Special Bulletin: Stop Congress from Eliminating Your College Tax Breaks!

IMG_9916The Ways and Means Committee of the U.S. House of Representatives is finalizing HR 1 and the full House will soon vote on it. It’s called the “Tax Cut and Jobs Act,” but as currently written this bill would eliminate federal tax breaks now available to you if you’re a current, former, or future college parent or student.

But HR 1 hasn’t become law yet. You can still influence it by telling your IMG_9919Representative you want these tax breaks left intact. So find your Congressperson’s contact information here and call or write immediately!

The higher education tax breaks you’ll lose if HR 1 becomes law as currently written include:

  • Tuition and Fee Deduction: HR 1 would end your right to deduct up to $4,000 per year for what you pay in postsecondary tuition and fees.
  • Scholarship and Fellowship Exclusion: Under HR 1 the government would IMG_9917tax scholarship and fellowship amounts that pay for your tuition, fees, books, and class supplies.
  • Lifetime Learning and American Opportunity Tax Credits: HR 1 would eliminate the Lifetime Learning Tax Credit. For an unlimited number of years, this credit allows you to reduce your federal income taxes by up to $2,000 per student for what you pay toward tuition, required fees, books, and supplies for courses leading to a degree or to acquiring or improving job skills. To partially offset this loss, the American Opportunity Tax Credit of up to $2,500 per student would be expanded to cover five, instead of four years of these expenses — but only for at least a half-time degree or certificate-seeking student.
  • Student Loan Interest Deduction: HR 1 would end your tax deduction of up to $2,500 per year on student and parent loan interest you pay.
  • Employer-Provided Educational Assistance: Today the first $5,250 your employer pays on tuition, fees, books, and supplies for courses you take is excluded from what determines your federal income taxes. HR 1 would end this, and you’ll be taxed on such assistance.
  • Coverdell Education Savings Accounts: HR 1 would make 2017 the last year to make new deposits into Coverdell accounts.
  • College Savings Bonds: HR 1 would tax students on money they use from federal college savings bonds to pay for college.

The House votes on HR 1 soon. So if these or any of its other provisions would affect you, hurry up and exercise your rights as a citizen!

Got questions? Feel free to contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com.

During College: Strategies for Your College Finance Plan

Your College Finance Plan (CFP) needs strategies for you and you student toIMG_9592 implement before, during, and after college. Let’s look at the “During College” phase.

Research at a major university indicates that, looking back, almost 4 out of every 10 seniors conclude part or all of their student loans weren’t essential for their educations. Therefore, some of these strategies focus on personal money management so students can spend and borrow less of the interest-bearing educational debt that, over time, increases college costs. These include:

IMG_9555Also, the faster your student gets her degree, the less cost and debt she’ll incur. Still, the latest national data show that only 39.8% of undergraduates earn their bachelor’s degrees within 4 years. Here are some strategies that’ll help your student graduate on-time, if not before:

 

Look here for why you need a CFP. You can find summaries of strategies for your plan’s “Before College” phase here. And next Wednesday there’ll be samples of “After College” strategies for your CFP here.
Beginning October 16, check this website every Wednesday for a more detailed account of a strategy you may want to use in your CFP’s before, during, or after college phase.

Before, During, and After College: You Need a Plan!

About 4 million babies will be born in the U.S. this year. Naturally, their parents want each of them to enjoy the American dream. Now, more than ever, that dream includes, even depends on a good education beyond high school.

But the dream is unraveling. It’s coming undone as the rising cost of college outpaces all but the wealthiest families’ ability to pay for it.

In 1998, the total cost of a year at a state college or university averaged $10,458. That was 27% of IMG_9377U.S. median household income. Eighteen years later this cost was $24,610, or 42% of median household income. At this rate, freshman year public college expenses for 2017’s newborns will average $33,224 — an astounding 56% of median household income.

Small wonder educational debt for recent college graduates averaged $34,000, or that 44 million Americans owe $1.4 trillion in such debt. Nor is it surprising that, in 2015, there were a million fewer students in college than in 2010; the first ever 5-year drop in our nation’s college enrollment.

How to ensure your child can afford college when he or she is ready to attend? It won’t be simple, and it won’t be easy. But a College Finance Plan (CFP) can help.

