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It’s that time of year again. That is to say, it’s time to gather all your paperwork, W-2’s, receipts, statements, and related documents and work on your tax forms. Consequently, here are a few key education tax benefits to help you get the most possible deductions. You can find more information in IRS Publication 970 Tax Benefits for Education. This includes all the information you need, including sample forms and worksheets.

Education Tax Benefits

Certain tax benefits are available if you are saving for or have paid for educations costs. In general, most benefits apply to higher education. They may be allowed for you as a student, or a member of your immediate family who was a student. Usually, you can’t use the same qualifying education expense for more than one tax benefit. Certain benefits may be ruled out based on your income. Here are the education-related items from Publication 970:

  • Scholarships, Fellowship Grants, Grants, and Tuition Reductions
  • American Opportunity Credit
  • Lifetime Learning Credit
  • Student Loan Interest Deduction
  • Student Loan Cancellations and Repayment Assistance
  • Tuition and Fees Deduction
  • Coverdell Education Savings Account (ESA)
  • Qualified Tuition Program
  • Education Exceptions to Additional Tax on Early IRA Distributions
  • Education Savings Bond Program
  • Employer-Provided Educational Assistance

Below are three general education tax benefits. Be sure to review IRS Publication 970 for all possible benefits. Seek help from a licensed tax professional to take full advantage of education tax benefits.

Student Loan Interest Deduction

Is your modified adjusted gross income less than $80,000 (or $160,000 if filing a joint return)? Did you also pay interest on a qualified student loan for higher education expenses? If so, you may be able to reduce the amount of your income subject to tax by up to $2,500. If the amount of interest you paid on your student loans in 2018 was $600 or more, you should receive a Form 1098-E (Student Loan Interest Statement) from your lender or loan servicer. Form 1098-E will provide you with the amount of interest you paid. The Student Loan Interest Deduction Worksheet in the Form 1040 or Form 1040A instructions can assist in calculating your deductions.

Student Loan Cancellations and Repayment Assistance

Loan Cancellation

If a loan you must repay is forgiven or cancelled, you must include the amount forgiven in your gross income for tax purposes. There is an exception to this rule in instances of a loan made by a qualified lender. This exception assists you in attending an eligible educational institution. Lenders make these provisions based on particular work capabilities.

Repayment Assistance

If you receive student loan payments from any of these sources, the payments are not considered taxable:

  • Scholarships, Fellowship Grants, Grants, and Tuition Reductions
  • The National Health Service Corps (NHSC) Loan Repayment Program
  • A state education loan repayment program eligible for funds under the Public Health Service Act
  • Any other state loan repayment or loan forgiveness program intended to provide for the increased availability of health services in underserved or health professional shortage areas (as determined by such state).

You may not deduct interest paid on student loans if those payments came through these programs.

Tuition and Fees Deduction

Did you pay qualified education expenses during the year for yourself, your spouse, or your dependents? If so, you may be able to reduce the amount of your income subject to tax by up to $4,000. As with as the student loan interest deduction, you claim the tuition and fees deduction as an adjustment to your income. Therefore, you are not required to itemize in order to claim this benefit. In order to claim the deduction, your modified adjusted gross income can’t be greater than $80,000 (or $160,000 for joint returns). Subsequently, the educational institution may provide you with Form 1098-T. This form provides payments received or billed for qualified education expenses. To claim the tuition and fees deduction, complete Form 8917 and submit it with your Form 1040 or Form 1040A.

We hope you found the above information helpful. We encourage you to be aware of all the possible deductions related to education tax benefits. There are a number of education related tax benefits available. If you think you might qualify, consult the IRS website or Publication 970 for more detailed information and guidance.

Like most college students, you’re probably planning to work a summer job to help pay for school next year. If you currently receive college financial aid, you may be wondering how your summer job will affect your aid eligibility. Below is helpful information to help you understand the impact of your student earnings on your college financial aid.

FAFSA and EFC

First, let’s spend a moment refreshing your memory about the Free Application for Federal Student Aid (FASFA) and your Estimated Financial Contribution (EFC). These topics are essential in understanding how your earnings can affect your financial aid. To qualify for financial aid, the FAFSA must be filed each year you attend college. The FAFSA collects information about your family income and assets. This information is part of a formula which calculates your family’s EFC for college. If you are financially dependent, your parents’ information and yours will be used. If you are financially independent or a graduate student, the EFC will be calculated using your information only. You school then deducts the EFC from the total Cost of Attendance to calculate your financial aid eligibility.

