General Principals - Education Flashcards
Exam Study Tips
Video - What is FASFA?
- Must apply every year
- Two year look back
- Questions an hinge around Federal Aide - PLUS, Pell. Supplemental Education Opportunity Grant, Stamford Loan, and Perkins (no longer offered).
- EFC - Expected Family Contribution - what the government expect the family to pay towards college.
- ESC - Expected Student Contribution counts 20% of assets in the student’s name.
- EPC Expected Parent Contribution counts 5.64% of assets in the parents name. Retirement account balances don’t, but the deferred contributions do.
- Know the education funding sources that are in the parent’s name - 529s, EE Education bonds, Coverdell.
- Know the education funding sources that are in the child’s name like UTMA/UGMA savings
- Grandparents need to be strategic when gifting money to the student. Ex. Money given college freshman year will show up at the students assets when the apply for FASFA again their junior year.
FAFSA (Free Application for Federal Student Aid)
The application used to qualify college students for financial aid
Student Aid Report (SAR)
A report that is sent out by the Department of Education after it processes a free application for student aid (FAFSA). It provides an electronic version of the results for schools listed on the FAFSA. Schools use the SAR’s Expected Family Contribution number to determine if a student will receive federal financial aid.
Federal Pell Grant
A federal grant for undergraduate students who qualify under the needs-analysis formula; available in amounts of up to $6,345 per year (2020-2021)
Expected Family Contribution (EFC)
The total amount that a student and student’s family are expected to contribute annually for college education before becoming eligible for financial aid. The amount is calculated by adding together the expected student contribution (ESC) and the expected parent contribution (EPC).
Federal Supplemental Education Opportunity Grant (FSEOG)
A federal grant program available to students who show exceptional need.
Federal Perkins Loans
Loans for students who show exceptional need. The program is administered by colleges but uses federal funds at low interest rates. Payments can be spread over 10 years after the student leaves school.
Parent Loans for Undergraduate Students (PLUS Loans)
A loan available through the Direct Loan Program and the Family Federal Education Loan Program. This type of loan is not based on need, but the borrower cannot have a bad credit record; it must be repaid within 10 years.
Stafford Loan
This type of loan is the major source of education borrowing from the federal government; such loans are available directly from the federal government through the Direct Loan Program, or through Family Federal Education Loan Programs from participating banks, credit unions, and other lenders. This type of loan may be subsidized (for students with financial need) or unsubsidized (available even to those with no need under aid formula). and must be repaid within 10 years.
American Opportunity Tax Credit
An education tax credit of up to $2,500 per student per year for tuition and related expenses incurred during the first 4 years of post-secondary education; the credit equals 100 percent of the first $2,000 of tuition and fees, and 25 percent of the next $2,000 of tuition and fees. The credit may be reduced based on modified adjusted gross income.
Lifetime Learning Tax Credit
An education tax credit of up to $2,000 calculated as 20 percent of the first $10,000 of tuition and related expenses paid for all eligible students. The credit may be reduced based on modified adjusted gross income.
Federal Loan Consolidation Programs
Available under both the Direct and FFEL loan programs. A borrower’s (student or parent) college loans are repaid and a new consolidation loan is created. Stafford loans, PLUS loans, and Federal Perkins Loans, as well as certain Health and Human Services/Health Professionals Loans, are eligible for consolidation. While loans can be consolidated after the student has left school under both the Direct and FFEL programs, the Direct program also permits students to consolidate their loans while still in school.
Section 529 Plans
A tax-advantaged approach to funding higher education expenses; also called a qualified tuition program (QTP). Types of plans include prepaid tuition programs and savings plans.
Section 529 Savings Plan
- Not need based
- ownership in parents/grandparents/trust
- beneficiary change allowed. Must be a family member of the original beneficiary.
- can gift $15k each yr for 5 yrs or lump sum $75k per donor. Max funding $400k.
- contributions can be made @ any age. Max funding
- 1 rollover in 12 months allowed.
529 Prepaid Tuition>529 Savings
Stay in same generation, otherwise will be a taxable gift. - beneficiaries cannot access the funds at the age of majority
- Path Act - approved expenses - tuition, computer and related expenses, tuition, fees, room, and board
- Secure Act- $10k lifetime use to pay down student loans
- $10k per year distributed to tuition at K12 schools.
- can be used for undergraduate and graduate school
529 Prepaid Tuition Plan
A type of Section 529 plan that allows tuition costs to be locked in years before enrollment
