Taxes and Financial Aid
Parents, this column is for you. It may not seem exciting when I tell you it is about taxes and financial aid – and will probably seem even less so when I give you your homework! But I think you’ll agree that tax credits for higher education expenses and student loan repayment programs are much more exciting than you might have thought at first.Parents, this column is for you. It may not seem exciting when I tell you it is about taxes and financial aid – and will probably seem even less so when I give you your homework! But I think you’ll agree that tax credits for higher education expenses and student loan repayment programs are much more exciting than you might have thought at first.
I’ve been doing quite a bit of research lately about how to go to college cheaper, and I’ve discovered some ways to make college less expensive for both the student and the parent. I wanted to share with you some basic information on these strategies, and link you to more specific information you can use to implement them yourself. I think everyone should be able to use at least one of the strategies, and many will be able to benefit from more.
Did you know that you can save tax money by choosing the right way to save for your student’s college? 529 Plans, Coverdell ESA’s, and some IRA’s are excellent vehicles with which to save for college AND save some money.
529 Plans - http://www.collegesavings.org/includes/pdfs/529plansFINAL.pdf
Coverdell ESA's - http://www.fool.com/college/college02.htm
The Motley Fool's College Savings Plans Comparison Chart -http://www.fool.com/college/compare.htm
Did you know that there are tax credits for college expenses paid by an individual or family for their student? The Hope Tax Credit, Lifelong Learning Credit, and a new credit (as of the February, 2009 Economic Stimulus Bill) whose name I couldn’t find could save you thousands in taxes! Restrictions DO apply, but I bet you’ll go look up information on them! (See link below for IRS Pub. 970)
Did you know that interest paid on the repayment of student loans may be tax deductible? If not, you should take a look at IRS Publication 970…
IRS Publication 970 - http://www.irs.gov/pub/irs-pdf/p970.pdf
Financial aid repayment
Did you know that there are programs that can reduce both the amount AND term of student loan repayment after graduation? IBR (income based repayment) does just what it sounds like - reduce loan payments for those with lower incomes (the graduates). While in the past, IBR programs reduced the payment but lengthened the term, it appears new rules (as of July 2009) may actually reduce the term for some! Maybe you know a grad or soon-to-be-grad who’d be interested?
Income Based Repayment Plan -http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp
Did you know the type of job within a given industry a graduate accepts after college can cause them to be eligible for thousands of dollars in LRAP (loan repayment assistance programs) funds? Many public service jobs and others with a high degree of value to the greater community and a relatively lower salary as compared to others in the field, may be eligible. Perhaps this is information you’d like to read more about…
Public Service Loan Forgiveness Program -http://studentaid.ed.gov/students/attachments/siteresources/LoanForgivenessv4.pdf
I think you’ll agree the ability to save on taxes before, during and after your student attends college is a very attractive notion.
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