The Stimulus Act and How it Affects Your College Savings

Joe Hurley of Savingforcollege.com wrote a great article, “How The Stimulus Act Affects Your College Savings”, that provides significant information important to your goal of saving and funding your college education. The article is based on the $787 billion American Recovery and Reinvestment Act of 2009, signed by President Obama, and it’s effects on your 529 college savings account.

Important Note: The following is a list of highlights presented by Joe Hurley in his article. Please remember to always perform due diligence and investigate each highlight to ensure that they are still available and that you are eligible.

The American Recovery and Reinvestment Act of 2009,  Hope Scholarship Credit, andAmerican Opportunity Tax Credit provide a number of new benefits. The following is a partial list of those benefits. For the full list, please read Joe’s newsletter

• For the years 2009-2010: ” the list of eligible 529 expenses is expanded to include purchases of computer technology and equipment, along with Internet access for students and their families.” according to Joe
• According to Joe “starting again in 2011, computers etc. do not qualify unless required by the educational institution as a condition of enrollment or attendance.”
• In 2009-2010 The Hope Scholarship is more robust under the Act
• The New temporary version (of Hope Scholarship) the American Opportunity Tax Credit is available to more families than the Hope Scholarship
• American Opportunity Tax Credit can be used in the 3rd and 4th years of college in ADDITION to the first 2 years
• Course materials are eligible as an expense
• The credit phases out at a higher range of $160,000-$180,000 for joint filers and $80,000-$90,000 for all others
• Maximum annual credit amount increases from $1,800 in 2008 to $2,500 for this year and next. 100% of the first $2,000 of eligible expenses plus 25% of the next $2,000 of eligible expenses
• In addition it can be applied against the alternative minimum tax
• And it’s up to 40% refundable for students not subject to the kiddie tax

Parents: Do Your Students Know How Much They Owe On Their Student Loan?

One of the most important details to understand is to make sure your student fully understands what will be owed once they graduate college. In our opinion, their total Student Loan payments upon graduation should not exceed 8% – 10% of their monthly gross income.

If in doubt, be sure to gather your pay off information and plan to pay back your loan within your budgetary constraints. Make a timeline for when you will be paid off by building in time for unexpected events. Review your timeline as a way to stay on top of your dwindling debt, and as a incentive to remove this burden from your life forever

STOP Servitude to Banks Providing Tuition Financing: College Planning Specialists’ Plan to Break the Loan Cycle

In today’s world of financing for a college education, the awesome and frightening reality for many students and parents are the lack of solid tuition financing alternatives. The main method of paying for an education., outside full athletic scholarships or parents who can afford to pay without discomfort, are student loans through fiance companies bent on creating an interest rate bonaza to your detriment.

In step with the high interest rates and never ending loan pay off dates is the fact that college tuitions are simply a rip off. There is very little competition or what analysits call downward pressure on college tuition pricing. In a good example of this problem, Paul Streitz’s article “The Great American College Tuition Rip Off” outlines how parents and students push for higher education at the best colleges. This demand is manipulated by those colleges that receive the highest rankings from the US News and World Reports. US News and World Reports rankings have long been a respected measuring stick to parents and students helping them identify the best institutions.

Streitz posits that without tuition price competition from equally rated universities, and with demand escalating, universities will continue to raise tuitions. These cost increases are not caused by spiraling administration costs, professor salaries, or any cost of doing business factors. Instead the true explanation is simple: universities can and do raise tuition fee because students and parents are willing to pay the costs without question.

How do students receive academic scholarships when their parents economic standing disqualifies them from aid? And how do parents whose main assets are in property and whose income is just enough to keep their household afloat help pay for their student’s educations? Is it possible to “requalify” these families in such a way as to make them eligible for financial aid after all? The answer to the last question is a resounding YES!

Right now is the right time to look for alternatives to the traditional loan rip offs. Now is the time to investigate and engage with a new method to pay for college. Now is the time to contact College Planning Specialists.

College Planning Specialists provides a number of valuable services which in whole bring a new alternative to the traditional problem of qualifying for financial aid. The professionals at CPS Dan Evertsz and Gerna Benz provide expert analysis and an action plan that helps non qualifying (financial aid) families qualify under aid guidelines.

CPS’s Service Checklist is comprised of 24 action steps when implemented have a positive effect on qualifying a family for the millions of dollars, that go unused each year, of financial aid available. The first step is to outline a complete financial overview and analysis of a family’s assets as they relate to college as well as their budget. Analysis of the family budget, taxes, retirement and other areas of financial management gives a clear picture as to the best steps to take.

During this analysis, CPS will calculate the family’s Estimated Family Contribution (EFC). This form is a way to calculate how much a family must pay outside of the financial aid package that they qualify to receive. It is CPS job to help families understand this process, do the calculations for the family, and most valuable-provide a plan/and or recommendations to reduce the Estimated Family Contribution.

Why worry about the EFC when most families do not qualify for financial aid due to their economic standing? In many many cases Dan and Gerna have been able to find avenues for families to qualify for financial aid. Almost all of these families never thought they would qualify, never knew where to go to investigate these alternatives, and have nothing to lose by going through the College Planning Specialists consultations.

For more information please contact this blog or stay tuned for the Part 2 in my series: Stop Servitude to Banks. . .

Students and their Credit Cards: How To Manage Student Credit Cards Without Sinking the Ship

Students constantly search for methods to finance their college educations. What is sometimes overlooked within this formula? The rising cost of living expenses each student incurs during their school year. Many students desperate to make ends meet surrender to the credit card “spiral.” The following information will hopefully give students some ideas and advice on how best to manage their credit and debt while pushing through school.

The following are steps to help students manage their student credit cards. This information is presented by Liz Roberts, loan consultant, with New Horizons Finance:

1. Willpower: Simple concept but difficult for most people to grasp. When the mood strikes to pull out the credit card students should ask themselves one simple question: “Do I really need this item or do I just want it?” This simple but powerful idea will help students control their spending, create a conscious check before purchase, and in many cases train the “spender” by positively reinforcing the idea that their credit balance is in line with their income.

2. Pay Cash: When casinos first began in this country, casino owners understood the “value” of removing a gambler’s emotion from their money. Simply put, casino’s from that beginning until today always insist that you “change” your cash dollars into their chips. Gamblers have a much easier time losing, without regret, their money in a casino if they are betting with chips. If the gambler was forced to throw down cash for every game or bet, the regret factor would help deter their spending and lower casiono profits. Like Robert De Niro in the movie “Casino” (picture above), credit card companies rely upon your human side to lead your astray.

The exact same casino concept applies with credit cards. Paying cash gives the spender the “feeling” that hard earned monies need to be rationed. Using a credit card allows the spender to avoid this feeling. We all know the results of unconscious spending.

3 . Budget Money/Allowance: Students like housewives, should create a personal budget. List items that are monthly needs first. Attempt to cut out the “fat” that your can actually live without. If at all possible save some money each month for an emergency cash fund. This is difficult but it could come in handy in the future.

4. Be Responsible: Try to be the “owner” of your debt. Do not go to family or friends for bail out funds whenever possible. By staying within a budget, you will be more likely to stay out of financial trouble. Remember that favors from family is much easier to ask for if it is a rare occurrence rather than a monthly request.

If you have trouble remaining responsible, run your credit card debt into the “ditch”, and borrow every last dime available from family and friends then you might just find yourself in the predicament below. Be responsible stay out of the “ditch.”