Students and parents are already gearing up for college payment decisions, so we put together a student loan miniseries on our Youtube Channel to help get the knowledge out there. #MyCollegeCorner features weekly updates, so subscribe to stay on track with your plan. Today’s episode covers subsidized and unsubsidized loans. Stay tuned for insight on Parent Plus in upcoming episodes.
For the first time, the FAFSA will be available beginning October 1. This is a big move from the traditional January 1st date for FAFSA availability, and will change the timeline for financial aid processing with implications for admissions. If you’re planning college admissions in Fall 2017, it’s already time to get started!
Prior-Prior Year Taxes (PPY): A move that will help streamline the process is the use of Prior-Prior Year Taxes to complete family financial information on the FAFSA. The 2017-2018 FAFSA will require info from the 2015 year tax returns. Those returns have long since been completed by most families, and may be available for digital transfer from the IRS via their Data Retrieval Tool. This means the financial details of your tax return can automatically populate the FAFSA, saving you time from data entry. Also, using Prior-Prior Year taxes negates the need to make estimations on the FAFSA when tax returns were incomplete. In the past, when FAFSA filers were required to use only the Prior year tax returns, they were encouraged to file the FAFSA on January 1st, before their actual tax returns were completed. Now that tax returns from the Prior-Prior year are used, there’s no need to estimate.
Expect similar admissions deadlines: Most colleges are maintaining their same admissions deadlines. May 1 will still be the major deadline for enrollment decisions. Early Decisions will be the exception from school to school. The big impact early FAFSA makes is that there will be more time for schools to process new incoming financial information, and families can get a better idea of their financial aid eligibility earlier in the process.
Pay attention to institutional funding deadlines: Institutional funding is money reserved by the college and awarded based on their own internal criteria and methodology. Eligibility requirements and deadlines can vary from school to school. Make sure to identify any deadlines for institutional funding to stay ahead of the curve. The simplest way to achieve this is by making sure all financial aid forms are completed and submitted in advance of any deadlines.
Remember the CSS profile: The FAFSA obviously gets a lot of attention, but the CSS / Financial Aid Profile is also required for about 400 select colleges when applying for financial aid. It goes more in depth than the FAFSA and is also available beginning October 1.
Dealing with uncertainty on the state level: Many states provide need based grant programs to students with low income based on data provided on the FAFSA. While the federal FAFSA is available beginning October 1, not every state will have their grant budgets for the 2017-2018 years ready yet. Be aware of any financial aid awards relying on estimates for state based funding as they may be subject to change based on final state budget legislature.
April is #FinancialLiteracyMonth offering many reminders about the importance of saving. Thinking about starting a 529? Here’s 5 reasons why the 529 makes an excellent option.
1. It’s cheaper to save than to borrow: It’s much more than “a dollar saved is a dollar earned” today, as many utilize student loans to cover the rising cost of higher education. Having to borrow becomes a much more costly endeavor long term, where savings is a more attractive option. For example, saving $100 per month averaging 4% rate of return compounded annually over 18 years would produce about $31,437. If borrowing $31,437 at 4%, a 10-year repayment schedule would require monthly payments of $318.28 for a total of $38,194.24 repaid. The $6,757.24 in interest costs may be a tax deduction in future years of repayment, but it’s clear that a little bit of early savings goes a long way to cover college costs.
2. No income limitations: Regardless of how low or high family income is, there are no income limitations associated with the 529 plan. This is unlike the Roth IRA, a retirement savings program that is only available for single people making less than $116,000 per year or married couples earning less than $183,000 per year as of 2015. Savers make saving a financial priority and are not limited by the 529 because of future gains on income.
3. Tax-free growth: Quite simply, 529’s offer a tremendous benefit of tax free growth. Specifically, all earnings grow free from federal taxes. Most states conform to the federal tax free treatment with 33 offering state tax deductions
4. Best savings option when considering financial aid: Families concerned their savings may affect their eligibility for need-based financial aid should take a look at the 529. Ultimately, the way cash is saved is what’s most important. On the FAFSA (Free Application for Federal Student Aid) money saved in a 529 plan owned by the parent is weighed against financial aid eligibility at 5.64%. For example, $10,000 saved in a 529 could end up reducing financial aid eligibility by $564. However, this is much better than having money in a standard savings account in the student’s name, where it can be weighed against financial aid eligibility by 20%. The 529 provides a superior vehicle for college savings given financial aid regulations for higher education.
5. Great for estate planning: Grandparents are finding creative ways to help fund college for their grandkids while retaining control of their assets as part of their estate. Money put into a 529 is removed from the taxable estate, but grandparents are able to retain rights of control over the 529 account even when funding is typically used to cover future college expenses for their grandchildren. Generally, the goal of estate planning is to reduce tax liabilities and provide assets to family members as efficiently as possible. Under current tax law, you are permitted to gift up to $14,000 per year to another person for any reason without having to pay a gift tax or a generation-skipping tax (GST). This limit is sometimes referred to as the “annual exclusion amount.” With a 529 Plan, however, you are able to make a lump-sum contribution equal to five years of annual exclusion gifts to a beneficiary in a single year. This means that you can give up to $70,000 (if you are single) or $140,000 (as a married couple) at once, per beneficiary, without having to pay gift or estate taxes.
Learn more about Invite Education’s 529 search engine and college savings calculator, helping your institution provide families with savings strategies and grade-by-grade guidance every step of the way.
So many great benefits are being provided to employees through smart use of technology combined with insightful knowledge. Just take a look at how employers like PwC are providing student loan repayment programs with Gradifi, or how companies can utilize Student Loan Genius to encourage employees to successfully repay student loan debt, even going so far as to match payments like a 401(k).
But all this focus on student loan debt begs the question:
Wouldn’t it be better if students could finish college with less debt in the first place?
Invite Education offers a complete planning platform that’s perfect for families managing the college process as early as Pre-K all the way to senior year of high school. We make college savings the first priority to help families take control of their future plans. Along the way, as the student progresses grade by grade, admissions and testing criteria are highlighted in preparation for the academic competitiveness involved. As college nears, scholarships and financial aid are highlighted along with cost analysis and comparisons to help finalize school choice. Finally, after all other funding avenues have been secured, student lending insight is provided to help families make wise decisions about debt.
Taking the “big picture” approach helps benefit long term planners with smart college decisions early helping to ease future student loan debt burdens. Some parents may still be paying off their student loans now, and want to find a better way to help their child. You can make this program available for your employees 24/7 and customize it to fit with your pre-existing benefits package.
Invite Education: Are you ready to Learn More?