How much of your earnings will be included in the EFC? The good news is that there is an earnings threshold before any contribution from student income is considered. For the EFC formula for the 2016-2017 academic year, dependent students can earn up to $6400 and independent students with no dependents can earn up to $9960 before any contribution is expected. After that, a percentage of your income will be used in the EFC calculation.

Income

Is it still worth it to earn more than the income threshold each year? The numbers would indicate that the answer is yes. Since the EFC considers only a percentage of your earnings, you will net more than you contribute toward college.

Here are some important facts you should know:

  1. Federal Work-Study is not included in your EFC. Since work-study is a form of financial aid your school awards, any earnings you receive do not factor into the formula. Read the directions and do not report your Federal Work-Study earnings on your FAFSA.
  2. Each year the FAFSA will be based on income from a previous year. For instance, when you next file the FAFSA, available in October 2016, you will report income information from the 2015 calendar year. You report the income you earn this year on the FASFA available in October 2017 or 2018. That reporting timeframe is important for planning purposes. Bear in mind that the 2017-2018 FAFSA will also introduce some changes to how you report income.
  3. Be cautious about double-reporting earnings. In theory, you use your earnings this year for college, so they will probably not be in a savings account when you file your FAFSA next year. You should be aware that the EFC calculation considers both your savings and earnings when determining student contributions toward college expenses. If you use the money you earned from income to pay upcoming college bills, read the FASFA directions. Only true savings need to be reported.

Although we can provide general guidance, it is always best to check with your college financial aid office to learn the best option for your specific situation. They can tell you more about how your current earnings, including your summer job, may affect your financial aid in future years.

Throughout the college admissions process, you’ll encounter several important checkpoints. Selecting schools, applying for admission and receiving college acceptances are all critical. But, your decision often comes down to the question, “How will I pay for this?” Financial aid can help by providing scholarships, grants, work-study employment opportunities, and student loans to those who qualify. Below are essential financial aid facts every student should know, including an introduction to the FAFSA.

Most financial aid requires filling out the Free Application for Federal Student Aid (FAFSA)

The FAFSA is the application for federal grants, work-study, and federal loans. Colleges and most state grant programs use the FAFSA to award their financial aid. Check your school financial aid website to see if you need to submit additional forms. When filling out your FAFSA, note that many state grant applications require you to list an in-state school first for consideration. You can find additional resources on filing the FAFSA on our website, with articles like Need Help Paying for College? File the 2016-17 FAFSA.

Know and meet financial aid application deadlines

Most schools have deadlines for submitting the FAFSA. Complete yours in time to meet the earliest deadline for the schools you’re considering, or for your state grant program if that deadline is first. The earlier you apply, the more likely you are to be considered for all the forms of financial aid. If you miss deadlines, you may receive fewer grants, need more loans, or may be offered less financial aid overall. Returning students have FAFSA deadlines as well. You can find deadline information on college financial aid websites. Tip: If your family’s income tax returns will not be filed by your schools’ FAFSA deadlines, you can estimate income. There is an IRS release which allows the IRS to transfer your tax return information to financial aid offices when filed.

Don’t rule out a college because you think it’s too expensive

The intent of financial aid is to provide access and college choice for students with financial need. If you are accepted at a school and filed your FAFSA and any other required forms in a timely way, you will receive a financial aid award notification before you are asked to make a decision about whether you will attend. To be in the best position, apply for admission at a few schools and send your FAFSA to all.

You’ll use your family’s 2015 income twice

The filing timeframe for the FAFSA begins in October for the next year. Basically, this means you’ll be using your 2015 income once again when you complete the 2017-18 FAFSA. The reason is the transition to a new filing timeframe; this duplication will not occur again. Since the new FAFSA filing deadline is earlier, all the related deadlines will change. Check your school’s financial aid website and Federal Student Aid’s website for more information as October approaches.

