College Loans

Graduating from college is an exciting time! It’s a time to start looking for work and to feel like a real, accomplished adult. Unfortunately, though, if you had student loans, it’s also a time to start paying them back. With most loans, you’ll automatically get a six month deferment after graduation, but that doesn’t mean you shouldn’t be taking smart steps toward repayment in the meantime. 

First of all, make sure you update all of your contact information so that your lender can reach you. A lot of people forget to provide their new post-college address to their lenders. If your plans are still up in the air, try and find a permanent address you can use, such as your parent’s address. And don’t think that you can get away with not making payments if your lender can’t reach you. You can’t, so it’s in your best interest to provide accurate contact information and maintain good communication with your lender.

Something you may want to consider with your student loans is consolidation. This option will allow you to merge your subsidized and unsubsidized loans into something you can pay in a single payment. Many people find this option easier than keeping track of multiple payments in varying amounts each month. You can talk to your lender to learn more about this option and whether or not it might be a good fit for you.

Whether you consolidate or not, you will definitely want and need to take steps to start paying off your student loans as soon as possible. These loans will haunt you forever if you don’t make efforts to pay them off. So, when possible, meet with a financial adviser and come up with a good, doable plan for getting those loans paid.

If you can follow these tips, then there is no reason that you can’t enjoy a great life post-college and quickly get out of that college loan debt.

Filing Taxes in College: What You Need to Know

Are you currently a college student? If you answered yes to that question, then your mind is probably focused on things like grades, books, and whether or not you need to drop that ridiculously hard class.   

In fact, taxes are probably the furthest thing from your mind. And, while that may be the case, the fact of the matter is that, if you are earning money, then, in most cases, you do need to file taxes.

In fact, doing so could ultimately lead to a refund, which could really help out that student budget that you’ve been living on. And, while an accountant is the best person to help you sort out your tax situation, which can be a bit tricky for students, learning the basic things you need to know can be super helpful for appropriately filing your taxes.

What’s Your Status?

First things first, in order to file taxes appropriately, you need to first figure out what your status is. And, no, we’re not talking about your Facebook status! We’re talking about your tax filing status.

Students will need to file for taxes as “dependent” or “independent”.

Dependent students are those who get claimed on other people’s taxes. If someone else, like Mom or Dad, is claiming you, then you file under this status and will need to know and report your parent’s income when you file.

Independent students, on the other hand, are not claimed as dependents by anyone and can file of their own accord.

If you are unsure of your status, then the first step toward figuring it out is to speak with a financial professional.

Tax Credits

Another thing that you should be aware of, as a college student, is that there are many relevant benefits for which you may qualify.

These benefits can help you to save money, pay less in taxes, and even potentially get more of a refund when the time comes.

While you can research these benefits on your own, you’re much more likely to find them all and get them in the right and most beneficial way with the help of a tax professional.

As a college student, you may think you’re too young to be working with financial professionals, but, really, it is never too early to start!

Do things the right way from the get-go and help yourself as much as possible by starting early and getting financial help now, while you’re still a student. You’ll thank yourself later!

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The 529 Plan: What You Need to Know

If you have a child who is preparing to go to college, or if you’re planning on heading to college yourself, there’s a good chance that you have heard of the 529 plan, also known as the qualified tuition program. This plan basically offers a way for soon to be students or the parents of soon to be students to start saving money for college. It gets its “529” nickname because of the section of tax code that explains this option.   

Basically, this is a plan that you can contribute to in order to save up for college costs- a smart move since these expenses are always increasing. Unfortunately, you won’t get a federal deduction for the contributions that you make to the plan, but you often get a state tax deduction, providing you invest in the plan that is relevant to the state in which you reside.

Another nice advantage of this plan is that as long as you use the money saved in it for qualified educational expenses, such as room, board, tuition, mandatory fees, and other required items, any earnings you receive will not be taxed.

If you’re ready to get these great advantages, then all you have to do is follow the steps, preferably with the help of a knowledgeable financial adviser, to set up a 529 plan. If you’re the one going to school, you can name yourself as the beneficiary, but if it’s your child who is to be the beneficiary, you can name him or her as such and yourself as the custodian.

Depending on where you live, you may also have the option of setting the plan up as a savings plan or a prepaid tuition plan. What you should and can do, however, will vary based on where you live and your goals for setting up the plan. For this reason and to ensure that your plan works out exactly as you hope, it’s always smart to seek advice from a financial adviser in your state. If you can do that, there is no reason that you can’t enjoy great benefits and help from your 529 plan.

Paying for College and All the Considerations

Paying for a child’s college education can be difficult. This is especially true if you’re going to have multiple children attending college at once and/or if you’re sending your child to a very prestigious school. Prestige often means a much higher price tag than, say, the local community college.

It’s important to understand, however, that, with a few exceptions, those “prestigious” colleges may not really be worth it. Some of those big-deal schools don’t actually offer an education that’s any better or better career prospects than other, cheaper schools.    

Don’t believe that? Well, amazingly, a recent study by the Brookings Metropolitan Policy Program revealed that in terms of mid-career earnings, loan repayment rate, and occupational earnings, graduates of Washington and Lee University, Harvey Mudd College, Clarkson University, and other cheaper schools actually fared better in these categories than Harvard graduates! Harvard is just about as prestigious as it gets, and if its graduates aren’t doing any better than graduates at other colleges, that should really make you think twice about forking over double the money just so your child can attend a “big name” school.

