Quick Reference to Financial Aid

• What is EXPECTED FAMILY CONTRIBUTION or EFC? "The estimated amount a family can contribute to college costs. The formula, established by Congress, is as follows:    
• Cost of attendance to the College(s) you have chosen
• MINUS
• Expected Family Contribution (same for any college you apply to)
• EQUALS
• Need Based Aid Eligibility (different for each school)

The Estimated Family Contribution is determined by taking into account your family's income, some assets, and certain expenses that are required (i.e. taxes), necessary (i.e. basic living expenses), and related to earning income (i.e. employment-related expenses). This information is obtained through the FAFSA form."

• There are two different types of Aid:
• >Gift Aid
• >Self-Help Aid
• Gift Aid does not have to be paid back

• Self-Help Aid - this money needs to be repaid or the student works to earn the money

• Educational Related Credits

1. The Hope Scholarship Credit - "May be claimed by individuals for tuition expenses incurred by students pursuing college or graduate degrees or vocational training. These credits are reported on IRS Form 8863. The Hope Scholarship Credit provides a maximum allowable credit of $1,500 per student for each of the first two years of post-secondary education. The Hope Scholarship Credit allows taxpayers a 100% credit per eligilbe student for the forst $1000 of tuition expenses (but not room, board or books) and a 50% credit for the second $1000 of tuition paid."
2. The Lifetime Learning Credit - "May be claimed by individuals for tuition expenses incurred by students pursuing college or graduate degrees or vocational training. These credits are reported on IRS Form 8863. The Lifetime Learning Credit allows a credit of 20% of qualified tuition expenses paid by the taxpayer for any year the Hope Scholarship is not claimed. The Lifetime Learning Credit is equal to 20% of the amount of tuition ;paid by the taxpayer and is available for the first $10,000 of tuition."

• New Tax Stimulus Information Regarding Education (posted Feb. 2009)

  My family: education

  Q:	I will soon have a child in college and with expenses only going up, can you tell me about the 'American Opportunity' Education Tax Credit and if I qualify?
  A:	The American Opportunity Tax Credit provides eligible taxpayers in 2009 and 2010 with a credit up to $2,500 of the cost of tuition and related expenses paid during a taxable year. You will need to spend at least $4,000 to get the full credit, however. Taxpayers receive a tax credit based on 100% of the first $2,000 of qualified expenses paid during the tax year and 25% of the next $2,000 ($500). Forty percent of the credit is refundable, which is good news for lower-income students and families paying for college. There credit begins to phase out for taxpayers with adjusted gross income in excess of $80,000 for individuals and $160,000 for couples filing jointly.
  Q:	My kids have 529 plan savings to pay for college = is there good news for me?
  A:	Yes. Generally when you withdraw money from your 529 plan(s), it's to help pay for college expenses such as tuition, books, room & board, and equipment required for attendance at the school. Now, in 2009 and 2010, you can also use your 529 plan money for qualified higher-education computers and computer technology = such as software and Internet service for students living at home.

   

  Visit www.digits.hrblock.com

  Unusual FAFSA Filing Situations

  Taken from American Educational Services (AES). When completing the FAFSA (Free Application for Federal Student Aid), your students may find themselves in a situation that requires some additional direction:

  Divorced or Separated Parents

  The parent with whom the student lived with the most during the past 12 months should complete the FAFSA. If the student did not live with one parent more than the other, the parent who provided the most support in the past 12 months (or in the most recent year that parental support was received) should complete the FAFSA. Support includes food, shelter, clothing, insurance, etc., not just cash payments.

  If parents who are separated file a joint tax return, only the parent with whom the student lived (as defined above) must report on the FAFSA their income, assets, taxes paid, and household size. It does not matter if this parent is not the one who claimed the student on their tax return.

  For financial aid purposes, a couple is considered separated only if there is physical separation. This means that a married couple who claims to be separated but is still living together is considered married, and both parents must provide information on the FAFSA.

  Stepparents

  If a parent has remarried, both the parent and the stepparent must report information on the FAFSA. A prenuptial agreement does NOT exempt a stepparent from providing their information.

  If the biological parent dies and the stepparent survives, the student becomes independent unless:

  • The student is dependent on the surviving biological parent. OR
  • The stepparent legally adopted the student.

  Adoptive Parents: For financial aid purposes, adoptive parents are the same as biological parents.

  Foster Parents: For financial aid purposes, foster parents are NOT the same as biological parents. A student living with foster parents is a ward of the court and is considered to be an independent student

TOP 5 FAFSA MISTAKES AND MIX-UPS

Taken from the Student Loan Buying Guide, A publication of the Greentree Gazette Corporation

5. Leaving fields blank. Enter '0' or 'not applicable' instead of leaving a blank.

4. Confusing Adjusted Gross Income as Total Income. They are not the same. This mistake is particularly common.

3. Entering the wrong amount of federal income tax paid. Report the amount from federal income tax forms (1040), not W-2 form(s).

2. Listing your marital status incorrectly. Your marital status on the day you sign the FAFSA is essential.

1. Listing parental marital status incorrectly - the custodial parent's marital status is needed.

KNOW YOUR LOAN SHOPPING GOALS AS YOU SHOP

Taken from the Student Loan Buying Guide, A publication of the Greentree Gazette Corporation

• Are you looking for the cheapest loan? for yourself? for your parents?
• Do you know your FICO score? your parents' FICO, if applicable?
• Are your career goals clear in mind? or still in the works?
• Is convenience important to you?
• Do you want to pay some interest while you're in school to prevent a larger balance later?
• Are you looking for a lender with a well-known brand?
• Will you be using charge cards while you're in college?

QUESTIONS YOU SHOULD ASK ABOUT INTEREST RATES:

• What is the interest rate today, expressed as a simple numeric percentage?
• Is the interest rate fixed or variable?
• If it's variable, how often can it be changed?
• If it's variable, what is the maximum (a cap) that it may not exceed?

The American Bar Association has a web site (www.safeborrowing.com/student/) for families with legal questions about student loans, private and federal.

• PLAN for COLLEGE COSTS - Below is a list to help you think about College Costs

1. Tuition
2. Room/Board
3. Texdtbooks/Fees
4. Insurance
5. Computer
6. Gas
7. Food
8. Car Payment
9. Campus Parking Sticker/Pass
10. Toiletries and other necessities
11. Travel (home to see mom and dad, etc)
12. Clothes and other shopping
13. Sorority/Fraternity or other Club Fees
14. Community Service Involvement and / or Mission Trips
15. Furnishings

• Beware of Scholarship and Financial Aid Fraud
• The FTC cautions students to look for tell tale lines:
• >"This scholarship guaranteed or your money back."
• >"You can't get this information anywhere else."
• >"All we need is your credit card number or bank account to hold the scholarship for you."
• >"We'll do all the work."
• >"This scholarship will cost some money."
• >"You've been selected by a 'national foundation' to receive a scholarship or 'You're a Finalist' in a scholarship competition you've never entered."

Making College Financial Planning Count online (by Monster.com)

• Your students and their families already know that a college education is valuable. But, do they know how they’ll pay for it?