When paying for college, parents often make common mistakes that end up costing them financially. Listed below are five tips parents should read to avoid making these common mistakes.
1. Assuming 529 Plan distributions are always tax free
529 plan earnings withdrawals may be taxable. Distributions of earnings from the 529 plan will be subject to income tax if the amount withdrawn from the 529 plan exceeds the qualified education expenses. Therefore, it is very important to be sure the amount withdrawn from the 529 plan does not exceed the qualified education expenses if you do not wish to pay tax on the earnings. Keep in mind that any expenses used in determining the Lifetime Learning or Hope credit will reduce the total qualified expenses used in calculating the tax exclusion for distributions from a 529 plan. For example, if you claim the Lifetime Learning credit based on qualified expenses of $10,000, the qualified expense is reduced by $10,000.
2. Assuming private schools always cost more than public schools
A student who attends an expensive private school may qualify for more financial aid than a student attending a lower-cost public school. The difference in the true cost may actually be less than you might expect because the student may receive gift aid from the private school.
3. Not reading the Award Letter carefully
Often times the colleges are awarding you debt! There are two types of financial aid: gift-aid and self-help aid. Gift aid includes grants based on your financial need, and scholarships usually based on academic performance. Self-help aid includes loans, which must be repaid, and government work-study programs. Most of the financial award at public institutions is self-help aid, however most financial aid at private schools is gift aid.
4. Not filling out the FAFSA because you think your income is too high to qualify for financial aid
Even if you do not qualify based on financial need, many schools will not consider you for non-need based aid if you do not apply for need-based aid. So regardless of what you think your eligibility status might be, it is important to fill out the FAFSA (Free Application for Student Aid). Federal student loan applications (Unsubsidized Stafford and Plus) also require the completion of the FAFSA. It is important to check with each school for its requirements.
5. Borrowing too much from Life Insurance to pay for college
Some parents use life insurance loans as a source of college funding. You should beware of taking out a life insurance loan. What typically happens when you take out a life insurance loan for a long period of time is that the loan balance increases because you do not pay the interest. Therefore, as the loan value increases, your family gets very little, if any death benefit. Also, the loan balance can eat up all the cash value, and there is not cash value left in the policy to sustain it. The policy will terminate unless you can pay back the loan.
- By: Karen Bolton
Showing posts with label credit. Show all posts
Showing posts with label credit. Show all posts
Monday, September 26, 2011
College Admissions Fall of Senior Year
Fall semester during the senior year of high school is an electric time. As the weather cools social calendars heat up. There is homecoming, dances and talk of senior trips. During all of the excitement it may be tempting to block out the 900 lb. gorilla in the room: College admissions. Fall is crunch time for students and their college search.
If senior year of high school is the first time a student even thinks about applying to a college, then thecollege admissions process will be that much harder for them to navigate. The key to success in college admissions is to start early; preferably in junior year of high school. Most colleges have application and admission deadlines that are open months, and sometimes, in excess of a year before the expected starting date.
College admissions can be a tricky part of the college search process. It’s the time in a student’s life when they have virtually no control over the outcome. Once an application is sent and all transcripts, reference letters and other accompanying documents reach the school-the decision is pretty much in the hands of admissions officials.
The waiting process can be less difficult if students have done their work beforehand. Starting early is the key. Some colleges begin awarding admission spots to students as they receive acceptable applications. Other schools wait until one universal deadline has passed and then examine the applicants. Getting started early will help ensures the student hits all of the deadlines.
Another tip for college admission success would be getting others involved in the application process. Asking pertinent questions of guidance counselors and using the resources they have available can be quite advantageous. Guidance counselors know more about the college admissions process than most other people students may have access to. Also, running important decisions by parents and other family members can also be helpful-as some of these people have gone through the same stressful situation, too.
By: Ron Smarjess
If senior year of high school is the first time a student even thinks about applying to a college, then thecollege admissions process will be that much harder for them to navigate. The key to success in college admissions is to start early; preferably in junior year of high school. Most colleges have application and admission deadlines that are open months, and sometimes, in excess of a year before the expected starting date.
College admissions can be a tricky part of the college search process. It’s the time in a student’s life when they have virtually no control over the outcome. Once an application is sent and all transcripts, reference letters and other accompanying documents reach the school-the decision is pretty much in the hands of admissions officials.
The waiting process can be less difficult if students have done their work beforehand. Starting early is the key. Some colleges begin awarding admission spots to students as they receive acceptable applications. Other schools wait until one universal deadline has passed and then examine the applicants. Getting started early will help ensures the student hits all of the deadlines.
