General Principles

Question 1

EDUCATION FUNDING

Options During Funding Years

Answer 1

• UGMA/UTMA
• child owns, subject to Kiddie Tax if under age 24
• EE Education Bonds
• Parents own bond (can’t use in UGMA/UTMA)
• Coverdell Education Savings Plan (ESA)
• Contribution limited to $2k total
• Section 529 Plan (QTP)
• 2 Types: College Savings or Prepaid Tuition
• $15k contribution per year per child x 5 years For $75k total

Question 2

COLLEGE FUNDING

Options During College Years for “Wealthy”

(Grants and/or Loans)

Answer 2

• PLUS Loans
• Parent Loan Undergraduate Students

*Remember - Wealthy Parents are a PLUS*

Question 3

COLLEGE FUNDING

Options During College Years for “PooriSh”

(Grants and/or Loans)

Answer 3

*$60k income cap*

• Pell Grants
• Supplemental Education Opportunity Grant
• Subsidized Stafford Student Loans

Question 4

COLLEGE FUNDING

Options During College Years:
Coordination Rules regarding Tax Credits, Distributions, Withdrawals

Answer 4

Cannot be combined for same child/expense - USE ONLY ONE

• American Opportunity Credit (AOC)
• Lifetime Learning Credit
• Coverdell Withdrawal
• 529 (QTP) Distribution

*Dont select more than one tax-advantaged sorce to pay for the same college expense, like tuition.*

Question 5

COLLEGE FUNDING

American Opportunity Credit (AOC)

Answer 5

• $2,000 + 25% of next $2,000 of expenses (MAX $2,500 tax credit)
• MAGI Phaseouts apply (Given on Tax Sheet)
• First 4 years of college only

Question 6

COLLEGE FUNDING

Lifetime Learning Credit

Answer 6

• $2,000 max (up to 20% of $10k)
• Can be used for any high learning institution
  (undergrad, graduate, continuing ed)
• MAGI Phaseout applied (Given on Tax Sheet)

Question 7

COLLEGE FUNDING

Coverdell Withdrawal

Answer 7

• Must be used before student is 30
• MAGI Phaseout applies (Given on Tax Sheet)

Question 8

COLLEGE FUNDING

529 (QTP) Distribution

Answer 8

• Tax Free if used for qualified education expenses
• $10k per year for K-12
• $10k towards student loans
• No MAGI Phaseout

Question 9

COLLEGE FUNDING

Options During Graduate Years

Answer 9

• Fulbright Scholarship
• Stafford Loan
• 529 Distribution OR Coverdell withdrawal (coordination rules apply)