College Financial Planning

Is A College Education Affordable                     

Planning for college can be one of the most exciting times in student life. But it can also be stressful; working with a Certified College Financial Consultant can help you build an effective, integrated college financial plan.

Planning for a college education will take an investment of your time and creating a college financial blueprint, implementing that blueprint, and monitoring that blueprint.

At Frazier Planning Service, we can help you create a college blueprint, implement that blueprint, and monitor that college blueprint.

Saving For College

College costs have skyrocketed in recent years, and the cost of a good education will continue to rise. There are ways to cut the price of a college education. Determine a specific amount needed and the date your child goes to college. Remember to include the cost of inflation (rate 2-3 times). Start saving early by creating a saving plan to meet your goal of funding a college education.

Paying For College

Grants

Grants are free money for school and are often based on financial need.

Colleges, states, and the federal government give out grants which don't need to be repaid. Most are awarded based on your financial need and determined by the income you reported on the Free Application for Federal Student Aid or FAFSA.

Grants are often called "gift aid" because they are free money—financial aid that doesn't have to be repaid. In addition, grants are often need-based, while scholarships are usually merit-based.              

Work-Study Jobs

Federal Work-Study provides a part-time job while you're enrolled in school.

Federal Work-Study provides part-time jobs for undergraduate and graduate students with financial needs, allowing them to earn money to help pay education expenses. In addition, the program encourages community service work and work related to the student's course of study.

Student Loans

With federal loans, you borrow the money you need and pay it back at a low, fixed interest rate. 

If you apply for financial aid, you may be offered loans as part of your school's financial aid offer. A loan is money you borrow and must pay back with interest.   

Scholarships

Scholarships are usually awarded based on academic achievement or other factors, such as background or where your parents work.

Scholarships are gifts. They don't need to be repaid. Schools, employers, individuals, private companies, nonprofits, communities, religious groups, and professional and social organizations offer thousands.

Advanced College Tax Strategies

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is for qualified education expenses paid for by an eligible student for the first four years of higher education. You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you.

Lifetime Learning Credit

The lifetime learning credit (LLC) is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate, and professional degree courses — including courses to acquire or improve job skills. There is no limit on how many years you can claim the credit. It is worth up to $2,000 per tax return.

Student Loan Interest Deductions

Student loan interest is paid during the year on a qualified student loan. It includes both required and voluntarily prepaid interest payments. You may deduct the lesser of $2,500 or the interest you paid during the year. The deduction is gradually reduced and eventually eliminated by phaseout when your modified adjusted gross income (MAGI) amount reaches the annual limit for your filing status.

The deduction is claimed as an above-line adjustment to income, so you do not need to itemize your deductions.

Tuition and Fees Education Tax Deduction

While there are several tax breaks for students and families who pay college costs, one of the largest ones, the Tuition and Fees Deduction, has expired and isn't allowable for the 2019 tax year (you can still claim it on your 2017 returns if you're filing them again.)

Coverdell Education Savings Accounts

A Coverdell education savings account (Coverdell ESA) is a trust or custodial account set up in the United States solely for paying qualified education expenses for the account's designated beneficiary. This benefit applies not only to qualified higher education expenses but also to qualified elementary and secondary education expenses. There are specific requirements to set up a Coverdell ESA:

Qualified Tuition 529 Plans

(QtPs), which are also called 529 plans after the section of the tax code that allows them, specifically IRC §529 — are programs set up by the state or by an eligible educational institution that will enable taxpayers to contribute to either a fund that prepays qualified educational expenses or a savings account for a designated beneficiary, which can be the account owner. The designated beneficiary can be changed at any time. Earnings grow tax-deferred, but distributions that pay for qualified educational expenses are tax-free.

Free IRA Withdrawals

If you need to pay expenses for higher education for you, your spouse, or your children or grandchildren, you may be able to take penalty-free distributions. Only costs incurred at certain educational institutions, such as a college, university, vocational school, or other postsecondary educational institution eligible to participate in the student aid programs administered by the U.S. Department of Education are eligible. For this purpose, qualified educational expenses include tuition, fees, books, and supplies.

Tax-Free Distribution From Savings Bonds

One exclusive benefit of United States savings bonds is the Education Tax Exclusion (26 USC § 135). It allows qualified taxpayers to redeem their bonds tax-free if the proceeds are used to pay for specific educational expenses at eligible institutions. For tax-free treatment, the redeemed bonds must be Series EE, or Series I bonds issued after 1989 to someone at least 24 years old and responsible for the college tuition, and the college tuition must be paid in the same year that the bonds are redeemed. In addition, the money cannot be used for books or room and board.

FPS Disclosure Statement

The information contained herein is subject to change without notice. This material is provided for general and educational purposes only; it is not intended to provide legal, tax, or investment advice or to avoid penalties that may be imposed under U.S. federal tax laws. Contact your tax professional, attorney, or investment advisor regarding your legal, investment, or tax situation. 

"I think college is possible. I think you have to plan ahead a little bit and make use of all of the resources available to you." - Scott Prince.