Chapter 8 TF Flashcards
College cost inflation has historically outpaced the consumer price index.
True
CollegeSure CDs guarantee to keep pace with college cost inflation at an individual college or university.
False. The CollegeSure CDs keep pace with an index of school costs, not the costs at a particular school
Spending restrictions on a Uniform Gift to Minors Account can ensure that account proceeds are used for education expenses.
True
State-run prepaid college tuition plans can only be used in a state college or university.
False. State-run prepaid college tuition plan balances are portable
The Savings Bonds for Education program has no modified adjusted gross income limitations
False. There are MAGI limits on the Savings Bond for Education.
The Savings Bonds for Education program requires that the bonds be held in the student’s name
False. To qualify for the Savings Bonds in Education program the bonds cannot be held in the student’s name
The Lifetime Learning Credit is limited to the first 2 years of post-secondary education.
False. The Lifetime Learning Credit is available for all years of post-secondary education
The American Opportunity Credit is available for the first four years of post-secondary education
True
The interest expense deduction on education loans is subject to phaseout based on modified adjusted gross income.
True
Taxpayers are able to deduct qualified tuition and related expenses even if they do not itemize deductions, although these expenses are subject to phaseout based on modified adjusted gross income.
True
Retirement planning can facilitate education planning.
True
Grandparents can use a Section 2503(e) exclusion from taxable gifts to make college tuition payments for grandchildren.
True
Scholarship monies for room and board are taxable to the student
True
Section 529 College Savings Plans are free of federal income taxes when the proceeds are used for qualified educational expenses.
True
Section 529 College Savings Plan contributions generate a federal income tax deduction
False. Some states allow deductions for contributions to an in-state plan but there is no federal income tax deduction
Required contributions from parental assets is a lower percentage than required contributions from the student’s assets
True
The Free Application for Federal Student Aid determines the expected parent contribution and expected student contribution and combines them to arrive at the expected family contribution.
True
The student aid report is independent of the expected family contribution.
False. The student aid report includes the expected family contribution.
Parents are expected to contribute 12 percent of unprotected assets.
False. Parents are expected to contribute 12 percent of unprotected assets but it only applies to 47 percent of those assets for an adjusted 5.6 percent.
Federal Perkins loans are need based
True
Stafford loans may be subsidized or unsubsidized depending on financial need
True
Investing for an emergency fund is no different than investing for retirement.
False. Emergency fund investing focuses on short-term investments and liquidity. Retirement investing has a longer planning horizon.
An emergency fund is fully funded if it has 2 months worth of living expenses
False. The rule of thumb for an emergency fund is 3 to 6 months of living expenses.
An emergency fund has a lower priority than saving for retirement
False. An emergency fund should have a higher priority than retirement investing