You also want to take your child’s major into consideration when choosing a college. In some fields, such as the technology field, the potential for earning a lot of money after graduation is high, and there’s a lot of competition, so, in that case, having a degree from a well-known institution could really be worth it. Your son or daughter might have a better chance of getting a job after graduation with the right degree and would be able to pay off any loans once that job was secured. With other, less competitive fields, however, it might not make a difference, in terms of career prospects, where a degree is from, and a graduate might not make enough, perhaps even ever, to pay off the loans he might accrue from attending a more prestigious (and expensive) school. Thus, it’s important to be practical and to consider what your child wants to major in and do after college and then factor the realities of that career choice into the college decision.

Finally, you always want to think about the potential connections your child could make at school and/or the alumni resources available to him or her after graduation. If your child stands to meet a lot of important people in his or her chosen field and make good, professional connections at a particular college, then it may be worth a higher price tag. Likewise, if a school offers lots of resources to help graduates secure employment and find success, paying more might just be worth it.

In the end, only you can decide if a particular school’s price and name is worth it to you and your child. Just be practical when you make this decisions and consider all the factors at play.

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College Financial Planning

Individuals who want to attend college but cannot afford the costs outright must find alternative funding through various types of financial aid. Many factors affect eligibility for federal financial aid; therefore, all students should apply for financial aid every year even if they think they do not otherwise qualify. 

FAFSA. The Free Application for Federal Student Aid (FAFSA) is the first step in the financial aid process. Students use the FAFSA to apply for federal student aid, such as grants, loans, and work-study. The FAFSA must be submitted for each year the student wants financial aid.

Income tax return. If the student (or parents) needs to file a 2013 income tax return with the IRS, it is recommended that it is completed before filling out the FAFSA.

Expected Family Contribution. The questions on the FAFSA are required to calculate the student’s Expected Family Contribution (EFC). The EFC measures the student’s family’s financial strength and is used to determine the student’s eligibility for federal student aid. The EFC is split between an expected amount contributed from the student (usually more) and an expected amount being contributed from the parents.

Student Aid Report. A student’s EFC will be listed on their Student Aid Report (SAR). The SAR summarizes the information submitted on the student’s FAFSA.

Financial need. Financial need is the difference between the EFC and the college’s cost of attendance (which can include living expenses), as determined by the college. The college will use the student’s EFC to prepare a financial aid package to help meet financial need.

Need analysis formula. To determine financial need, a need analysis formula measures the parents’ and student’s assets and income. Assets are measured as follows:

•    Assets in the student’s name are assessed at a maxi-mum rate of 20%, whereas parents’ assets are assessed at a maximum rate of 5.64%.

•    The assets of other children are not considered by the need analysis formula.

•    Specific types of property (automobiles, computers, furniture, books, clothing and school supplies, boats, and appliances) do not count as assets.

•    Retirement funds and pensions are generally not considered assets. 

•    Annuities and life insurance policies are generally not considered assets.

•    Small businesses owned and controlled by the stu-dent’s family are excluded as assets. However, a partnership where the family owns 50% of the business is not excluded.

•    Consumer debt (such as a credit card balance) is not counted against assets and income.

•    Only debt secured by property (mortgage on home or business loan for equipment) is counted against assets and income. 

Need more education planning advice?  Call Us!

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Paying for College

One of the main reasons that people seek the help of professional investment services is because they want to start saving for their child or children’s college funds. Unfortunately, most people don’t seek the help of these services when their children are young. Instead, they seek them a year or so (or even later!) before their children are about to start college.

If you’re in the same boat, don’t beat yourself up. While saving well ahead of time is definitely smart, you can’t turn back the hand of time. If you’re in need of fast money to help pay for your child’s college costs, you do have some options.

To begin with, start looking at local scholarships for which your child is eligible. There are lots of good ones out there, but you’ll often have more luck if you turn to those lesser-known or local scholarships for which the competition isn’t quite so fierce.

It’s also, contrary to popular belief, not such a bad idea to take out a few college loans to help ends meet. A financial advisor can help you to choose smart loans and to develop a plan for paying them back.

Even if you didn’t start saving when you should, college is likely still a possibility for your child. You just need to take action now and get the right help to make it happen.

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Start Planning for College Now

education (Photo credit: Sean MacEntee)

Are you expecting to have a child this year? If so, then planning for his or her college education might be the farthest thing from your mind. After all, it probably seems like many, many years before your child will even be thinking about school. The truth is, however, that eighteen years fly by pretty quickly. Furthermore, recent financial reports are predicting that, in eighteen years, college costs will likely be hundreds of thousands of dollars more in total than they are now.

Fortunately, most people realize the rising costs of college and are starting education planning early. A lot of these people, however, just put money aside in checking or savings accounts, and while there’s nothing wrong with that, it’s always better to be saving via a method that earns you tax benefits.

To find out which of those methods applies to you and to save the most money possible for your child’s education funds, visit Platinum Financial Associates of Naperville for help with education planning.

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Don't Use Retirement Funds for Childs Education

A recent article in The US News & World Report chronicled how many adults are dipping into their retirement funds in order to pay for the ever-rising costs of sending their children to school. While this strategy might seem like the best option or like your only option, it’s really not a smart choice. If you start making wise decisions with your money now, you can be better prepared for handling education costs, and you can do so without dipping into your retirement fund.

To begin with, start education planning as soon as possible. Even if your child is still in diapers, it’s not too early to start putting aside money for college. The right financial organization can help you to set realistic savings goals no matter what the age of your child or how long you have to save.

The right financial organization can also help you to take a future-forward approach to education planning by estimating the costs of college by the time your child will be going off to school and by helping you to prepare to meet those costs head-on.

To give your child and yourself the best future possible, don’t rely on retirement funds to pay for education costs. Instead, contact Platinum Financial Associates of Naperville to come up with a better plan that benefits both you and your child.

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