A CFP is like a mortgage — a decades-long undertaking. You (the parent) and your student (son or daughter) are its key players. It involves nothing exotic or fancy; just strategies to be adopted before, during, and after actual college enrollment. You’ll want to start implementing these strategies as early as you can, and stick to them.

A CFP won’t make college free, or even inexpensive. But collectively, its strategies can help make college costs more manageable so your student can access the best possible postsecondary education.

Want a quick look at strategies you should consider for the “Before College” phase? See Before College: Strategies for Your College Finance Plan. A review of “During College” strategies will be posted on this website October 2, and “After College” strategies will be outlined here October 9. IMG_9373You’ll also find more in-depth discussions of individual strategies here through the end of academic year 2017-18.

No matter where you and your student are in the college-going process, itake concrete steps to keep the cost of a postsecondary degree within your means. Start building your CFP now!

Got questions about college costs and how to deal with them? Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for help at no charge.

Special Bulletin: Hurricane Harvey-Affected College Students Need Your Help!

Thousands of college students are at risk of dropping out just as the academic year gets started. Why? Because Hurricane Harvey damaged or destroyed their family homes and businesses, leaving them and their parents unable to provide the funds they need to stay in school.

While such students can seek financial aid to replace lost family funding, there’s a problem — there may be little or no additional aid available. This is because many of these heretofore needy students have already received the maximum amount of federal and state aid allowed by law, and most colleges have already awarded 100% of their institutional grants and scholarships.

One-third of The University of Texas at Austin’s (UT’s) 51,000 students come from communities ravaged by Harvey. So UT has redirected $500,000 into scholarships to help meet their increased financial need. It’s also seeking matching contributions to make this $1 million.

And this is where you come in. Help UT’s Harvey-stricken students by making a tax-deductible contribution at hornraiser.utexas.edu. In doing so, you’ll provide much-needed financing to deserving but tapped-out young scholars so they can stay on-track toward earning their university degrees.

Want to help such students at other institutions? Pick one and search out its development web page. Even if it hasn’t posted anything specific about funds for students struggling in Harvey’s wake, you can usually make donations through that page. Typically, it’ll also allow you to specify that your donation fund scholarships for disaster-affected students. If not, mail your donation to the development office with written instructions.

And if helping needy collegians isn’t your thing, remember that preliminary estimates place the cost of Harvey’s damages at $150 to $180 billion. So make donations or do something, anything, to help the millions of Americans from Texas to Tennessee who are in distress due to this horrible storm. Thank you!

Contact College Affordability Solutions at (512) 355-5354 or collegeafford@gmail.com.

Before College: College “Sticker Prices” Aren’t Necessarily Their Final Prices

This summer is the time for rising high school seniors to begin researching colleges they may want to attend. There’s much check out, including each school’s costs.

To get an idea of what it’ll cost to attend different colleges and universities, go to their websites and search for “Cost of Attendance 2018-19.” You might also want to use College Navigator from the National Center for Education Statistics, opening its IMG_6849“Tuition, Fees, and Estimated Student Expenses” page to track cost increases over the last four years.

Here’s an important point — 2018-19 college prices you see on websites and College Navigator are “sticker prices” and not necessarily final. Schools generally engage in “discounting” their tuition and fees and, sometimes, other student expenses.

Colleges offer discounts differently than auto dealers, although the end result is the same. Rather than reducing a student’s tuition and fees, they give him grants and especially scholarships to pay these charges. For recruiting purposes, prestigious institutional scholarship offers often impress families and help bring in students.

Public and private colleges both discount. A new study by the National Association of College and University Business Officers found that private non-profit colleges and universities provided institutional grants and scholarships to 87.9% of new freshmen and 78.5% of all undergraduates in 2016-17. Collectively, these awards discounted tuition and fees by 49.1% for freshmen and 44.2% for all undergraduates.

Why discount? One reason is increased price sensitivity by families still recovering from the recession. It’s also related to decreased numbers of traditional college-age students and increased competition from other institutions for, like all businesses, colleges must bring in customers to survive.

IMG_6850Not every student should expect grants and scholarships equal to the discounting percentages noted above. Financial need plays a role. So do the characteristics of students an institution seeks to enroll; some want higher SAT scores, or certain types of musicians, or students likely to succeed in various academic programs. Your student won’t know his actual discount rates until winter or early spring, when he receives official financial aid offers from the colleges to which he’s applied.

