Special Bulletin: Your College-Related Tax Breaks Survived a Congressional Move to Eliminate Them

In November College Affordability Solutions urged you contact your members of the U.S. House and Senate in opposition to certain provisions within the House tax bill that was then working its way through Congress.

That bill was supposedly designed to cut taxes. But it would have done away with IMG_0428deductions and exemptions that reduce taxes for you and other students and parents by over $18 billion a year — money that helps pay college costs.

The original House bill was remarkably partisan. It was written by Republican House members without input from Democrats, and it got 227 Republican votes but no Democratic votes

Fortunately, the Senate also opposed eliminating college-related tax deductions, exclusions, and exemptions. It made sure they remained unchanged in the final bill, which is now law. So don’t ever think your voice doesn’t matter — constituent pressure clearly helped preserve these tax breaks!

Here are the college tax benefits that were preserved in the final bill:

  • If you’re a student, you still won’t be taxed on money you use from your College Savings Bonds to pay your educational expenses.
  • Parents, you may keep on making deposits into your Coverdell Education Saving Accounts to build up money for college.
  • The first $5,250 you use from your Employer-Provided Educational IMG_0429Assistance program to pay higher education costs will continue to be untaxed.
  • The Lifetime Learning Tax Credit remains unchanged. So you may keep reducing what you’ll pay in federal income taxes by up to $2,000 a year based on what you spend on tuition, required fees, books, and supplies for any student (including you) taking courses to get a degree or improve job skills.
  • The Scholarship and Fellowship Exclusion will continue to omit from federal taxation what your scholarships and fellowships pay toward your college costs.
  • Borrowers, you’ll still be able to claim your Student Loan Interest Deduction of up to $2,500 for student and/or parent loan interest you pay each year.
  • Your $4,000 per year Tuition and Fee Deduction remains unchanged.
  • Are you or will you be a graduate student? If so, any Tuition Reduction you receive in connection with a graduate assistantship or fellowship still won’t be subject to taxation.

Congratulations on keeping these benefits! But stay active and alert. More bills impacting college affordability will come before Congress soon.

Contact College Affordability Solutions by calling (512) 366-5354 or emailing collegeafford@gmail.com.

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After College: Things to Do As Your First Student Loan Payment Comes Due

If you graduated from college last spring, chances are your obligation to begin repaying your Federal Direct Loans has begun. If you’ve not yet heard from the student loan servicer Washington hired to collect your payments, you need to contact it immediately (see below) because you’ve got some important things to do:

Choose Your Repayment Plan. Your servicer sent you a notice by email, U.S. Mail,IMG_0410 or both. This notice invites you to select the repayment plan that works best for you at this point in time. If you don’t select a plan, you’ll automatically be assigned a Standard Repayment Plan under which you’ll pay off your Federal Direct Loans within 10 years by paying the same amount every month.

No matter what your repayment plan, you can change it by contacting your servicer. However, if you’re paying under an income-based or income-contingent plan, you can switch only after making payments for at least three months.

Decide How to Pay. You may pay by cash or check. But the most convenient way to pay is to give your servicer permission to draw your monthly payment out of your bank account via “electronic funds transfer.”

Your Payment Due Date. Your notice will also tell you the date on which your first payment is due. This date is in January for most spring graduates.

Payment must arrive at your servicer within 15 calendar days of this date or you’ll be behind in your payments. But remember, if you’re mailing your payments, assume it’ll take the post office about 10 days to deliver them.

IMG_0411You’ll have the same payment due date every month. However, if at any time this date doesn’t work for you, you may contact your servicer and request a different payment due date provided you’re not behind in your payments.

If You Can’t Afford to Make Payments. Call your servicer. Describe the issues affecting your ability to pay. Ask if you qualify to postpone your payments through a deferment or forbearance. But remember, postponing payments often IMG_0412generates additional interest on your Federal Direct Loans, so you’ll spend more to repay them in the long run.

Contacting Your Servicer. Access your records in the National Student Loan Data System to find your loan servicer’s contact information.

You’ve got lot’s of options. Make well-informed, wise choices to help set yourself up for a smooth and successful repayment experience.

Need advice about your student loan payments? Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for a no-charge consultation.

During College: Timely Advice To Help Your Student Manage January Expenses

January can be expensive for college students. A new academic term often means paying for travel back to school, tuition and fees, books and supplies, and room and board. Add leftover holiday bills and January spending can quickly get out of control.

How to best resolve all this without jeopardizing progress toward graduation? These are big, intertwined tasks, so your student may need guidance from you, her parents, or even a skilled money management professional.

Linda Matthew, an experienced Accredited Financial Counselor with Money Mindful Personal Financial Coaching, endorses a four-point approach.

(1) Your student should confirm exactly how much she owes and when payments are due using her records, including credit card and other receipts, to make a list of these.

(2) Urge her to prepare to pay her outstanding debts and soon-to-be expenses by IMG_0367writing out a spending plan for the first quarter of 2018.

This plan should include your student’s school-related costs. If she must pay 100% of these by a certain date to enroll and succeed in classes, she needs to pay them by that date even if doing so means spreading other payments over the next two or three months.

But payment may not be required on every institutional charge as the term begins. Some colleges offer payment plans that delay one or more installments until later in the term, freeing up funds for other January expenses. Some also offer short-term tuition loans. However, these usually require extra fees so she should take those costs into consideration.

Your student may also want to investigate refinancing her credit card debt. Doing so could reduce her interest and even postpone a payment on her new card’s balance.

IMG_0366(3) If your student ended up dealing with unexpected January expenses because she didn’t plan for this past Christmas, it’s absolutely critical that she begin saving for next holiday season as part of her spending plan. No sense in courting another problem in another 12 months.

(4) If extra income’s needed, suggest your student search out a short-term, part-time job if she’s not already working. Another way to raise money is to file for her federal tax refund ASAP. The IRS issues 90% of tax refunds within 21 days of receiving 1040 forms.

The holidays are over, but advice about managing expenses is one of the best gifts your student will ever receive!

To contact Linda Matthew at Money Mindful Personal Financial Coaching for help resolving your financial issues, call Linda at (530) 220-3369 or email her at linda@moneymindful.org.
Have questions for College Affordability Solutions? Call (512) 366-5354 or email collegeafford@gmail.com.