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Why Have Student Loans Increased So Dramatically?

Posted on Oct 31, 2012 with No comments

Oct 31, 2012

Student loans have been significantly raised over the past few years, with top universities now charging £9,000, and most charging at least £6,000. Just over 10 years ago students didn't pay anything at all in terms of tuition fees, but now face extensive debts once they graduate.

When included with maintenance loans, which amount to around £5,500 to £7,675 depending on where you choose to study, the cumulative debt for university can be in the tens of thousands. It’s worth, then, looking at why loans have increased, and how it affects the repayments of students, as well as some of the options available to them to reduce the burden of debt. 

Cuts and Funding

Increased tuition fees primarily developed out of funding cuts to universities, and the need to make up for deficits in terms of paying teachers. Universities depend on public funding, fees, sponsorship and grants to survive, and when one area declines, more investment is needed in others.

The increase in fees also came as part of government pushes to make higher education more open and competitive, in line with global trends. Making UK student tuition fees higher similarly has the knock on effect of narrowing the gaps between British and international students, with the latter still tending to pay a lot more for studying in the UK.

Defenders of the tuition fee rises look past declining applications since 2010 to the staggered cost of repaying loans. Raising the earnings cap before repayments begin to £21,000 to £15,000 means that students have longer to pay off their loans, and don’t feel the full impact of interest on their loans for several years unless they enter into highly paid jobs - at which point the loan becomes more manageable in relation to earnings.

Other disparities exist, however, with students in Scotland, Wales, and Northern Ireland either not paying fees for their home universities in the case of the Scottish, or having subsidized fees.

There are also a number of support schemes in place to help students from lower income backgrounds to afford the cost of study. The National Scholarship Program provides bursaries to students that can contribute towards fees and living costs.

Homes with a joint income of under £25,000 can also receive non repayable maintenance grants, while homes earning £25,000 to £42,600 are eligible for smaller amounts. Universities are similarly expected to provide hardship loans and scholarships to students with low incomes.


In terms of when you have to make repayments on your loan as a student, the £21,000 cap means that many will not immediately start paying off their loans. Once this is activated, employers deduct 9 per cent from earnings through PAYE, while self employed workers receive automatic deductions after filling out their tax forms with HMRC.

Interest is also paid on loans at a rate of 3 per cent above inflation. If the thought of a long term set of repayments does not appeal, then there is the option of taking out a short-term loan to pay off a student loan. By taking a calculated risk on the short term interest rates on a loan providing enough of a deficit on a long term student loan repayment, this option can be a good one for those that can afford it.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

5 Things About Student Loans You Need to Know

Posted on Oct 29, 2012 with 2 comments

Oct 29, 2012

If your one of the thousands of students on track to graduate this year and you have student loans, there are a few things you need to be a ware of. Thankfully the President signed legislation that prevents federal student loans specifically, federally backed, subsidized Stafford loans originated for the 2012-2013 school years -- from doubling.

Here are six things you need to know about recent changes.

1. The grace period on Stafford loans has changed.

If you take out a Stafford loan for undergraduate work in 2012-2013, you won't have to make payments until six months after graduating. This has always been the policy. The difference is that in the past, this six-month grace period was interest-free. Starting July 1, 2014, interest will accrue during that grace period.

2. How much you make matters.

The government's Income-Based Repayment (IBR) program allows you to pay back federal loans on a sliding scale based on your income and family size. Anyone who owes more in federal student loans than they earn is eligible to choose IBR. For most borrowers, payments are less than 10 percent of income. The lower your salary, the lower your payment. (Prior to July 2012, the IBR rate was 15 percent.) If you still owe on your loan after 20 years, and consistently have made on-time payments, your remaining balance may be canceled (the previous requirement was 25 years). To switch to an IBR payment plan, contact your loan company. You also can learn more at Federal Student Aid or call 1-800-4FEDAID (1-800-433-3243).

3. Public service workers get a break.

With the Public Service Loan Forgiveness program, people who meet certain criteria do not need to pay their loan. There are several qualifications. First, you need to be employed full-time in an eligible public service field for 10 years. You also need to have made 120 loan payments on or after Oct. 1, 2007 (payments made prior to that do not count). Eligible public service jobs include emergency management, government, military service, law enforcement, public health (including nurses and nurse practitioners), social work, public education, librarians and employees who work for tax-exempt nonprofit organizations. Learn more at

4. Consider consolidation.

If you have government and/or private direct loans or federal family education loans (FFEL), you may be able to consolidate them. The new consolidated loan could have a lower interest rate than your current blended rate. Learn more at Federal Student Aid or call 1-800-4FEDAID (1-800-433-3243).

5. Ask for assistance.

Graduates with educational debt who take low-paying jobs in certain fields may be eligible for Loan Repayment Assistance Programs (LRAP). LRAPs are most common in the fields of education, medicine (for work in certain high-need communities) and law (for work as public defenders or in public interest organizations). The best way to find out whether your employer offers an LRAP is to ask.

Thousands of college grads are entering a tight job market burdened with debt. If possible, talk to your school's financial aid officer about your repayment options before you don that cap and gown. Once you get into the right plan, you can focus on landing a good job and building your career.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Want to be heard? Leave a reader comment below.

An Incorrect 1098-T Can Sink Your Tax Return

Posted on Oct 28, 2012 with No comments

Oct 28, 2012

And if this form is wrong, your tax return may be wrong. And you may be entitled to a refund.

The American Opportunity Education Credit is one of the favored ways to get some tax relief for many parents. It's based on the amounts you paid for college tuition and related fees. However, one of the forms used in the preparation of your college tuition deduction or credit, the 1098-T, which is provided by the college, may not show the correct figures. If it is not correct, you may want to file an amended return and lower your tax liability.

