 529 Plan- parent asset, appreciation tax free, contribute 16k year or 5 yr (80k)
Advan: no AGI phaseout, removes asset from gross estate, possible state tax deduction if same state school
disavan: beginning 2018, 10k can be removed for schools, 2020-10k can be used to pay student loans - 529 ABLE acts - assist person with disability, can only have 1 act per person, beneficiary must have SSI or liability cert with IRS, 16k year contribution, not counted as income is <100k
- Coverdell Education Savings- parent asset, 2k per year contribution
Advantage: contributions tax deferred, can be used for private elementary and 2nd education
Disadvantage: AGI Phaseout MFJ (190k-220k), S (95k-110k), must be used by 30. cannot make contributions after age 18. - Roth IRA - 6k year/7k 50yr+
Advantage: grow tax deferred and qualified distributions not included in gross income
disadvantage: not tax deductible, RULES: 5 year holding AND:
- death, disability, 59 1/2, first time home purchase (10k limit) - Series EE Bonds- sold face value $25 min (10k MAX)
- non marketable, nontransferable, doesn’t pay interest
- can redeem after 1 yr with penalty under 5 yr with interest subject to federal tax unless qualified education expenses. - Uniform Gift/Transfer to Minor Act- asset of child, taxed unearned income may be subject to kiddie tax, if <19 unearned income will be taxed in parent bracket
What are the tax advanatages
$2500 income tax deduction for interest
Lifetime Learning Credit - 20% up to 10k(2k may per family)
American Opportunity (4 years)- 100% first 2k, 25% second 2k (max 2500yr per child)
You (may/maynot) claim AOTC (or/and) LLC in the same year as a 529 distribution but (may/maynot) for the same dollar amount
MAY, OR, NOT
You (may/maynot) claim both AOTC and LLC for the same child in the same year
MAY NOT
You (may/maynot) use AOTC or LLC for the SAME expenses paid by qualified tuition program
MAY NOT
you (may/maynot) use AOTC or LLC same year as distribution from qualified tuition plan just NOT the same expenses
MAY
