Student Finance – the Big Picture
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Transcript of Student Finance – the Big Picture
Student Finance – the Big Picture
EASFAA 2013Stephen G Brown, Fordham Law School
Who Cares !
How is college paid?Student Borrowing 18%Parent Borrowing 9%Grants and Scholarships 29%
Parent Income and Savings 28%Student Income and Savings 12%Relatives and Friends 4%
Student Loan DebtIn the news, how much is true?Increased as federal limits have
increased◦Especially at Grad/Prof level
Families and choicesEasy to borrow federal loans
◦Harder to be creative
Parents52% pay from current income!11% from 529/530 plans9% from taxable savings5% withdraw retirement savings
Parent Borrowing8 % PLUS3% Private Education Loan4% credit cards2% HELOC2% retirement account loan3% other loan
Payment PlansNo interestFeeCan cover charges not covered
by aid10 months-8 months-4 monthsEarnings from “float”
PLUS and GradPLUSFederal
◦Guarantee, ◦Consolidate, grad in IBR, PAYE,
FPSLFP, ◦death/disability◦Published credit criteria◦Parent as borrower or endorser◦Grad Student as Borrower◦7.9%, but 4 % fees
Private LoansImagine walking into a bank…Fixed v variable interestFeesCredit worthinessCredit scoreParents on behalf of studentsLack of federal benefitsSchool certified or not
Employment
Employer provided Educational AssistanceUp to $5,250Tuition and feesBooks and suppliesAny employer may choose to
offer◦But fewer doing it!
Employer tuition benefitsNot only for schoolsBenefit – often awarded through HRUndergrad no tax implications for education
employeesGrad no tax if perform teaching or researchTaxed above $5,250May require certain gradesPayment may be after completion of the
courseWaiting period? Commitment after payment?May require courses related to job
Student work for SchoolFWSResident Assistant
◦ Room◦ Perhaps meal plan and some tuition
Teaching or Research Assistant◦ Tuition◦ Other employee benefits?
Really depends on schoolAt REAL job
◦ Part time school, but free or reduced tuition!
Parent work for school
The Tuition Exchange tm
Consortium of IHEs600 schoolsWorked mainly through HR/Benefits officeOffers tuition benefits at many institutions
◦Ties to school policiesSchools require applicationBalance of tradeAdmissions requirements
Veterans BenefitsMontgomery Bill
◦ Chapter 30◦ Contributed while enlisted◦ Up to 36 months
Chapter 35◦ Dependents of dead or disabled vets
Post 911 GI Bill◦ Chapter 33◦ Tuition and fees – $17,500 maximum unless
grandfathered◦ Housing stipend◦ Books stipend◦ May be transferable to beneficiaries
Yellow RibbonIn conjunction with Post 911 GI BillSchools “opt- in”For schools that are more
expensive than highest public tuition – often private
VA will match schools contributions up to half of costs in excess of Post 911 GI Bill
UGMA/UTMAUniform Gift to Minors ActUniform Trust for MinorsInvolves planningIrrevocableReverts to minor at age of
majorityAsset? For FAFSA reporting –
owned by student
Home EquityCan you (your parents) afford to lose
your home?Long term debtSecured by houseUp to $100,000 over the amount
needed to purchase home is deductible“Second Mortgage”Home Equity Line of credit
Tax Policy
Is my Scholarship Taxable?117c qualified Scholarship
◦Degree candidate◦Qualified educational expenses
Tuition, fees, books, supplies, equipment◦Not compensation for teaching,
research, work
Qualified Tuition ReductionReceived from eligible education
institutionUsed at eligible education
institution◦Need not be the same
Employee or dependantUndergraduate not taxedGraduate – requires teaching or
research
American Opportunity CreditTAX CREDIT up to $2,500MAGI Limits
◦$90,000 single, $180,000 married/jointUp to 40% refundable ($1,000)First 4 yearsOnly 4 yearsTuition, fees and booksNo LLC or T & F deductionLoans used for Qualified expenses countNot Coverdell exemption
American Opportunity Credit …100% of first $2,000 in expenses25% of next $2,000Reduction for MAGI $80-90k