Here’s Why

1098-T, Box 1, ‘Payments Received for Qualified Tuition and Related Expenses.’Included in this box is suppose to be ‘total payments’ from any source. This means not only from the student, and/or parent, but also student loans, which went directly to the college from the lender. This figure is not supposed to include insurances or student health fees.

1098-T, Box 2, ‘Amounts Billed for Qualified Tuition and Related Expenses.’ For 99.99 percent of us, this box is totally useless because we are ‘cash basis’ taxpayers, and record expenses when they are paid, not when we receive a bill. Included in this box is usually the amounts the college billed you in December for the spring semester — January, February, and March. You don’t care when or how much is billed. You only care about what you paid. Ignore this box.

1098-T, Box 4, ‘Adjustments Made for a Prior Year.’ If there is a figure in this box, you may have to file an amended return to report that you overstated the tuition and fees deduction of a prior year. If it reduces your education credit claimed in the prior year, no amended return is required. The difference is added to the current year’s tax liability. If there is an adjustment, it is incumbent upon you to pay back the excess. You don’t want to add to the national deficit, do you?

1098-T, Box 5, ‘Scholarships or Grants.’ The institution records these benefits you received in this box. These generally reduce your payments to the college. Again review the tuition statement carefully. It is your money.

1098-T, Box 6, ‘Adjustments to Scholarships or Grants for a Prior Year.’ This may also require you to file an amended return for a prior year.
What To Do?

For now, examine your statements, and make sure that the total you paid by cash, check, and student loans agree to Box 1. If not, and if you used the amount in box 1, consider filing an amended tax return.

When your 1099's come next year be sure to compare your records to the amounts on the statement
Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Why Students Should Have a Budget?

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You say you know where your money goes and you don’t need it all written down to keep up with it? I issue you this challenge. Keep track of every penny you spend for one month and I do mean every penny.

You will be shocked at what the itty-bitty expenses add up to. Take the total you spent on just one unnecessary item for the month, multiply it by 12 for months in a year and multiply the result by 5 to represent 5 years.

That is how much you could have saved AND drawn interest on in just five years. That is the very reason all of us need a budget.

If we can get control of the small expenses that really don’t matter to the overall scheme of our lives, we can enjoy financial success.

The little things really do count. Cutting what you spend on lunch from five dollars a day to three dollars a day on every work day in a five day work week saves $10 a week… $40 a month… $480 a year… $2400 in five years….plus interest.

See what I mean… it really IS the little things and you still eat lunch everyday AND that was only one place to save money in your daily living without doing without one thing you really need. There are a lot of places to cut expenses if you look for them.
Set some specific long term and short term goals. There are no wrong answers here. If it’s important to you, then it’s important period.

If you want to be able to make a down payment on a house, start a business fund for your future, buy a sports car, take a vacation to Aruba… anything… then that is your goal and your reason to get a handle on your financial situation now.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

What Happens If I Take to Much Out of My 529 Account?

Posted on Oct 27, 2012 with No comments

Oct 27, 2012

By February 1, Form 1099-Q is issued when a withdrawal is taken from a 529 account. It will have the Social Security number of the person receiving the money — the beneficiary (student) or the account owner (you). The form will show the withdrawal and the earnings. The IRS also receives a copy of the form, which they will match with the recipient’s tax return.

Are the withdrawals federal and state tax-free? Yes, as long as they do not exceed your adjusted qualified education expenses or, as the IRS calls, it “AQEE.” Here’s how the tax rules work:

Total the educational expenses:

The account beneficiary’s tuition and related fees for an undergraduate or graduate program;

  • Room and board (but only if he or she carries at least half of a full-time load); and 
  • Books and supplies, computer and Internet access costs. 

From the above costs, you subtract:

  • Costs covered by Pell grants; tax-free scholarships, fellowships, tuition discounts and veterans’ educational assistance; 
  • Costs covered by employer-provided educational assistance or any other tax-free educational assistance (not including assistance received by a gift or inheritance); 
  • Expenses used to claim the American Opportunity or Lifetime Learning tax credit on your tax return; and 
  • Expenses used to claim the tax deduction for college tuition and fees on your tax return. 

This total is the adjusted qualified education expense. If the withdrawals exceed this AQEE, then part of the earnings is taxable.

For example, if college expenses are $36,000 and tuition discounts and scholarships total $24,000, then the AQEE equals $12,000.

If a withdrawal is made from the 529 plan of $36,000, including $6,000 of interest, then only $12,000, or one-third (36,000/12,000) of the withdrawal, is being used for college, and therefore, only one-third of the $6,000 earnings, or $2,000, is tax-free, with taxes due on the $4,000 balance.

Determine what the AQEE will be and, possibly have the check, and therefore the 1099-Q, issued to the student whose tax liability on the $4,000 would probably be lower than the parents.

For state tax purposes, in this example, the $24,000 withdrawn and not used for educational expenses will be taxed, plus a penalty.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Where to Find Nursing Scholarships

Posted on Oct 25, 2012 with No comments

Oct 25, 2012

If you're on your way to college, you might be confused with the many courses being offered. Choosing one can give you a headache, but if you already know what particular career you want to pursue after college, you will not have much difficulty.

Observe the trends in the job market. The medical field hires a lot of competent people every year, and the demand for medical professionals is still increasing at present. Even those who already have a career are looking for ways to join this particular field.

Nurses are badly needed. The demand for nursing graduates is growing. Health agencies and other services are looking for highly trained and qualified nurses. That is probably why many students are attracted to this field.

The primary problem that most students encounter before they go to college, especially with a nursing course, is funding. Though this field is very much in demand, not all aspiring nursing students are able to graduate because of financial problems.

