Section 101 Unit 9 Flashcards Preview

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Flashcards in Section 101 Unit 9 Deck (16):

Coverdell Education Savings Account ESA

Contributions are limited to $2,000 per year per child. Either in a trust or a custodial type of account. Non tax-deffered but account accumulation income tax free. Use on any type of education including room and board. Use before age 30. May change beneficiary to another child.


IRC Section 529 Plan AKA Qualified Tuition Program QTP

Is a tax-advantaged program that helps families save for college expenses. Income tax benefits, contributions regardless of the contributor's AGI. Tax-free earnings growth, and tax-free withdrawals to the extent they are used to pay qualified higher education expenses. If not used for educational expenses the income portion is included in the gross income of the beneficiary and generally subject to a 10% penalty tax.


Prepaid Tuition Plan

Permits contributors to prepay future tuition at today's tuition rates or purchase tuition credits to apply to future tuition costs.


College Savings Plans

May be offered only by states, state-sponsored organizations, and eligible educational institutions. Market-based performance, suitable for risk-tolerant investor, no state-guaranteed return, open enrollment, available for out-of-state tuition costs without any refund difference.


Expected Family Contribution EFC

Is the amount of money that a family is expected to contribute toward the cost of a student's college education.


Expected Family Contribution
Four Calculations

1.Parental Income - taxable and nontaxable income.
2. Parental Assets - Includes almost everything owned by the parents with the notable exceptions of home equity, cars used for regular transpiration, the cash value of a life insurance policy, and the parents' accrued benefit or account balances in any retirement plans.
3. Student Income - Includes taxable and nontaxable income.
4. Student Assets - This includes the value of everything the student owns or saved.


Subsidized Stafford Loan

A need-based loan on which the US Department of Education pays the accrued interest while the student is in school and during any deferment periods.


Unsubsidized Stafford Loan

A non-need-based loan on which interest begins to accrue as soon as the funds are disbursed.


Parent Loan for Undergraduate Students (PLUS) Loan

A non-need-based loan available to parents of dependent undergraduate students. For high income level parent's that meet federal standards of creditworthiness.


Perkins Loan

Has the advantage of a low interest rate and a longer deferral period than stafford loans. It's a federal loan that the institutions determines whether the student needs the loan.


Supplemental Educational Opportunity Grants

These are federal grants given to students, with priority given to students who also received Pell Grants.


Federal Work-Study Programs

These programs provide students with part-time jobs while attending college. In turn, the institution disburses the earned funds to the student.


IRC Section 127 Employee Benefit

AN employer may provide up to $5,250 of non-job-related educational assistance to an employee during any one year as a tax-free employee benefit.


IRC Section 162 Employee Benefit

An employer may provide an unlimited amount of educational assistance to an employee so long as this assistance is job related.


American Opportunity Tax Credit

Up to $2,500 credit per student (100% x first 2,000) + (25% x second 2,000) For four years
Available first four years of postsecondary education
Student must be pursuing an undergraduate degree or other credential
Student must be enrolled at least half-time for academic period.
No Felony drug conviction is permitted on student's record, or credit is unavailable


Lifetime Learning Credit

Up to $2,000 credit per taxpayer return
Available all years of postsecondary education and courses
Student does not need to be pursuing an undergraduate degree or other credential
Credit is available for one or more courses without regard to enrollment status
Felony drug conviction rule does not apply