Federal Financial Aid, Tax Credits and Loans

Federal Student Financial Aid & Study/TrainingTax Deductions

 
Federal Student Aid, an office of the U.S. Department of Education, ensures that all eligible students can bene_t from federally funded _nancial assistance for education beyond high school. We consistently champion the promise of postsecondary education—and its value to our society.      See: www.studentaid.ed.gov and the most recent “Loan Programs Fact Sheet”
 
What is a federal student loan?
 
Federal loans are borrowed funds that you must repay with interest.   A federal student loan allows students and their parents to borrow money to help pay for college through loan programs supported by the federal government. They have low interest rates and offer _exible repayment terms, bene_ts, and options. Beginning July 1, 2010, all new Stafford and PLUS loans will be made under the William D. Ford Federal Direct Loan Program (Direct Loan ProgramSM). In the Direct Loan Program, the U.S. government is the lender, and loan funds are provided to students through their school.  
 
What is a private student loan?
 
A private student loan is a nonfederal loan issued by a lender such as a bank or credit union. Private student loans often have higher interest rates and loan fees than federal loans, usually require a credit check, and do not provide the bene_ts of federal student loans. If you’re not sure whether you’re being offered a private loan or a federal loan, look at the name of the loan: does it include the word “federal”? If not, just ask the _nancial aid of_ce at your school.
 
Why consider federal student loans for paying for college?
 
Federal student loans offer low _xed interest rates, income-based repayment plans, cancellations for certain employment, and deferment (postponement) options, including deferment of loan payments when a student returns to school. For these reasons, students and parents should always exhaust federal student loan options before considering a private loan.
www.studentaid.ed.gov
What kinds of federal student loans are available?
 
Federal Perkins Loan • Your college is the lender; payment is owed to the college that made the loan
• For undergraduate and graduate students.                                 • Interest charged on this loan is 5%
• Undergraduate students: up to $5,500.                                        • Graduate and professional degree students: up to $8,000
• Funds depend on student’s _nancial need and availability of funds at the college
TIP: You should be sure to find out which financial aid programs described above are available at each school you are interested in attending. Not all schools participate in all of the federal student aid programs.
 
Direct Subsidized Stafford Loan (two types: Federal Direct Loan (Direct Loan) and Federal Family Education Loan (FFEL)
• Must be at least a half-time student. • For undergraduate and graduate students            
• Borrower is not charged interest while in college and during grace and deferment periods
• Interest charged on this loan is 4.5% for undergraduate students and 6.8% for graduate students 
• The U.S. government is the lender; payment is owed to the U.S. government
• Between $3,500 and $8,500 depending on grade level           • Must have _nancial need
 
Direct Unsubsidized Stafford Loan
• Must be at least a half-time student. • For undergraduate and graduate students             • Interest charged on this loan is 6.8%
• Borrower responsible for interest on loan include while in college & during grace and deferment periods
• The U.S. government is the lender; payment is owed to the U.S. government. See: www.FederalStudentAid.ed.gov/aidinfo
• $5,500 to $20,500 (less any subsidized amount received for the same period) depending on grade level and dependency status
 
Direct PLUS Loans for Parents
• For parents of dependent students                                               • Borrower is responsible for all the interest
• Interest charged on this loan is 7.9%                                            • Financial need is not a requirement            .
• The U.S. government is the lender; payment is owed to the U.S. government. Maximum amount is cost of attendance minus any other _nancial aid the student receives                                    • Must not have negative credit history
 
Direct PLUS Loans for Graduate and Professional Students
• For graduate & professional degree students                             • Borrower is responsible for all the interest.  
• Interest charged on this loan is 7.9%                                           • Financial need is not a requirement.                                           
• Must have applied for annual loan maximum eligibility under the Subsidized and Unsubsidized Stafford Loan Programs before applying for a Graduate/Professional PLUS Loan                        • Must not have negative credit history.
• The U.S. government is the lender; payment is owed to the U.S. government.   Maximum amount is cost of attendance minus any other _nancial aid the student receives.   Questions? Call 1-800-4-FED-AID or visit www.studentaid.ed.gov/funding.
TIP: Graduate and professional students that borrow a PLUS Loan receive an automatic deferment while in school.
 
NRCSA Consortium Schools * Tel 414.278.0631 * http://nrcsa.com * Study@nrcsa.com
Campus-Based Programs are administered by participating schools. These programs include the Federal Supplemental Educational Opportunity Grant, Federal Work-Study, and the Federal Perkins Loan.
 
Federal Supplemental Educational Opportunity Grants are grants available for undergraduates with exceptional financial need. Awards range from $100-$4,000.
Federal Work-Study provides jobs to undergraduate and graduate students, allowing them to earn money to pay education expenses.
 
US Tax Deductions for International Education & Training
 
There are a number of education and travel expenses which are tax deductible. Some may be deducted from income, others may be deducted directly from taxes due.
Employer related deductions generally apply to educational institutions worldwide. Deductions specifying “Eligible Educational Institutions” generally require taking the foreign course for US university credit. (For a list of NRCSA courses abroad which may be taken for US university, contact NRCSA at 414.278.0631.)
IRS rules are very specific. If taking tax deductions for international study, consult a qualified accountant or tax attorney. You may also want to review the following IRS publications which you will find on the IRS website:
Pub. 970 (2009): Education Expenses                          Pub. 463: Travel Expenses                               Pub. 535: Business Expenses
 
DEDUCTIONS TO CONSIDER
 
Tax Credits (Deduct from taxes owed)
American Opportunity Tax Credit (Hope Scholarship Credit) - up to $2500. Applies to qualified tuition, fees, and course materials for the first four years of post-secondary education.
Lifetime Learning Credit - up to $2000 per year
The credit is equal to 20 percent of the taxpayer's out-of-pocket expenses for qualified tuition (and required texts and course materials) of all eligible family members, up to a maximum of $10,000 annually. May be for undergraduate or graduate courses leading to a degree or to acquire or improve job skills. Deduct credit from taxes due (but if no taxes due, no credit). Does not cover transportation, room and board. 
 
Tax Deductions (Deduct from taxable income)
Tuition and Fees - up to $4000 deduction. Qualifying expenses must be for higher education
Qualified Student Loan Interest Expense - For tuition, fees, room, board, books, supplies, transportation
Business Deductions for Work-Related Education - Education required by your employer which meets the needs of employer or maintains or improves skills needed in your present work or if maintains or improves skills needed in present work.
 
Savings Plans
529 Plans - see IRS Code, Section 529
Unlimited contributions nondeductible. Distributions (including accrued interest) tax-free
Coverdell Education Saving Accounts
May be used for K-12 and post K-12 education. See IRS Tax Tip 2008-59
 
Tax Free
Employer Provided Educational Assistance - up to $5250 per year
Undergraduate or graduate, need not be work related. 
 
Additional references
IR-2009-78 (Highlights) http://www.irs.gov/newsroom/article/0,,id=107670,00.html
Fact Sheet 2009-12 http://www.irs.gov/newsroom/article/0,,id=213034,00.html
529 Plans   http://www.irs.gov/newsroom/article/0,,id=213043,00.html
Publication 970 http://www.irs.gov/pub/irs-pdf/p970.pdf
Tax Tips http://www.irs.gov/newsroom/article/0,,id=107670,00.html
Tax Credits http://www.irs.gov/newsroom/article/0,,id=202107,00.html
Education Credits http://www.irs.gov/individuals/article/0,,id=121452,00.html
Tax Incentives http://www.irs.gov/individuals/article/0,,id=96341,00.html