Public colleges which offer nursing courses can cost you around $14,000 a year; and if you want to attend college in a private university, the cost can reach as high as $30,000 a year. And to think that the tuition fees increase every year. You can just imagine how much it's going to cost you if you want to graduate with a nursing degree.

Nursing is quite an expensive course, and if you don’t have the money, you can't possibly graduate. What a sad ending for an aspiring student, but don’t lose hope yet. There are still ways to pursue your college studies without anymore worrying for your expenses.

Education helps people learn about different things, but it doesn’t end there, it is also a business in itself. If you don’t have enough money, you can't get the best education possible. If you don’t have money, that is not a problem. If you want to finish a course in nursing, you must be aware that it entails a lot of coursework. So if you are a working student, you will surely have difficulty in keeping up with your job and the coursework. What you need is a college scholarship to fully concentrate in your education.

First and foremost, you must contact nursing associations in your locality, your state's nursing board, and the American Nurses Association (ANA). Check the website of ANA on the net because they can provide you with the necessary information you will need for a nursing scholarship and grants. All it takes is a little research.

Federal government funds certain nursing scholarships, as well as private entities. Schools, agencies, and corporations offer nursing scholarships for individual students.   
You will need all indispensable information from certain people like the college of nursing department head. He/she can provide you with scholarship/grant applications. Or you can also contact the person in authority who provides scholarship/grants to nursing students.

You're quite lucky if you have parents who can fund your way to college, but if you're one of the less fortunate ones, you definitely need some form of assistance. Stand up and make a move, don’t just sit there and wait for someone to offer you a scholarship of some sort. Chances are it wouldn’t come looking for you.

If you are quite confident that you can maintain a scholarship, apply for one. It never hurts to try.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

529 Plans Pay for More Than Tuition and Books

Posted on Oct 24, 2012 with No comments

Oct 24, 2012

If you're one of the smart parents that have opened a 529 College Savings Plan you know it's going to help you pay for tuition and books. But what other things can you use the money for? According to 529 plan rules, you are allowed to use the funds for qualified education expenses.

Some examples of qualified education expenses:

If you are attending classes in the medical field you can expect to spend money on required medical supplies. Whether you're attending radiology, general diagnostic medical sonography, dental hygiene, or practical nursing you can expect to pay more than $3,000 on supplies depending on which field you are studying in. Dental hygiene has the highest costs, totaling more than $3,000. Radiology students need less than $400 in supplies.

Equipment and supplies are the most overlooked expense when attending college or trade school, according to Upromise Investments Inc. Don't let the costs for needed equipment sneak up on you. Save the necessary money in your 529 plan.

To prepare for acquiring this equipment you need to find out exactly how much the equipment will cost.

1. Find equipment estimates on school websites: School websites' financial aid offices post cost of attendance estimates online, including estimates for tools and supplies. These estimates aren't exact, largely because students have purchasing options beyond the school bookstore. For instance, medical scrubs are also available from uniform shops.

During the application stage, parents and students should use these estimates to compare costs among different programs. After choosing a program, an exact supply list is needed, she says.

2. Get the required tools list: A few months before schooling begins, students should request complete lists of supplies from the academic department or individual professors teaching first year courses. If contacting professors, confirm with academic counselors that the tool list is the same no matter which professor teaches the class, experts advise.

Don't forget to ask if there are any restrictions that might limit product selection. For instance, is new or branded equipment required? Are there manuals specifically for student use that come with the tool? Do scrubs need to be a certain style or color to identify students working in a hospital environment?

3. Be wary of extravagantly priced products: While a $250 pair of riding boots may look spiffier than the $150 required version estimated in the cost of attendance for a horse training program, using 529 plan withdrawals to pay for the more expensive boots could result in an audit. He notes that 529 plans have restrictions on how families can allocate distributions.

Sometimes the IRS will fall back on the 'ordinary and necessary' (section 162) theory, essentially that expenses considered ordinary and necessary for a particular situation are deductible, while those considered 'extravagant' are not. Parents should err on the side of caution and not purchase the most expensive supplies and equipment, unless required by the educational institution.

4. Compare prices: Determine rules for buying new or used supplies. For instance, don't buy used scrubs because they're relatively inexpensive; a top and bottom set starts at under $20. However, she'll consider used tools from a company that verifies sterilization and good, working condition of tools.
Next, compare prices. The selection depends on the career training program. For instance, tools for an automotive mechanic may be bought from hardware or automotive repair retailers, tool shops, and websites. Medical equipment may be bought from a variety of online outlets, as well as medical supply retailers.

No matter where equipment is bought, don't stray from the required tool list. If you're unsure if the tool is the exact same one from the list, consult the academic department.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

How to Apply for a College Scholarship

Posted on Oct 21, 2012 with No comments

Oct 21, 2012

When we speak of college scholarship application, the burden is always on the parents. Since they have the responsibility over the education of their children and they know what will be good for them, parents apply personally for the college scholarship of their children.

What if we turn the tide? From primary to secondary education, your parents accepted the responsibility. But you are old enough to take care of a simple college scholarship application. It takes some courage, self-confidence, and some excellent academic records to apply for a college scholarship. Keep in mind that is you who will utilize the financial aid that comes with the scholarship and not your parents. Thus, applying for a college scholarship is now your business, and you can do it with less supervision from your parents.

The procedure for college scholarship application is similar when you apply for college. You need to learn every scholarship opportunity available and make a list of potential prospects that you think will fit your personal needs. Once through with the list, you need to create an application letter and state your achievements (good high school scholastic records and recommendation letters from your high school director and teachers) and you are now on your way on getting into college for less, if not for free.

