1. Student Finance – the Big Picture EASFAA 2013 Stephen G Brown, Fordham Law School

2. Who Cares !

3. How is college paid? Student Borrowing 18% Parent Borrowing 9% Grants and Scholarships 29% Parent Income and Savings 28% Student Income and Savings 12% Relatives and Friends 4%

4. Student Loan Debt In the news, how much is true? Increased as federal limits have increased ◦ Especially at Grad/Prof level Families and choices Easy to borrow federal loans ◦ Harder to be creative

5. Parents 52% pay from current income! 11% from 529/530 plans 9% from taxable savings 5% withdraw retirement savings

6. Parent Borrowing 8 % PLUS 3% Private Education Loan 4% credit cards 2% HELOC 2% retirement account loan 3% other loan

7. Payment Plans No interest Fee Can cover charges not covered by aid 10 months-8 months-4 months Earnings from “float”

8. PLUS and GradPLUS Federal ◦ 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

9. 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

10. Employment

11. Employer provided Educational Assistance Up to $5,250 Tuition and fees Books and supplies Any employer may choose to offer ◦ But fewer doing it!

12. Employer tuition benefits 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

13. Student work for School FWS Resident Assistant ◦ Room ◦ Perhaps meal plan and some tuition Teaching or Research Assistant ◦ Tuition ◦ Other employee benefits? Really depends on school At REAL job ◦ Part time school, but free or reduced tuition!

14. Parent work for school

15. The Tuition Exchange tm Consortium of IHEs 600 schools Worked mainly through HR/Benefits office Offers tuition benefits at many institutions ◦ Ties to school policies Schools require application Balance of trade Admissions requirements

16. Veterans Benefits Montgomery Bill ◦ Chapter 30 ◦ Contributed while enlisted ◦ Up to 36 months Chapter 35 ◦ Dependents of dead or disabled vets Post 911 GI Bill ◦ Chapter 33 ◦ Tuition and fees – $17,500 maximum unless grandfathered ◦ Housing stipend ◦ Books stipend ◦ May be transferable to beneficiaries

17. 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

18. 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

19. 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

20. Tax Policy

21. Is my Scholarship Taxable? 117c qualified Scholarship ◦ Degree candidate ◦ Qualified educational expenses  Tuition, fees, books, supplies, equipment ◦ Not compensation for teaching, research, work

22. Qualified Tuition Reduction Received from eligible education institution Used at eligible education institution ◦ Need not be the same Employee or dependant Undergraduate not taxed Graduate – requires teaching or research

23. American Opportunity Credit TAX CREDIT up to $2,500 MAGI Limits ◦ $90,000 single, $180,000 married/joint 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

24. American Opportunity Credit … 100% of first $2,000 in expenses 25% of next $2,000 Reduction for MAGI $80-90k ($160- 180k) Form 8863 Extended through December 31, 2017

25. Lifetime Learning Credit TAX CREDIT of up to $2,000 Cannot be combined With American Opportunity Credit MAGI limits ◦ $61,000 (s) $122,000 Married Joint 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

26. 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 1098- E) Voluntary interest is OK

27. Student Loan interest… Phaseouts $60-75k ($120-150k) Directly deductible ◦ Line 33 1040 ◦ Line 18 1040 A ◦ Line 9 1040 EZ

28. 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

29. Tuition and Fees… Income from $65k - $80k (130k-160k) ◦ Max deduction $2,000 Income below $65k ($130k) ◦ Max deduction $4,000 Form 8917

30. Tax Free Savings Accounts

31. 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

32. Coverdell ESA 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

33. 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

34. 529 Plans 529 Plans 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 ◦ Tuition and fees ◦ Room and board ◦ Books, computer

35. 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) Transfer to other family member QTP

36. Early IRA Distribution penalty 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)

37. Education Savings Bond Interest Phaseouts MAGI $71,100 and $86,100 ◦ $106,650 to $136,650 married jointly 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

38. Insurance, TDAs and other

39. Personal deduction for work

40. Business Deduction for Work Related Expenses 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

41. Qualifying Work Related 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

42. 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?

43. Have I exhausted you yet? Questions Comments Snide Remarks

44. Stephen G. Brown Fordham University School of Law 33 West 60 th Street New York, NY 10023 212 636-7178 sbrown@law.fordham.edu