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%
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Parent Income and Savings 28%
 Student Income and Savings 12%
 Relatives and Friends 4%
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Student Loan Debt
In the news, how much is true?
 Increased as federal limits have increased
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◦ Especially at Grad/Prof level
Families and choices
 Easy to borrow federal loans
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◦ Harder to be creative
Parents
52% pay from current income!
 11% from 529/530 plans
 9% from taxable savings
 5% withdraw retirement savings
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Parent Borrowing
8 % PLUS
 3% Private Education Loan
 4% credit cards
 2% HELOC
 2% retirement account loan
 3% other loan
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Payment Plans
No interest
 Fee
 Can cover charges not covered by aid
 10 months-8 months-4 months
 Earnings from “float”
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PLUS and GradPLUS
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Federal
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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
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
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Employment
Employer provided Educational
Assistance
Up to $5,250
 Tuition and fees
 Books and supplies
 Any employer may choose to offer
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◦ But fewer doing it!
Employer tuition benefits
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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
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FWS
Resident Assistant
◦ Room
◦ Perhaps meal plan and some tuition
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Teaching or Research Assistant
◦ Tuition
◦ Other employee benefits?
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Really depends on school
At REAL job
◦ Part time school, but free or reduced tuition!
Parent work for school
The Tuition Exchange
tm
Consortium of IHEs
 600 schools
 Worked mainly through HR/Benefits office
 Offers tuition benefits at many institutions
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◦ Ties to school policies
Schools require application
 Balance of trade
 Admissions requirements
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Veterans Benefits
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Montgomery Bill
◦ Chapter 30
◦ Contributed while enlisted
◦ Up to 36 months
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Chapter 35
◦ Dependents of dead or disabled vets
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Post 911 GI Bill
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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
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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
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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
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Tax Policy
Is my Scholarship Taxable?
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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
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◦ Need not be the same
Employee or dependant
 Undergraduate not taxed
 Graduate – requires teaching or research
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American Opportunity Credit
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TAX CREDIT up to $2,500
MAGI Limits
◦ $90,000 single, $180,000 married/joint
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Up to 40% refundable ($1,000)
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 ($160180k)
 Form 8863
 Extended through December 31, 2017
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Lifetime Learning Credit
TAX CREDIT of up to $2,000
Cannot be combined With American Opportunity
Credit
 MAGI limits
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◦ $61,000 (s) $122,000 Married Joint
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Non Refundable, Unlimited years
No matriculation required
Tuition and fees and books paid to institution
$20% of first $10,000
Reduction at $51 – 61k ($102-122k)
Form 8863
Through December 31, 2017
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 1098E)
 Voluntary interest is OK
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Student Loan interest…
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Phaseouts $60-75k ($120-150k)
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Directly deductible
◦ Line 33 1040
◦ Line 18 1040 A
◦ Line 9 1040 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
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Tuition and Fees…
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Income from $65k - $80k (130k-160k)
◦ Max deduction $2,000
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Income below $65k ($130k)
◦ Max deduction $4,000
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Form 8917
Tax Free Savings Accounts
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
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Coverdell ESA
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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
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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
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529 Plans
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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
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◦ Tuition and fees
◦ Room and board
◦ Books, computer
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 least half time)
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Transfer to other family member QTP
Early IRA Distribution penalty
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Not subject to 10% penalty
◦ May be subject to ordinary income taxation
Tuition and Fees
 Books, supplies, equipment
 Special needs
 Room and board (if registered at least half
time)
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Education Savings Bond Interest
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Phaseouts MAGI $71,100 and $86,100
◦ $106,650 to $136,650 married jointly
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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 return
Tuition and fees
 Form 8515
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Insurance, TDAs and other
Personal deduction for work
Business Deduction
for Work Related Expenses
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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
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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?
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 Have
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I exhausted you yet?
Questions
Comments
Snide Remarks
Stephen G. Brown
Fordham University
School of Law
33 West 60th Street
New York, NY 10023
212 636-7178
sbrown@law.fordham.edu