The above-mentioned procedure is the most common way of getting a college scholarship. However, the chances of success lies in you, and you need to exert more effort to assure yourself of a financial aid when you go to college. To increase your chances, here are some pointers that you can consider:

  • You should start as early as your high school years. There are many college scholarships that open during your senior high school year. In addition, these financial aid programs are only open in a specific period of time. Once the application closes, you have to wait for another year before you can file for your application. Starting early will give you better chances of getting the best financial aid available. 
  • Give importance to the scholarship requirements. Keep in mind that among all available scholarships, there are only few that will fit your qualifications. Read the eligibility standards of the college scholarship that you want to apply. If you found out that the financial aid does not fit with the qualifications that you have, search for another. Do not insist yourself on scholarships where your chances of success is minute.
  • Do not forget to complete the requirements asked by the college scholarship. Prepare the documents that are commonly asked by the scholarship grantee to its applicants. 
  • Your application letter will be your “speaking alter-ego” to the sponsor of the college scholarship you have applied for. Thus, you need to create an application letter that will convince the sponsor that you honestly need the financial aid and you deserve to get one, state honest information in your application. Never include false information especially if your purpose is just to “flatter” the sponsor with your achievements. 

After you followed the aforementioned recipe, you are now ready to submit your application to the scholarship screening committee. Be prepared for other requirements (such as interviews and examinations) that will determine if you are eligible to receive a college scholarship.

Follow the aforementioned college freshman’s recipe when you apply for a college scholarship. And best of all, do not forget to pray that the sponsor would consider you eligible for the college scholarship.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

529 Plans - When to Change Providers

Posted on Oct 19, 2012 with No comments

Oct 19, 2012

Does it make sense to switch out of an expensive or poor-performing plan? Keep in mind that some states such as New York and Illinois require you to pay back the money you deducted from state income taxes if you move money out of that state's 529 plan. And you could also pay a fee of about $50, on average, to make the switch, said Joe Hurley, founder of, a website that offers advice on college savings, particularly 529 plans.

"Sometimes you can find another 529 plan that has essentially the same make-up of mutual funds in another state, with lower fees; then it becomes compelling to make the move. You can expect the same pre-fee investment, for a higher post-investment outcome," said Hurley.

There's no prohibition against having multiple plans, either, so you could always just stop contributing to an in-state plan you don't like and open a new plan in another state, without moving any money and incurring switch fees and taxes.

Before making a switch, it may be possible to improve savings by reallocating the funds that are invested in a 529 that is rated "neutral" or "negative".

Many plans with options to allocate savings in large equity or bond mutual funds can be reworked to place all or most of the savings in one of these funds. A federal law allows reallocations as well as rollovers to take place no more than once a year.

Morningstar analysts' concerns with some of the "negative" plans were due to the inclusion of a few weak funds. They also largely contained funds groups like Blackrock, however, which provided more stable investment options.

If you are making a small investment, chances are that you won't get much of a tax benefit with your state's deductions. It may be worth shopping for an out-of-state plan with better performance.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Best 529 Plans for 2015 by Morningstar

Posted on Oct 18, 2012 with No comments

Oct 18, 2012

College is expensive and it seems that the costs only continue to increase. This is a point of financial stress for many of us with children in elementary school but the good news is that we still have many years to save.

One popular college savings avenue is a state-sponsored 529 plan. If you’re in the market for a 529 then you’re in luck, Morningstar just released its list of the Best 529 College-Savings Plans for 2015.

Morningstar’s list includes “27 plans that are likely to outperform their peers on a risk-adjusted basis over a full market cycle. These plans earned Gold, Silver, or Bronze Morningstar Analyst Ratings, which are forward-looking, qualitative ratings.” Source:

Four of the 27 plans earned a gold rating: Alaska’s T. Rowe Price College Savings Plan, the Maryland College Investment Plan, the Utah Educational Savings Plan and Nevada’s Vanguard 529 College Savings Plan.

An additional four 529 plans earned a silver rating: Arkansas’ iShares 529 Plan, the Michigan Education Savings Program, Ohio’s CollegeAdvantage 529 Savings Plan and Virginia’s CollegeAmerica program.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

What is the Difference Between Federal and Private Student Loans?

Posted on Oct 17, 2012 with 1 comment

Oct 17, 2012

With the high cost of a college education most students are forced to apply for student loans. Many people know of the existence of federal student loans but they don't know there are also private loans available also. Knowing the difference between the two are necessary because they have different rules for borrowing and repayment.

Key Differences Between Federal and Private Student Loans

There are several different types of federal student loans: Direct Subsidized and Direct Unsubsidized Loans; Direct PLUS Loans; and Federal Perkins Loans.

Your financial aid package will outline which loan(s) you’re eligible for. You might also qualify for private student loans, but keep in mind that these are generally more expensive than federal student loans and may not have fixed interest rates or attractive repayment plans.

Some of the key differences between federal and private student loans are listed below.