Compare financial aid packages

If you’ve followed the advice above, you should receive financial aid packages from a few schools, if you are eligible. You can compare the amount of scholarships, grants, work-study, and loans offered at each school, and calculate your net costs at each. When determining your school costs, consider all expenses – tuition, fees, room, board, books, supplies, transportation, and personal expenses. The makeup of your financial aid package differs among your schools, and the net cost may differ as well. If you need additional aid, there may be other federal loans and private loans to help cover your portion of costs.

Before you accept your financial aid and make a final decision about the school you will attend, be sure to read all the information accompanying your financial aid offer. You should fully understand each program in your package, your obligations, and and the renewal process for each program. If you have questions, your college financial aid office is an excellent resource.

While preparing for college, one of the most important considerations is how to pay for it. All students should complete the Free Application for Federal Student Aid (FAFSA) because it is used to determine students’ potential eligibility for various financial aid programs, as well as various state and institutional-based aid programs. All of this is based on a variety of factors, including your Expected Family Contribution. To learn more about options to pay for college, visit U-fi.com.

Expected Family Contribution

When completing the FAFSA, you’ll need to provide certain information. You need to detail your (and possibly your parents’) income, family size, and number of family members attending college. The FAFSA uses all of the information you provide to determine a figure known as the Expected Family Contribution (EFC). Don’t be alarmed if your calculated EFC is high. Colleges use your EFC college financial aid offices to determine the amount of financial aid you are eligible to receive.

Cost of Attendance

Each college sets a figure known as the Cost of Attendance. Direct costs such as tuition, fees, books, as well as room and board make up the Cost of Attendance. It also includes other indirect costs such as transportation and other personal expenses. Colleges and universities have varying Costs of Attendance, but your EFC remains the same, regardless of where you go.

Determining Eligibility

Financial aid offices use the formula below to establish your financial need. This determines if you qualify for grants and other financial aid programs.

Cost of Attendance – Expected Family Contribution = Financial Need

The lower your EFC, the greater the likelihood that you’ll qualify for need-based financial aid.

Remember that your EFC stays the same no matter what school you attend. The name Expected Family Contribution might sound like you have to directly contribute or pay that amount. But, it’s just a part of the formula that determines your financial aid eligibility. There are other financial aid sources that can be used to fully fund your college education such as unsubsidized Direct LoansPLUS loans, private loans, and other aid programs not based on financial need. It’s best to exhaust all sources of grants and scholarships before borrowing for college. You can use a free search at Peterson’s to find available scholarship opportunities. You can also visit the U.S. Department of Education’s Federal Student Aid website to learn more about the EFC, FAFSA, and other financial aid programs.

Considering paying off your student loan debt with your tax return or just a lump sum of money? There can be more to larger payments than meets the eye. Follow these steps to learn how to make the most of your lump sum payment.

1. Make a List

Knowing which loans you want to pay off first will help you get the most bang for your buck. Make a list of all of your federal and private student loans, the balances, and the interest rates. Then, based on your goals, weigh your options. You could put your lump sum payment toward your highest interest rate loans, or pay off your low-balance loans first. Paying off your highest interest rate loans reduces the amount of interest you pay. It also saves you money over the life of the loan. Paying off your lowest balance loans first could save you money on your monthly payment. Paying off your lower-balance loans allows you to put money saved from a lower payment toward your other student loans. This can help you to pay them off faster.

2. Talk to Your Loan Servicer

Check to make sure your loan servicer knows how you want your payments applied to your student loans. If you pay above the minimum payment and don’t specify how you want payments applied, your loan servicer decides for you.

Below is a sample letter put together by the Consumer Financial Protection Bureau (CFPB) that you can send to your loan servicer to ensure payments above your minimum monthly payment amount are being applied to the correct loan(s). For some loan servicers, this can be done online.

I am writing to provide you instructions on how to apply excess payments greater than the minimum amount due. Please apply payments as follows:

  1. After applying the minimum amount due for each loan, apply any additional amount to the loan accruing the highest interest rate.
  2. If there are multiple loans with the same interest rate, please apply the additional amount to the loan with the lowest outstanding principal balance.
  3. If any additional amount above the minimum amount due ends up paying off an individual loan, please then apply any remaining part of my payment to the loan with the next highest interest rate.

It is possible that I may find an option to refinance my loans to a lower rate with another lender. If this lender or any third party makes payments to my account on my behalf, use the instructions outlined above.

