Education Flashcards
What 2 financial aid loans are available for education that is NOT based on financial need?
Hint: Directors are mature
Loans are available for undergraduate, graduate and professional student
Direct Unsubsidized Loans
Direct PLUS aka Parent PLUS or Grad PLUS - the only one Funded by US Dept. of Education
What parental and student education funding related assets are included in FAFSA?
Assets on FAFSA:
Parental: College savings plans, Coverdell savings accounts and 529 accounts held in the parent’s or dependent child’s name
Student: UGMA and UTMA
What financial aid is available for education on a financial need basis?
Hint: Fire and Police Departments need money
Only financially needy get grants, but is for Undergraduate only
Fire & Police are Grants:
Federal Supplemental Educational Opportunity Grant (FSEOG)
Pell Grant
D is only a loan
Direct Subsidized/Stafford
Interest paid by govt while in school (at least ½ time) and 6 months after leave school
What is unique about Distributions from student-owned Coverdell ESA and Roth IRA?
They are considered income on the FAFSA.
What % of Parent/Student Assets and Income is used to determine EFC for FAFSA?
Parent Assets - 5.64
Student Assets – 20%
Parent Income – 22-47%
Student income – 50%
What is the Lifetime Learning Credit credit, education and coverage details?
Hint: Life is hard; they’re more stingy and goes on through life
Non-refundable
20% up to $10,000 cost - $2000 credit per RETURN max
All education/courses to acquire/improve job skills
Tuition and fees only
What is the American Opportunity Tax credit, education and coverage details?
Refundable
100% of the first $2,000 and 25% of the second $1,000 per student
4 years of undergraduate and pursuing a degree
Tuition, fees, books and supplies
What are the contribution and withdrawal tax treatments, eligible expenses, and asset (parent/student) EFC treatment of a 529?
Hint: The sky is the limit, except when K-12
NO annual contribution limit
Contributions are non-deductible
Can contribute at any age
Earnings are tax free for education withdrawals
College tuition, fees, books, supplies; room and board if at least half-time student
$10,000 annual withdrawal limit (from all donors) for tuition and supplies for K-12 and student loan payments
Counts as asset of parent
10% penalty if used for non-education expenses
What are two ways to extend gift allowance for 1) education and 2) 529 contributions?
Payments made directly to the education institution (tuition only) avoid annual gift limit and generation skipping tax
Standard annual gift allowance of $17K can be combined as if contributing over a 5-year period to “superfund” up to $85K per donor
What are the contribution and withdrawal tax treatments, eligible expenses, and asset (parent/student) EFC treatment of a Coverdell Savings Account?
Hint: COVERdell COVERS less! More restrictions going in, but less going out.
Contribution phase out limits - see CFP Tax sheet
$2,000 (non-deductible) contribution limit per year (from all sources)
No further contributions allowed once beneficiary turns 18
Earnings are tax free for education withdrawals
K-12 and College tuition, fees, books, supplies; room and board if at least half-time student
Must be used (or change beneficiary to another family member) by age 30
Counts as asset of parent
10% penalty if used for non-education expenses
How are UGMA and UTMA taxed and treated for education?
UGMA/UTMA are student assets
First $1,250 of earnings are tax free (ALL unearned income)
Next $1,250 of earnings are taxed at child’s rate
If under age 24 and a dependent, earnings over $2,500 are taxed at parent’s marginal rate
How can Series EE/I Bonds be beneficial in funding education?
No tax on interest earned if used for education
State tax free (always)
Must be at least 24 years old to purchase
Education phaseouts occur for both contribution and credits. Explain.
Details found on CFP Tax sheet.
Exclusion phase outs for EE bonds
Contribution phase outs for Coverdell
Credit and interest loan deduction phase outs for Lifetime Learning, American Opportunity and Education loans
How are student (a dependent) assets counted for EFC (Expected Family Contribution) for financial aid?
Dependent student assets are counted as parental assets; but their income over $7,600 is included at 50%.
Work study income is NOT included.
Parent Assets - 5.64
Student Assets – 20%
Parent Income – 22-47%
Student income – 50%
What is the lookback period for income for FAFSA?
2 years for income; must be completed each year in college