  • Repayment requirements – federal student loans don’t need to be paid until six months after you graduate, leave school, or change your enrollment status. Private student loans typically have to be repaid while you are still in school.
  • Interest rates – interest rates are fixed on federal student loans are usually much lower than private student loan rates. Also, some federal loans feature subsidized loans, where the government pays the interest on the loan while you’re in school. Private student loans are not subsidized so you are responsible for paying all the interest on the loan.
  • Credit checks – you won’t need a credit check for a federal loan, but private student loans will require you to have a good credit score and clean credit report.
  • Cosigner – federal student loans typically don’t require a cosigner; most private student loans do have this requirement.
  • Tax advantages – interest on federal student loans may be tax-deductible; interest on private loans typically are not tax-deductible.
  • Consolidation options – federal student loans can be consolidated into a Direct Consolidation Loan; you don’t have this option with private loans.
  • Repayment options – if you end up having struggling to make your loan payments on a federal loan, you may be able to reduce your monthly payment or postpone loan payments temporarily. Most private lenders don’t offer as many types of loan deferment or forbearance option, so these loans are less flexible in terms of repayment terms.
  • Prepayment penalty fees – federal loans don’t impose a penalty fee for paying off the loan before the loan term. Private loans can impose prepayment penalty fees, so be sure to review the terms carefully.
  • Loan forgiveness – if you work in public service – say, you are a police officer, social worker or a nurse – you may be eligible to have a portion of your federal loans forgiven. Lenders typically don’t offer any type of loan forgiveness program for private loans.
  • Loan assistance – you can get free help for federal loans by calling 1-800-4-FED-AID and review information on the U.S. Department of Education website. Recently, the federal government announced plans to oversee private lenders. As part of that effort, there will be an advocate for borrowers with private loans. To reach this advocate, you will need to contact the Consumer Financial Protection Bureau’s private student loan ombudsman.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Student Loans Within a Marriage Can Complicate Finances

Posted on Oct 16, 2012 with No comments

Oct 16, 2012

When a couple, each with student loan gets married, how are the student loans of each spouse treated. The good news is these loans have more repayment options and possible breaks than most other loans. There is some confusion about how to handle student loans in a family , I will try to answer a few here.

Whose loan should get paid off first?

There may be a point of contention in the family about whose loan should be paid of first. Should it be the one with the smallest balance or the one with the high interest?

There are two sets of answers to this question. The communal method suggests looking at you and your spouse’s loans as belonging to you jointly. In this scenario, you pay off any private student loans first, since these loans can change in interest over time – similar to a credit card – and have fewer hardship repayment options. If neither of you have private student loans, then you should pay off your highest interest rate loans first – unless one of you qualifies for income-based repayment. (We’ll go deeper into income-based repayment later in the article).

The other answer applies to couples who are newly married or will keep finances relatively separate. Since your spouse isn’t legally responsible for your student loans, you may not want to work together to pay off your honey’s loans before your own – no matter what the interest rate difference is. Thus, you have several options under the individual theory. Each of you pays your student loans out of your own paychecks. To pay off your student loans together (but not one person’s debt before the other), you can try the equal amounts system. Set an amount above your minimum payments that goes towards each of your debts. For example, if you have $200 total between the two of you for speeding up debt repayment, add $100 to your individual loan payments.

While it may seem unromantic to think of your loans as individual property, there are long term benefits should you ever get divorced. There are circumstances where you would qualify for a temporary break from loan payments, reduced payments, or loan forgiveness personally, but not if listing your partner’s income.

Will Marital Income Affect Income-Based Repayment Options?

Yes. If you file a joint tax return, you’re combined adjusted gross income (AGI) determines your eligibility for income-based repayment. For example, let’s say your AGI is $10,000 this year while your spouse’s is $60,000. Each of you has $50,000 of federal student loan debt at 6.8%. If you filed individually, you’d pay $0 on income-based repayment. Your spouse pays $475. If you filed a joint return, you’d each pay $300. This reason alone isn’t a good reason to file separately, but it’s a reason to compare filing options at tax time. If you utilize TurboTax or other tax software, fill out both individual and joint returns and then file whichever option works out better for you each year.

Is My Spouse Legally Responsible for My Loans?

No. Student loans do not go on each other’s credit reports when you get hitched. Your loans stay with the individual that borrowed the money, and remain that way through single life, marriage, and divorce.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Credit Cards and Students

Posted on Oct 15, 2012 with No comments

Oct 15, 2012

In today’s world, having a credit card is a luxury. Credit cards are a great convenience, meaning that you don’t need to worry about cash when making a purchase. Although some credit cards have strict requirements, there are a lot of manufacturers that are giving both high school and college students the chance to get their own credit cards. Student credit cards can be used the same way as a traditional credit card, although they do come with certain restrictions and limitations that other credit cards don’t normally have.

A lot of companies and banks that offer student credit cards will normally need a co-signer as a form of insurance or collateral. This person will sign on the loan with the student, and will be the person the company falls back on if the student is unable to pay the bill. Normally a parent or guardian, the co-signer is considered to be back up and a peace of mind for the issuer of the student credit card, as they can always count on the co-signer with good credit to pay if the student can’t.

Normally, the APR or interest rate is higher with student credit cards, which helps to minimize the risk for the company. The spending limit is also different with these credit cards, as most are between 250 - 800 dollars. The reason for this, is because most students have established any credit, and therefore won’t have a great credit rating. Although the spending limit is obviously lower with these cards than other credit cards, they will still help students establish credit.

Students who plan to make a large purchase, can greatly benefit from using student credit cards. To make large purchases, you’ll need good credit - which is where a student credit card can really help out. You can use these credit cards as a stepping stone to building credit, and establishing a good credit rating. If you can get your credit rating high with your credit card, you’ll then be able to be approved for much higher loans in the future.

Student credit cards can also help students gain a sense of responsibility. The card works just like any other credit card, although the spending limit is much lower. Once the student has mastered usage of the card, he or she can manage money much better later on in life. These cards are great for students to have, and can teach them money skills that will last a lifetime.

Just like traditional credit cards, students should also know that student credits cards can be dangerous. Although they are great to have, there are pitfalls such as overspending. If students spend more money than they having coming in, they will be unable to pay their credit card bill, which will then affect their credit. If the company goes after the co-signer to pay the bill, it could also affect their credit as well. Therefore, students should always have a budget in mind before they start using their credit cards.

All in all, student credit cards are great to have. For high school students or college students, these credit cards are a means of freedom, and a way to teach responsibility. They can come in handy during emergencies, which is reason enough to invest in them. If your son or daughter is in school right now, you should look into student credit cards. They can help your child to establish credit - which will take them farther wherever they go in life.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

What Federal Grants can College Students Apply for?