The important thing is this — don’t let a institution’s “sticker price” discourage your student from putting it on the list of colleges to which he’ll apply. If that price gets discounted, it may be much more affordable than he thinks.

Before College: May 1 is Right Around the Corner!

May 1 is just 34 days away. That’s the deadline for paying a nonrefundable enrollment deposit to hold a spot at the 4-year college your student decides to attend this fall. When it comes to affordability, there’s much to do.

(1) Award Letter: Be sure your student has his financial aid offer from each school he’s considering. If a school’s award letter hasn’t arrived yet, make sure you’ve completed verification (if the school required it), then contact the financial aid office to request one IMG_5726ASAP.

(2) Outside Aid: If you know about scholarships your student’s getting from parties outside the school, report them to the aid office right away. Not doing so will freeze financial aid once the school learns of these awards, because it’s required to determine that the aid it awarded isn’t affected by outside scholarships. Should reductions be required, schools usually cut loans, then work-study and, last, grants or scholarships.

(3) Appeal: File a financial aid appeal ASAP if it might lower your student’s Expected Family Contribution and qualify her for more need-based aid. The aid office can tell you how.

(4) Affordability Analysis: Evaluate the affordability of each school under consideration.

First, use the “Tuition, Fees, and Estimated Student Expenses” on the National Center for Education Statistics College Navigator website to calculate annual growth in the average cost of attending a school over the last four year. Multiply the school’s 2017-18 costs by this average for each of the next four years to project your student’s 4-year cost.

Now project the financial aid to be received over four years. Some institutional grants and scholarships are for one year only, so be sure to differentiate between them and 4-year IMG_5659awards. And watch out for schools that practice bait and switch. Assume federal and state grant amounts will remain constant each year. Keep your borrowing assumptions within annual federal loan limits.

Subtract your 4-year financial aid projection from your 4-year cost projection. Now the big question — can you and your student cover the remaining gap? If so, keep that school on the list for consideration. If not, it may have to be dropped.

(5) Fit: Fit is absolutely critical. If a college or major doesn’t work for your student, chances are he’ll transfer, which’ll increase the cost of his degree. So consider fit carefully.

Need help analyzing the affordability of the colleges your student is considering? Contact College Affordability Solutions by email at collegeafford@gmail.com or by phone at (512) 366-5354.

Before College: Problems With Beginning at Community Colleges

The financial reasons for beginning at a community college are compelling. But this isn’t necessarily what’s best for every student. Problems along the way undermine some students’ ability to complete an affordable higher education.

If your student seeks an occupation requiring a bachelor’s degree, he’ll eventually need to transfer to a 4-year college or university, so carefully consider whether he has the academic dedication, drive, and perseverance to get there.IMG_5562

Only 16% of students who begin at community colleges transfer and get bachelor’s degrees. Of course, not all these students want such degrees but, at an age when peer pressure is a big influence on your student, these will be his classmates and friends. They could distract him from his ultimate educational goal.

Course transferability is another problem. Your student will actually lose money whenever she must retake a community college course at a more expensive 4-year school.

She’ll probably be able to transfer some, but not all, community college courses to substitute for “core” courses at your state’s 4-year colleges and universities. Chances IMG_5628are that some of her less community college coursework won’t be accepted by those schools for classes she must complete to earn a specific degree. So before she registers for community college classes, urge her to check this out with that college’s academic advisor or the admissions offices at 4-year institutions to which she may transfer.

If your student has been accepted to another college, consider his scholarship offers that are limited to attending that institution. Most scholarship providers won’t hold their awards until he transfers from a community college. If those offers are large enough, he could actually lose money by not beginning at the school to which they’re tied.

Finally, to really save at a community college, your student will have to exercise spending and borrowing discipline while there. Attending a community college but borrowing to live an expensive lifestyle is a losing proposition. Your student may actually end up taking on more debt than classmates who began and ended at her 4-year college or university.

An affordable college experience isn’t worthwhile unless your student graduates with the degree she wants. Beginning at a community college can work If her eventual goal is a bachelor’s degree, but only if she avoids or overcomes the problems described above.

NOTE:
WE’LL BE TAKING SPRING BREAK NEXT WEEK, SO OUR NEXT POST WILL BE ON MARCH 22.

College Affordability Solutions can help you conduct an affordability analysis on various paths your student may take to earn a bachelor’s degree. Contact us at (512) 366-5354 or collegeafford@gmail.com if you need such assistance.