Student loans are designed to help students pay for higher education expenses. Options ultimately depend upon each family's needs and resources.
Types of Student Loans:
- Federal Aid: Certain federal aid programs are available to families with modest means. These include Pell Grants, Subsidized Stafford Student Loans, and Supplemental Educational Opportunity Grants. Another option are PLUS Loans, which are not need-based and typically carry less favorable provisions.
- Institutional Aid: Some schools also offer direct financial assistance to families. This aid may be merit-based, need-based, or some combination of the two. Institutional aid varies widely based on each school’s resources.
- Private Loans: These are loans offered directly by banks, credit unions, and other private companies. Terms and conditions are set by the lender.
Application Process:
- All families must complete the FAFSA form to apply for federal student loans. This information helps determine eligibility for various types of federal aid. Click here for useful tips before filling out the 2024/2025 FAFSA form.
- Many schools also require an additional form, called the CSS Profile, to determine institutional aid eligibility. The CSS Profile relies on a slightly different formula than the FAFSA form.
Loan Disbursement:
- Outside loans are disbursed directly to the educational institution. Any funds remaining after tuition and fees are refunded to the student for additional education-related expenses.
Interest, Fees and Repayment:
- Loan repayments may begin immediately or after a grace period. The repayment policy depends on the type of loan. Repayment plans, deferment, and forbearance options may exist.
- Federal student loans have fixed interest rates set by Congress. Favorable loan programs may also offer certain interest subsidies.
- Servicing and origination fees may apply.
Families should consider their funding options carefully. Parents and students should explore scholarships, grants, and other forms of financial aid before resorting to loans and only borrow necessary amounts.
It is also important to be proactive. An educational needs analysis can inform families about their funding capacities and constraints. Certain planning techniques may also optimize financial aid eligibility for families. Finally, 529 Plans are an excellent, tax-advantaged savings vehicle for forward-looking families.
#educationfunding #FAFSA #financialaid #studentloans
In life being proactive is generally positive, but especially true of financial and estate planning.
Tax Cuts and Jobs Act (TCJA) of 2017 made several significant changes to the Code - some permanent and some temporary - that are set to sunset and expire after 2025. Congress may act to extend or make permanent some or all of the temporary provisions of TCJA, but this is currently an unknown. Therefore, for tax planning purposes, now may be the time to act before the sands shift again.
There are several Estate Tax planning opportunities available to individuals to help prepare for the sundown of the TCJA and to take advantage of today’s favorable tax laws. Of course, even if a planning opportunity does ultimately save taxes, it may still not be appropriate or the right fit for an individual depending on their unique circumstances.
Said differently, it is prudent to thoroughly review available planning ideas and opportunities with your advisory team to ensure all aspects of your decisions are evaluated, understood, and made with confidence.
The unified credit, also known as the federal estate tax exemption or the basic exclusion amount, is a tax provision in the United States that allows individuals to transfer a certain amount of assets to non-spousal heirs without being subject to federal estate tax. The unified credit effectively exempts a certain amount of an individual's estate from federal estate taxes upon their death.
The amount of the unified credit is subject to change and is set by the Internal Revenue Service (IRS) each year. It's designed to adjust for inflation over time. For example, in 2024, the federal estate tax exemption is $13,610,000 per individual or $27,220,000 for a married couple filing jointly. Amounts above this exemption threshold are subject to estate tax, which is a tax on the transfer of the estate of a deceased person.
It's important to note that state estate tax laws may differ, and some states have their own estate tax exemptions and rates. Therefore, individuals should consult with a tax professional or attorney to understand how the unified credit applies to their specific situation and any relevant state laws.
#unifiedcredit #estateplanning #federalexemption #estatetax #IRS
An ETF, or Exchange-Traded Fund, is an investment fund holding a basket of stocks, bonds, or commodities. ETFs are similar to mutual funds in many ways, with two key differences:
- Trading: ETFs trade on secondary exchanges and their prices change throughout the day, just like individual stocks. Mutual funds are only bought and sold at the end of each trading day based on the closing net asset value (NAV) of the underlying holdings.
- Tax Efficiency: ETFs typically generate less tax liabilities than similarly structured mutual funds. This is largely because ETFs trade on secondary exchanges.
ETF investors typically sell their shares in the open market when they choose to exit the fund. Conversely, mutual fund managers must unload underlying positions each time investors want to redeem their money. The resulting tax consequences are distributed across all investors in the mutual fund.
ETFs can provide low-cost exposure to a diversified portfolio of assets. Their unique structure allows for easy buying and selling throughout the trading day. Many ETFs track a defined index, such as the S&P 500 or Dow Jones Industrial. However, there are also many ETFs that target certain sectors, industries, or themes.
#ETF #investments #taxefficiency #diversification #portfolio