Posted on Oct 14, 2012 with No comments

Oct 14, 2012

Securing money for college by saving and scholarships is usually not enough. The Federal government offers several kinds of grants to help pay for college costs. Unlike student loans, grants do not need to be paid back.

Grants are often called a “gift aid” and are based on need. If you apply for a federal grant, you will need to submit a Free Application for Federal Student Aid (FAFSA). The U.S. Department of Education will then work with your college or career school to determine whether you are eligible for a grant, how much you can get, and when you would start receiving it.

The U.S. Department of Education offers a few different types of grants to eligible students. One of the basic requirements for getting these grants is that you need to be attending a four-year college or university, community college, or career school. Here’s a closer look at each grant:

Federal Pell Grants

These grants are usually only rewarded to undergraduate students who have not already earned a bachelor’s or a professional degree. However, this grant can be awarded to students enrolled in a post-baccalaureate teacher certification program. For the 2012-13 school year, the maximum Federal Pell Grant you can receive is $5,550 and the minimum Pell Grant award is $577. The amount received depends on financial need, cost of attendance, part-time or full-time status, and your plans to attend school for the full academic year or less.

Federal Supplemental Educational Opportunity Grants (FSEOG)

This grant is designed for undergraduate students that can demonstrate exceptional financial need. Your college will need to determine what your financial need is based on your FAFSA application. A school’s financial aid office is responsible for administering this program but not all schools participate. The award amount is between $100 to $4,000 a year, depending on need.

Teacher Education Assistance for College and Higher Education (TEACH) Grants

If you plan to become a teacher in a high-need field and in a low-income area, you may be eligible for this grant. This is different from federal student grants because you do need to take certain types of classes to qualify for the grant, and then choose a specific career path. You also need to teach for at least four complete academic years within eight years after completing your educational program.

Iraq and Afghanistan Service Grants

If your parent or guardian was a member of the U.S. armed forces and died as a result of military service performed in Iraq or Afghanistan after the 9/11 events, and you were under 24 years of age or enrolled in college at least part-time when your parent or guardian died, you may be eligible for this grant. The grant is equal to the amount of the maximum Federal Pell Grant for that award year.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Want to be heard? Leave a reader comment below.

College Education: Scholarship Grants or Financial Aid?

Posted on Oct 11, 2012 with No comments

Oct 11, 2012

Let’s face the reality. College education is expensive! A lot of parents do a double take when their children are preparing and looking forward to attending a community college or a state university.

There are a lot of things which comprises the cost of college education and the tuition fee is just a part of the big picture of getting into college. Other everyday expenditure includes food, transportation, housing, pocket money, and other miscellaneous fees which when added up can create a significant portion in financing a college education.

A lot of families in this day and age, even if they belong to the upper-class society, think about applying for financial aid. College grants and scholarships are the most excellent kind of financial assistance.

Grant and scholarship programs do not entail students or the family to pay back. These could be of two kinds: (1) base on need, which is given due to the financial inability of the student and the family as a whole, and (2) base on merit, the talent of the student like in sports, is the main consideration. The student’s academic ability also falls under the merit-base college grant and scholarship.

Oftentimes, college grants and scholarships combine the merit and need criteria to ease out the whole financial aid process. Numerous students and their families are in the look-out for this type of financial aid. However, college grants and scholarships are limited compared with the growing number of students year after year.

Qualifying students can avail of federal and a number of state scholarship programs. Some of which are the following:

Federal or National Pell Grants – this is a program funded nationwide intended to endow assistance to any qualified undergraduate learner pursuing postsecondary schooling. Grants and scholarships of this kind are given to those who have not finished a baccalaureate degree.

The worth of the grant can vary year after year and will depend largely on the financial need of the students, the expenses that will be incurred while attending the chosen university or college, and the availability of funds from the national government.

This type of grant will open opportunity for the students to avail succeeding financial aid from the national government.

Federal Supplemental Educational Opportunity Grant (FSEOG) – this is a program for ongoing undergraduate students with outstanding monetary need. However, not all students can avail this type of grant. This will depend on the eligibility of the students and availability of finances of the concerned school.

Another form of financial aid that students and families can turn to is through loans. This type of financial assistance should be paid back. The financial need of the family should be considered thoroughly to avoid paying high interest rates.

It is also a must to understand all the terms of lending agencies such as the schedule of repayment and interest rates, before signing in or making a commitment.

Work study is a form of financial assistance which calls for students to do labor to sustain their college education. Work study is commonly done on campus and is the most typical form of financial aid in all universities and colleges. Usually, the students will render service to schools for ten to fifteen hours per week.

Scholarships, grants and other forms of financial aid to acquire college education is really multifaceted, confusing at times, and even exasperating. The good thing is college education is a non-refundable and non-biodegradable type of investment. It is for the future!

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Saving Money Is One Of The Best Ways To Avoid A Student Loan

Posted on Oct 8, 2012 with No comments

Oct 8, 2012

Student loan debt is one of the biggest problems for American economy. The debt is more than $1 trillion, it’s hard to imagine how many students are struggling with paying of their loans, it takes long years to pay it off and start living your own life. College tuition never was so expensive like it is today and lots of young people who are going to attend college think that the only way to get there is to take out private of federal student loan. But as every loan, taking out a student loan is a serious financial commitment. That’s why it’s important to pay attention to alternative ways of paying for college.

