Beyond Financial Aid NYSFAA 2012 Priscilla D Armsby, Siena College Stephen G Brown, Fordham Law School

Who Cares? Why are you doing this?

Student Loan Debt In the news, how much is true? Increased as federal limits have increased –Especially at Grad/Prof level Families and choices Easy to borrow federal loans –Harder to be creative

Payment Plans No interest Fee Can cover charges not covered by aid 10 months-8 months-4 months Earnings from “float” TMS, NELNET, Sallie Mae

PLUS and GradPLUS Federal –Guarantee, Consolidate, IBR, ICRa, FPSLFP, death/disability –Published credit criteria –Parent as borrower or endorser –Grad Student as Borrower –7.9%, but 4 % fees

Private Loans Imagine walking into a bank… Fixed v variable interest Fees Credit worthiness Credit score Parents on behalf of students Lack of federal benefits School certified or not

Employer tuition benefits Not only for schools Benefit – often awarded through HR Undergrad no tax implications for education employees Grad no tax if perform teaching or research Taxed above $5,250 May require certain grades Payment may be after completion of the course Waiting period? Commitment after payment? May require courses related to job

Student work for School Resident Assistant –Room –Perhaps meal plan and some tuition Teaching or Research Assistant –Tuition –Other employee benefits? Really depends on school At REAL job –Part time school, but free or reduced!

The Tuition Exchange tm Consortium of IHEs 600 schools Worked mainly through HR/Benefits office Offers tuition benefits at many institutions –Ties to school policies Schools require application Balance of trade Admissions requirements

Veterans Benefits Montgomery 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 Ribbon In conjunction with Post 911 GI Bill Schools “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/UTMA Uniform Gift to Minors Act Uniform Trust for Minors Involves planning Irrevocable Reverts to minor at age of majority Asset? For FAFSA reporting – owned by student

529 Plans Section 529 of the Internal Revenue Code –“Qualified Tuition Programs” Pre-paid tuition or college savings Allows anyone to set up a plan for beneficiary Sponsored by states in cooperation with investment firms Large selection of investments Accrues tax free and withdrawals federal tax free for –Tuition and fees –Room and board –Books, computer

Coverdell Education Savings Account Section 530 of IRC Many investment options Beneficiary must be under 18 when set up $2,000 annual limit Accrues tax free Tax free withdrawals for educational expenses Must liquidate at age 30 Contribution limits based on contributor’s MAGI

Home Equity Can you (your parents) afford to lose your home? Long term debt Secured by house Up to $100,000 over the amount needed to purchase home is deductible “Second Mortgage” Home Equity Line of credit

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 Reduction Received from eligible education institution Used at eligible education institution –Need not be the same Employee or dependant Undergraduate not taxed Graduate – requires teaching or research

American Opportunity Credit TAX CREDIT up to $2,500 MAGI Limits –$90,000 single, $180,000 married/joint Up to 40% refundable First 4 years Only 4 years Tuition, fees and books No LLC or T & F deduction Loans used for Qualified expenses count Not Coverdell exemption

American Opportunity credit … 100% of first $2,000 in expenses 25% of next $2,000 Reduction for MAGI $80-90k ($ k) Form 8863

Lifetime Learning Credit TAX CREDIT of up to $2,000 Cannot be combined With American Opportunity Credit MAGI limits –$61,000 (s) $122,000 Married Joint Non Refundable, Unlimited years No matriculation required Tuition and fees and books paid to institution $20% of first $10,000 Reduction at $51 – 61k ($ k) Form 8863

Student Loan Interest Deduction Qualified Student Loan Reduce Income by up to $2,500 Enrolled at least half time when borrowed MAGI $75,000 ($150,000) Not from a related person Tuition, fees, housing, books, transportation (COA) Amortize fees ( but not reported on 1098-E) Voluntary interests OK

Student Loan interest… Phaseouts $60-75k ($ k) Directly deductible –Line –Line A –Line EZ

Tuition and Fees Deduction Not if AOC or LLC Not if married filing separately MAGI $80,000 ($160,000) $4,000 income deduction Tuition and related expenses paid to institution Not 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

Coverdell ESA MAGI less than $110,000 ($220,000) –MAGI = AGI for most taxpayers Can establish account for beneficiary under 18 (or special needs) Distributions tax free for ADJUSTED Qualified Educational Expenses $2,000 annual contribution limit Must be distributed by time beneficiary is 30

Coverdell ESA Tuition and Fees Books, supplies, equipment Special needs Room and board (if registered at least half time) Transfer to other family member 530

QTP (529) Plans No income restrictions on contributions Withdrawals for Qualified Educational Expenses --Tax free Tuition and Fees Books, supplies, equipment Special needs Room and board (if registered at lesat half time) Transfer to other family member QTP

Early IRA Distribution penalty Not subject to 10% penalty –May be subject to regular taxation Tuition and Fees Books, supplies, equipment Special needs Room and board (if registered at least half time)

Education Savings Bond Interest Phaseouts 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 DENENDENT for whom you claim exemption on tax return Tuition and fees Form 8515

Employer provided Educational Assistance Up to $5,250 Tuition and fees Books and supplies

Business Deduction for Work Related Expenses Must be working Must itemize or Must file Schedule C or F Must 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 Related Must 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 skills Refresher Current developments Academic Tuition and Fees Books and Supplies Transportation--Work to school and school to home Travel—Is this session deductible?

Contact Information Stephen Brown, Fordham Law Priscilla Armsby, Siena College