Untitled Deck Flashcards
Who are the 529 plan owners?
Parents/grandparents
Single people with no dependents (aunts, uncles, friends)
A trust
How does a 529 plan impact financial aid?
Reduces a student’s eligibility for need-based financial aid
Treated as a parents asset in financial aid calculation
What are the steps to calculate education funding?
1) Determine the cost of the first year of college
2) Determine the amount that must be available when the child is age 18
3) Determine how much parents need to save
Assistance funding graduate school programs
1) Fullbright scholarship
2) Stafford Loan
3) 529 Distribution or Coverdell Withdrawal
When funding education, what are considered present interest gifts and not complete gifts?
Present interest: Gifts to an UTMA, UGMA, 529 or Coverdell
Not complete gifts: EE Education bonds (parent owns the bond)
How are 529s and Coverdell ESAs treated for financial aid calculations?
Treated as parental assets
Explain Qualified Tuition Programs (QTP)/529 Plans
A “qualified State tuition program” is a program maintained by a state or state agency.
Must meet certain requirements and allows a taxpayer to:
1) purchase tuition credits/certifications on behalf of a bene or (prepaid tuition),
2) make contributions to an account established to fund the qualified college education expense of the designated bene (college savings)
Explain a Coverdell ESA
- can contribute up to $2k/yr for the benefit of each child under age 18
-Contribution is not deductible
-can be used for elementary, secondary, and college
-No tax or penalty for qualified education expenses
-qualified expenses are broad (books, supplies, religious school, room, board, transport, uniform, etc.)
-Funds must be used by age 30
-Account is set up in a trust or custodial account
-Subject to MAGI phaseouts
Explain Series EE Saving Bonds
-Bond to fund eligible education expenses are called Series EE or Series I education bonds.
Qualifications:
-Purchased in parent’s name (purchaser must be age 24+)
-Can’t be issued in the name of child or in a custodial account
-Must be redeemed in the year the owner (parent) pays qualified education expenses.
-Qualified education expenses are tuition and fees only (not room and board)
-Interest is tax exempt
-subject to MAGI thresholds
American Opportunity Credit
-Tax payers receive a tax credit (reducing federal income tax $1 for $1)
-Credit is based on 100% of first $2,000 plus 25% of the next $2,000 (for a max. of $2,500) of tuition, fees and course material (not room and board)
- Only for undergraduate (first 4 year)
-Must be at least half-time student
- MAGI phaseout
-Expenses paid by grants or scholarships do not qualify for the credit
-Cannot be claimed with LLC
-Student mat NOT have a felony drug conviction
Lifetime Learning Credit
-Per-period credit vs. per-student credit
-20% of the first $10k of qualified tuition and related expenses (max of $2k)
-No student load requirement, can be tech school
-Undergrad or graduate
-MAGI phaseouts
-Can have a felony conviction
-Room and board is not an eligible expense
Pell Grant
-Financial aid
-Max is $7,395 in 2024-2025
-Only for undergraduate
-Full-time students or those with 6+ credit hours
-Eligibility based on Expected Family Contribution formula
What is the Expected Family Contribution Formula?
Financial Need = Cost of Attendance - Expected Family Contribution
Explain a PLUS loan
Financial Aid
Parent Loan for Undergraduate Students:
-Parents can borrow entire cost of college including tuition and living expenses, minus financial aid
-Not need based
-Parents must meet credit worthiness standards
Perkins Loans
- Not renewed by Congress after 2019
-No longer used
Explain Subsidized Stafford Student Loans
-Financial aid
-Available to students who should financial need after EFC, Pell Grant eligibility, and other aid subtracted from cost of attendance
-Loan amount is limited
Explain Supplemental Education Opportunity Grants
-Financial Aid
-Available for Pell Grant recipients (needs based) only and offered up to $4k per year
Loans for Wealthy families to fund education
-Parent Loan
-Wealthy parents are a PLUS
Loans for PooriSh to fund college
- Pell Grants
- Supplemental Education Opportunity Grant
-Subsidized Stafford Student Loans
Explain Public Service Loan Forgiveness
-Available to government and qualifying nonprofit employees with federal student loans
-Loan balance forgiven after 120 payments (10 yrs)
-Qualifying fields: firefighting, teaching, military, government, nursing
Disability Loan Discharge
-can’t work due to total and permanent disability (mental or physical)
-Must provide disability documentation
-Gov. may monitor for 3 years. If requirements aren’t met, can reinstate loans
Teach Loan Forgiveness Program
-Motivates to take jobs in elementary, secondary, or educational agencies serving low-income
-Must teach FT for 5 full and consecutive years
- $5k-$17k is eligible to be forgiven
What are 4 income-driven payment plans?
1) Income-contingent repayment plan (ICR)
2)Income-based repayment plan (IBR)
3)Pay-As-You-Earn Repayment Plan (PAYE)
4) Revised Pay-As-You-Earn Repayment Plan (REPAYE)