Why Students Default on Their Loans (

Attending a college shouldn’t be a spontaneous decision. The earlier you start – the better for you. At first it’s necessary to understand how much money you need to understand your final goal. Talk to your family and relatives and ask if they can help somehow. Remember, that your goal is saving enough money to avoid a student loan. Starting your professional way with a huge debt isn't the best option. Until you are repaying your loan, probably you won't be able to afford a house or a car, because you will be focused on eliminating debt. Unfortunately, college degree isn't a guarantee of job. Some graduates work for small wages because they have no job experience. Student loan is a special kind of loan, so even filing for bankruptcy will not help to avoid paying it off. That’s why the best option is to focus on saving money or look for other alternative.

5 Mistakes I Made in College and Wish I Could Do Over (

Learn more about 529 plan. This is a tax free savings plan which can help to save money to college tuition. This plan is a great solution which can help parents to send their students to college. It’s really a good option intended to help you to save money for higher education and avoid a student loan. It’s just like a 401 (k) plan which is the most popular option to save money for retirement. Also it’s important to think the way you can help your parents to save. For example, you can get a part-time job or online job to raise some money. It’s not worth to think that good and quality education is available only in the most expensive colleges. Compare prices offered by a few colleges and try to choose the best option.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

How Does a 529 Plan Affect Your FASFA

Posted on Oct 7, 2012 with No comments

Oct 7, 2012

Knowing how your 529 plan affects you FASFA can help you make better decisions. Did you know there are different ways to register you 529 Plan so that it will do the least harm on the FAFSA form? Here are some helpful pointers to make your 529 Plan friendly.

529 Plans are already treated pretty well by the FAFSA because their money is listed as the owners (most likely the parent) money instead of the beneficiary (the student). Under the Federal Method, this takes you exposure down from 20% to 5.6% on your EFC (Expected Family Contribution).

A quick example of this would be that if you have $50,000 in an account under your child’s name, you would be expected to use $10,000 of it towards tuition in year one. If that same $50,000 was listed as a parent owned 529 Plan, only $2,800 of it would be expected to use in year one.

How can I make the FASFA treat us better financially? First, list either Grandpa or Grandma as the owner on the account. When this is done, you do not have to list the 529 Plan assets as either Parent or Student Assets on the FAFSA form. Now this is fantastic, because none of the money that you worked so hard to save is being used against you!

However, the catch here is that once the money is used for tuition, the money is counted as student income on the FAFSA form the following year. How do you combat that? We advise that you wait until the students Senior year to use the assets, that way there are no more FAFSA’s that need to be filed.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Why is There Risk When Using a Prepaid College Plan?

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Saving for college and retirement are the two most expensive endeavors any family has to deal with. Both have ever rising costs and trying to save for something that you do not specifically know the total cost of, just makes it even harder to do. When saving for either one most people choose mutual funds that invest in the stock market.

These days most people do not have much faith using mutual funds as an investment vehicle, they want something with less risk and a more of a guarantee. That's why prepaid college plans are becoming more popular. But are prepaid college plans any less risky than their mutual fund counterparts?

Prepaid college plans are a type of 529 plan according to section 529 of the Internal Revenue Code. In addition to deferring federal tax, these plans may have considerable state tax advantages, allow for matching grant and scholarship opportunities, and offer protection from creditors and exemption from financial aid calculations for investors. Prepaid college plans allow you to purchase tuition credits at a rate that is fixed today to be used in the future. That “fixed” rate is usually higher than the current tuition rate, but would be much lower than the expected tuition by the time the child enters university. As many as 20 states once provided a prepaid tuition plan – currently 12 states do.

Tuition-based 529 plans have an advantage over 529 savings plans, where growth is generally based upon market performance of the underlying investments, typically consisting of mutual funds. While the aim of savings plans is for the underlying investments to keep up with rising tuition costs, prepaid plans have already fixed the cost of tuition, presumably at a bargain price.

But prepaid tuition plan funds might still be risky for a number of reasons. The first is that the funds might close to new contributions, even from existing investors. These closures have resulted from the gap between sputtering market performance and rising college costs, the latter exacerbated by declining or frozen state support for higher education. According to the College Board, Standard & Poor’s 500 stock index has dropped three percent since 2000, while tuition and fees at public four-year schools have increased at an inflation-adjusted 72 percent.

Ohio closed its prepaid plan to new enrollments in 2003 in anticipation of potential shortfalls caused by declining investment returns and soaring tuition after the state had lifted a lid on fees. Some funds took greater financial risks to bridge the funding gap, but those actions resulted in widening the gap. For example, the Illinois plan made bets on private equity and hedge funds, leaving it 30 percent underfunded. As a result, the state in 2011 temporarily closed the fund to new investments.

The second risk is that the plans are not necessarily guaranteed. This fact may surprise many consumers, considering that the plans are state-run and often advertise themselves as “guaranteed.” However only five states truly guarantee their plans. Massachusetts, Florida, Mississippi and Washington guarantee their plans through the full faith and credit of the state. The Texas plan is also state-guaranteed, through the state universities and colleges.

Plans run by the states of Pennsylvania, Nevada, and Michigan are only backed by assets in the trust. Plans in Maryland, Virginia and Illinois require varying degrees of legislative action for the state to pay back investors in the event of a funding crisis, meaning that it may take consumer action if legislators are reluctant to bail out the state’s tuition plan fund.

Finally, legislatures have and continue to “adjust” all plans, raising the cost of buying credits from time to time. They are constrained mainly by the fact that sales of plans would fall if credit costs rose too much. Despite the funding uncertainties, the best hedge against this third sort of risk is to prepay for more of your child’s tuition sooner.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Save Money in College While Still Having Fun

Posted on Oct 4, 2012 with No comments

Oct 4, 2012

During college, most people’s finances take a hit as they must contend with tuition, books and fees while also paying rent. However, the increased college expenses do not mean that a college student has to give up on fun. Instead, students should take advantage of the following ideas so that they can start saving money while still enjoying college life.

