student finance – the big picture
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Student Finance – the Big Picture. EASFAA 2013 Stephen 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%. - PowerPoint PPT PresentationTRANSCRIPT
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Student Finance – the Big Picture
EASFAA 2013Stephen G Brown, Fordham Law School
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Who Cares !
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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%
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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
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Parents52% pay from current income!11% from 529/530 plans9% from taxable savings5% withdraw retirement savings
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Parent Borrowing8 % PLUS3% Private Education Loan4% credit cards2% HELOC2% retirement account loan3% other loan
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Payment PlansNo interestFeeCan cover charges not covered
by aid10 months-8 months-4 monthsEarnings from “float”
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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
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Private LoansImagine walking into a bank…Fixed v variable interestFeesCredit worthinessCredit scoreParents on behalf of studentsLack of federal benefitsSchool certified or not
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Employment
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Employer provided Educational AssistanceUp to $5,250Tuition and feesBooks and suppliesAny employer may choose to
offer◦But fewer doing it!
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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
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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!
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Parent work for school
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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
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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
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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
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UGMA/UTMAUniform Gift to Minors ActUniform Trust for MinorsInvolves planningIrrevocableReverts to minor at age of
majorityAsset? For FAFSA reporting –
owned by student
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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
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Tax Policy
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Is my Scholarship Taxable?117c qualified Scholarship
◦Degree candidate◦Qualified educational expenses
Tuition, fees, books, supplies, equipment◦Not compensation for teaching,
research, work
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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
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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
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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
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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
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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
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Student Loan interest…Phaseouts $60-75k ($120-150k)
Directly deductible◦Line 33 1040◦Line 18 1040 A◦Line 9 1040 EZ
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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
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Tuition and Fees…Income from $65k - $80k (130k-
160k)◦Max deduction $2,000
Income below $65k ($130k)◦Max deduction $4,000
Form 8917
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Tax Free Savings Accounts
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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
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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
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Coverdell ESATuition and FeesBooks, supplies, equipmentSpecial needsRoom and board (if registered at
least half time)Transfer to other family member
530
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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
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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
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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)
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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
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Insurance, TDAs and other
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Personal deduction for work
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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
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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
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Maintain or Improve skillsRefresherCurrent developmentsAcademic Tuition and FeesBooks and SuppliesTransportation--Work to school and
school to homeTravel—Is this session deductible?
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Have I exhausted you yet?
QuestionsCommentsSnide Remarks
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Stephen G. BrownFordham University School of Law33 West 60th StreetNew York, NY 10023212 [email protected]