($160-180k)Form 8863Extended through December 31,
2017
Lifetime Learning CreditTAX CREDIT of up to $2,000Cannot be combined With American Opportunity
CreditMAGI limits
◦ $61,000 (s) $122,000 Married JointNon Refundable, Unlimited yearsNo matriculation requiredTuition and fees and books paid to institution$20% of first $10,000Reduction at $51 – 61k ($102-122k)Form 8863Through December 31, 2017
Student Loan Interest DeductionQualified Student LoanReduce Income by up to $2,500Enrolled at least half time when borrowedMAGI $75,000 ($150,000)Not from a related personTuition, fees, housing, books,
transportation (COA)Amortize fees ( but not reported on 1098-
E)Voluntary interest is OK
Student Loan interest…Phaseouts $60-75k ($120-150k)
Directly deductible◦Line 33 1040◦Line 18 1040 A◦Line 9 1040 EZ
Tuition and Fees DeductionNot if AOC or LLCNot if married filing separatelyMAGI $80,000 ($160,000)$4,000 income deductionTuition and related expenses paid
to institutionNot required matriculation
Tuition and Fees…Income from $65k - $80k (130k-
160k)◦Max deduction $2,000
Income below $65k ($130k)◦Max deduction $4,000
Form 8917
Tax Free Savings Accounts
Coverdell Education Savings AccountSection 530 of IRCMany investment optionsBeneficiary must be under 18 when set up$2,000 annual limitAccrues tax free Tax free withdrawals for educational
expensesMust liquidate at age 30Contribution limits based on contributor’s
MAGI
Coverdell ESAMAGI less than $110,000 ($220,000)
◦MAGI = AGI for most taxpayersCan establish account for beneficiary
under 18 (or special needs)Distributions tax free for ADJUSTED
Qualified Educational Expenses$2,000 annual contribution limitMust be distributed by time beneficiary is
30
Coverdell ESATuition and FeesBooks, supplies, equipmentSpecial needsRoom and board (if registered at
least half time)Transfer to other family member
530
529 PlansSection 529 of the Internal Revenue Code
◦ “Qualified Tuition Programs”Pre-paid tuition or college savingsAllows anyone to set up a plan for beneficiarySponsored by states in cooperation with
investment firmsLarge selection of investmentsAccrues tax free and withdrawals federal tax free
for ◦ Tuition and fees ◦ Room and board◦ Books, computer
QTP (529) PlansNo income restrictions on contributionsWithdrawals for Qualified Educational Expenses
--Tax freeTuition and FeesBooks, supplies, equipmentSpecial needsRoom and board (if registered at least half
time)
Transfer to other family member QTP
Early IRA Distribution penaltyNot subject to 10% penalty
◦May be subject to ordinary income taxation
Tuition and FeesBooks, supplies, equipmentSpecial needsRoom and board (if registered at
least half time)
Education Savings Bond InterestPhaseouts MAGI $71,100 and
$86,100◦$106,650 to $136,650 married jointly
Series EE issued after 1989 or series I◦Owner older than 24 at bond issue
date◦Only for DEPENDENT for whom you
claim exemption on tax returnTuition and feesForm 8515
Insurance, TDAs and other
Personal deduction for work
Business Deductionfor Work Related ExpensesMust be workingMust itemize or Must file Schedule C or FMust be Qualifying Work Related or
maintain or improve skills◦Required by employer or law to keep job◦Serve bona fide business purpose◦Not needed to meet minimum requirements
for current job◦Does not qualify for a new trade or business
Qualifying Work RelatedMust be Qualifying Work Related
or maintain or improve skills◦Required by employer or law to keep
job◦Serve bona fide business purpose◦Not needed to meet minimum
requirements for current job◦Does not qualify for a new trade or
business
Maintain or Improve skillsRefresherCurrent developmentsAcademic Tuition and FeesBooks and SuppliesTransportation--Work to school and
school to homeTravel—Is this session deductible?
Have I exhausted you yet?
QuestionsCommentsSnide Remarks
Stephen G. BrownFordham University School of Law33 West 60th StreetNew York, NY 10023212 [email protected]