Student Debt Plateaus, but…

A new analysis of the National Postsecondary Aid Study in the New York Times shows that while there is good news– student debt levels are leveling off and perhaps even declining in inflation-adjusted terms– the reason for that is nothing to cheer about.

The good news: average student debt for those receiving degrees in 2015-2016 was $30,301, about the same as for the last three years. This despite rising college costs. Sounds good, right?

The bad news: Mark Kantrowitz of Savingforcollege.com crunched the numbers and concluded that the reason the debt level hasn’t increased is that students have been hitting the cap for Direct Student Loans, so additional costs are being pushed into other borrowing programs. Kantrowitz’ analysis shows that parent PLUS loan borrowing increased by 14% during the same period. And more than 40% of student borrowers hit the Direct loan cap of $31,000 over four years.

Because the report only deals with federal aid programs, it does not provide data on private loan debt.

Read the full article here.

What’s a Qualified Expense?

Qualified expenses (QHEE’s) are expenses that are eligible for some form of tax benefit such as the AOTC or a tax- and penalty-free distribution from a 529 account. Sounds simple, right? Let the fine print begin! Not all “qualified expenses” qualify for all purposes. And of course the most important rule of claiming education tax benefits: You can’t double-dip. That means that if you use 529 plan funds to pay an expense, you cannot also claim a tax credit for that expense. Continue reading What’s a Qualified Expense?

What Year?

With the change to prior-prior tax year reporting on the FAFSA and CSS PROFILE, it seems that keeping track of what data dates pertain to what is becoming increasingly complicated. This table summarizes the relevant years or dates for each school year.

School Year 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023 2023-2024 2024-2025
FAFSA/ PROFILE Income Year 2016 2017 2018 2019 2020 2021 2022
Assets As Of October* 2017 2018 2019 2020 2021 2022 2023
AOTC Tax Year** 2018, 2019 2019, 2020 2020, 2021 2021, 2022 2022, 2023 2023, 2024 2024, 2025

* Assets are as of the filing date, which may be as early as October or into the following year depending on the school’s filing date.

** Remember that the AOTC can only be claimed for four tax years, so families should decide whether the fall of freshman year is better than spring of senior year for claiming. With the income limit of $160,000 (married filing joint) or $80,000 (single), some families might not be eligible every year.

Parents may find that different strategies are needed during different years. For example, a family with a student beginning college in fall of 2020 might reduce pre-tax retirement contributions this year (to increase taxes, which are deducted from income on the FAFSA and therefore reduce EFC) and then maximize contributions beginning in 2021 to reduce AGI for AOTC claiming purposes.

 

 

EFC vs Net Cost

Families who are a few years out from college should calculate their EFC, but as college approaches and students start identifying schools they’re interested in, net price calculators become far more valuable. There can be vast differences between EFC and net price, and even significant school-to-school differences in net price due to different aid policies. Continue reading EFC vs Net Cost

Finding Scholarships

Did you know you can get a scholarship just for being enthusiastic about the number 5? Or for being tall? Or well-rounded? Or wearing a dress made from Duck Tape to prom? While the vast majority of scholarship dollars on any college campus come from the school’s own funds and donors, there are plenty of other scholarships out there for students willing to track them down and apply. Summer– when school-related writing is on hiatus– is a great time to apply for outside scholarships. Here are some of the best ways to find them: Continue reading Finding Scholarships

Manipulation of Student Loan Default Rates

A recent New York Times article brought attention to a GAO report about schools manipulating their cohort default rate data to avoid federal sanctions that can result from schools having too high a percentage of students default on their loans. Because cohort default rates are a metric I’ve encouraged prospective students to look at, I wanted to provide some additional detail. Continue reading Manipulation of Student Loan Default Rates