1. Buddy up-For most college students, living expenses are one of their largest financial concerns. In order to split costs on rent and utilities, college students should consider having a roommate. Not only is boarding with someone else a great way to save money, but it also offers an instant friend for hanging around the house or hitting the town.

2. Hold dinner parties-Eating out at restaurants can get expensive. Therefore, college students should invite their friends over for dinner parties such as a potluck. If everyone brings a dish, then the cost of eating will be reduced while everyone can enjoy a feast along with each other’s company. For some extra fun, try centering the dinner party on a theme such as Greek cuisine or a time period that is being studied in class.

3. Share textbooks-Next to rent and utilities, the cost of textbooks can be another one of a college student’s highest expenses. For this reason, it can be helpful for students to team up with their classmates and share the cost of a textbook. Then, they can meet up for study groups and enjoy their shared savings.

4. Head to the park-Gym memberships are another expense that can be eliminated by simply stepping outdoors. Grab a few friends and head to the local park for an impromptu game of sand volleyball or football. This can be a great way to get some exercise while enjoying the natural setting with some friends.

5. Visit the library-Textbooks are not the only required texts that a student may need to purchase for a class. Most courses have other required reading texts along with videos and other types of media that a student may need to purchase. These costs can be avoided by checking out the materials from the local library. Additionally, most libraries also offer other amenities that students can enjoy such as meeting rooms, free Internet access and book clubs.

When a student makes an effort to save money in college, then they will be taking steps to ensure their financial security after graduation. However, saving money does not have to be boring. Instead, students can take advantage of community resources while teaming up with their friends to make saving money part of a lifestyle that also includes plenty of social interaction and time set aside for fun.

Author Bio:
Paul and his wife Julie both spend quite a bit of time coming up with ideas, blogging, and researching all things related to childcare. They take care of all the necessary information related to “”. He personally thinks his blog will help finding information on all things related to a babysitter.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

3 Ways to Help Your Student Through College

Posted on Oct 3, 2012 with No comments

Oct 3, 2012

The students have just gone back to University, but for many it’s their first time in the big cities, having to fend for themselves and make sure that they’re up in time to make the first lectures of the day! While the early birds will have no problem with that task, others might find it a little more difficult, so anything we can do to help make their time at Uni simpler can only be a good thing right?

Whether it’s our own children or the Grandchildren who’ve gone off in search of the foundations they need to build their future careers, they’re likely to realize how important it is to budget between student loan payments.

But before they get bogged down and depressed by their poor financial situation – a factor every student, unfortunately, has to deal with – there are a number of things you can do to help them.

Budgeting Lessons

If they haven’t gone already, or if you get the chance to sit down with them sometime soon, work out exactly how much they have in their account, how much their rent is each month, and when the next payments are due both in and out of their banks. This way you can chat clearly and easily, showing them exactly how much money they have to “play” with, and how much they’re able to spend each week, helping them to stay out of the red, and in the black for as long as possible.

Shopping Tips

Shopping is a key part of student life, popping down to the supermarket and buying trolleys full of baked beans, pizzas and drinks, but many students don’t know how to get as much as possible for as little as possible. You don’t need to be one of the top accountants based in Dublin, London, Manchester or Edinburgh to know how to make savings. Own-brand products can be significantly cheaper than the brand named products, but with little or no difference in taste, something you’ve worked out with your experience of doing the family food shop that they might not have realized. Let’s be honest, students won’t notice the difference once it’s out of the packet anyway, they’ll eat anything!

Regular Communication

Possibly the most important thing is to stay in touch while they’re away. The last thing you want to find is that the reason you haven’t heard from them in a few days or weeks is because they’re worried about telling you they’ve run out of money. By staying in regular contact, you can gauge how they are. This isn’t to say you should ring them every day, (they’ll soon stop answering), but maybe once a week at least if you haven’t heard from them beforehand.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.comWant to be heard? Leave a reader comment below.

Saving for College with 529 Plans

Posted on Oct 1, 2012 with No comments

Oct 1, 2012

There is a rise in college student debt as people are finding it difficult to arrange funds for higher education. The debt manages to pile up on the students if they are unable to repay the student loans on time. This article is all about saving for college so you don’t have to take out student loans that may transform into huge debt over a period of time.

The 529 plans have come up as a great solution to the problems that parents generally face as they try to arrange funds for their children’s higher education. These plans are quite similar to the 410(k) programs that help in saving money for retirement. It is reported that there have been investments worth billions of dollars into the 529 plans. There are positive hopes when it comes to future contributions in these plans. The coming decades are going to see a rise in the amount of investments in these attractive plans that have come to solve the problems of children looking to get into college.

529 plans

It was the year 1996 when the Section 529 plans were created by Congress. It didn’t have much of a role to play in saving money for college and was mostly related to the Small Business Job Protection Act. A year later, the law on these plans was refined by the Taxpayer Relief Act. Further modifications were done by the Economic Growth and Tax Relief Reconciliation Act and Pension Protection Act in 2001 and 2006 respectively.

The federal law states the Section 529 plans as qualified tuition programs. The reason behind using the name ‘529 plan’ is the Internal Revenue Code section 529. This section is responsible for governing the operation of this plan. 

Knowing the 529 plans better

A 529 plan is a way to save money for college. It offers federal tax advantages. The 529 plans are categorized in two types:

  • College savings plans 
  • Prepaid tuition plans 

These two plans offer similar federal tax advantages. Nevertheless, there are significant differences between these two plans.

Using the 529 plans

It is important that you make an extensive use of the 529 plans. This way you won’t have to take out student loans. It is important to remember that not repaying the loans on time is going to put you under mountainous debt and damage your credit. Carry out some research work to know more about the 529 plans.


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