Another tip for college admission success would be getting others involved in the application process. Asking pertinent questions of guidance counselors and using the resources they have available can be quite advantageous. Guidance counselors know more about the college admissions process than most other people students may have access to. Also, running important decisions by parents and other family members can also be helpful-as some of these people have gone through the same stressful situation, too.
By: Ron Smarjess
What Every Student Needs to Know About College Student Credit Cards
College student credit cards can become both a blessing and a curse. They are a wondeful financial resource for high school grads just starting out on their own, but they are also a temptation that some students just can’t resist. If you want to make sure you don’t make the same mistakes so many other students have made with college student credit cards, follow these five tips.
1. It’s Not a Loan
When you become the recipient of college student credit cards, don’t look at it like a loan. Never charge more than you can pay off at the end of the month (unless it’s an emergency) and definitely don’t look at it like a license to go on a shopping spree.
The purchases you make with your student credit cards will add up quickly -- more quickly than you may realize. If you bite off more than you can chew, you may find yourself in financial trouble before your financial future even gets started.
2. They’re Not for Sharing
So you have one or two college student credit cards and your best friend doesn’t have any. Real friends share, right?
Wrong!
Never share your college student credit cards unless you’re willing to be responsible for paying for the purchases your friends make. Nothing can break up a friendship faster than fights over finances.
Do yourself a favor and keep your college student credit cards in your own wallet.
3. Mommy and Daddy Are Not An Out
Don’t be tempted to get in over your head with your college student credit cards because you think mom and dad will be there to bail you out if you run into trouble. College student credit cards are the first step into your adult financial future. Mom and dad have nothing to do with it.
4. Do Not Charge School Expenses
You may be tempted to use your college student credit cards to pay for school tuition or books. Don’t do it. That’s what student loans are for. College student credit cards carry a higher interest rate than student loans, so if you use them for education expenses, you’re throwing away money.
5. The Due Date Is Not a Guideline
When you start using your college student credit cards, realize how important the terms and conditions are. Make sure your payment will reach the bank well before the due date (the due date is not a guideline, it’s written in stone) and don’t go over your limit.
If you default on your credit card’s terms and conditions, you’re going to be hit with ugly fees and your interest rate is going to take a hike skyward. Manage your college student credit cards wisely and respect the responsibilities you have been given.
It’s true -- college student credit cards can be overwhelming. Don’t let it scare you. By keeping the above tips in mind, you’ll be well on your way to managing your college student credit cards responsibly and building a respectable credit history.
By: Max Anderson
1. It’s Not a Loan
When you become the recipient of college student credit cards, don’t look at it like a loan. Never charge more than you can pay off at the end of the month (unless it’s an emergency) and definitely don’t look at it like a license to go on a shopping spree.
The purchases you make with your student credit cards will add up quickly -- more quickly than you may realize. If you bite off more than you can chew, you may find yourself in financial trouble before your financial future even gets started.
2. They’re Not for Sharing
So you have one or two college student credit cards and your best friend doesn’t have any. Real friends share, right?
Wrong!
Never share your college student credit cards unless you’re willing to be responsible for paying for the purchases your friends make. Nothing can break up a friendship faster than fights over finances.
Do yourself a favor and keep your college student credit cards in your own wallet.
3. Mommy and Daddy Are Not An Out
Don’t be tempted to get in over your head with your college student credit cards because you think mom and dad will be there to bail you out if you run into trouble. College student credit cards are the first step into your adult financial future. Mom and dad have nothing to do with it.
4. Do Not Charge School Expenses
You may be tempted to use your college student credit cards to pay for school tuition or books. Don’t do it. That’s what student loans are for. College student credit cards carry a higher interest rate than student loans, so if you use them for education expenses, you’re throwing away money.
5. The Due Date Is Not a Guideline
When you start using your college student credit cards, realize how important the terms and conditions are. Make sure your payment will reach the bank well before the due date (the due date is not a guideline, it’s written in stone) and don’t go over your limit.
If you default on your credit card’s terms and conditions, you’re going to be hit with ugly fees and your interest rate is going to take a hike skyward. Manage your college student credit cards wisely and respect the responsibilities you have been given.
It’s true -- college student credit cards can be overwhelming. Don’t let it scare you. By keeping the above tips in mind, you’ll be well on your way to managing your college student credit cards responsibly and building a respectable credit history.
By: Max Anderson
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