Retain these instructions. Please apply these instructions to all future overpayments. Please confirm these payments will be processed as specified. Otherwise, please provide an explanation as to why you are unable to follow these instructions.

3. Things to Keep In Mind

There are a few other things to be mindful of once you’ve decided where to apply your lump sum payment.

  1. Follow up with your loan servicer. Call or check your accounts online to make sure your payment was applied as specified.
  2. Making a payment larger than your minimum payment amount can sometimes advance your due date. This means another payment on your student loans won’t be due until your minimum payments catch up to your lump sum payment. While it can be nice to skip a few months of student loan payments, your loans still accrue interest and won’t save you any money. Even if your due date advances, continue to make your monthly payments to save yourself money in the long run.
  3. You can also save money on your student loans by refinancing. Refinancing allows you to combine both your federal and private student loans into a new loan with a new repayment term and interest rate, which can often save money over the life of the loan, or help lower your monthly payment.

Paying off your student loans is a great accomplishment. As you begin to make decisions around your personal finances, make sure to keep these tips in mind so that you can make the best choices for your financial future.

College is expensive and many families need help paying for it. For financial aid consideration next year, the first step is filing the 2016-17 Free Application for Financial Aid (FAFSA). The FAFSA is the application for federal scholarships, grants, work-study opportunities and loans. Many schools and state programs also use it to determine eligibility for their financial aid programs. Have a FAFSA question? Let’s take a look at some of the most common questions and answers.

FAFSA Question #1 – When should I complete the FAFSA?

You should always file in time to meet your earliest deadline. Since that deadline will often be set by your school, check your college’s financial aid website for information. As a general rule, file as soon after January 1 as possible. Most employers, banks and financial institutions send the income information needed for tax returns by the end of January, but if your school has an earlier deadline, you and your parents (if you are financially dependent) can estimate income to be sure the form is turned in on time. The FAFSA is located at FAFSA.ed.gov.

FAFSA Question #2 – Do I need to include my parents’ information?

If you are under 24, your parents claimed you on their income tax return in any of past three years, and not in the military or married, you may be considered financially dependent and may need to include your parents’ information. If your parents are divorced or separated, check the FAFSA directions to determine which parent’s information to include. Please note: students entering graduate school are automatically considered financially independent.

FAFSA Question #3 – What’s new this year?

Before you file the FAFSA, both you and your parents, if applicable, must obtain a Federal Student Aid (FSA) ID this year, which replaces the PIN. The FSA ID is more secure since it includes a username and password instead of just an ID number. It provides access to the FAFSA and all federal aid information. You can obtain an FSA ID at here before you file the FAFSA.

FAFSA Question #4 – Where should I send the FAFSA?

If you are applying to college for the first time, considering a transfer, or moving on to graduate school, you can send the FAFSA to multiple schools. You are not considered for aid until you apply and the program accepts you. Your state grant program may also require the FAFSA and a list of state grant codes. The first page of the FAFSA overview lists their application deadlines. As with school deadlines, be sure to file early enough to meet your state grant deadline.

FAFSA Question #5 – Should I file a new or renewal FAFSA?

If this is your first FAFSA, you will complete a blank form. Although they are available in paper form if needed, most students and parents file electronically. The online FAFSA offers help features to guide applicants and electronic submission is faster. If you have filed a FAFSA before, you can use the renewal FAFSA process. After entering your FSA ID, your information will auto-fill if you have filed a FAFSA before, allowing you to update items which have changed.

FAFSA Question #6 – What documents will I need?

FAFSA filers, including students and parents, will need W2s, income tax documents, bank statements, non-taxable income, investment documents, and other financial information. The FAFSA allows you to use an IRS Data Retrieval tool to obtain your income tax information. You will use your 2015 Income Tax information for the 2016-17 FAFSA.

FAFSA Question #7 – Where can I get help?

Federal Student Aid (FSA) has comprehensive directions on their website, including help for filing the FAFSA. Your college financial aid office is also a good resource for any remaining questions.

FAFSA Question #8 – What happens next?

Your information helps calculate an Expected Financial Contribution (EFC). FAFSA sends this information to you and your school. The EFC takes into consideration income, assets, the number of people in your family and more. You will receive a Student Aid Report (SAR) approximately a week after filing your FAFSA. It will display your FAFSA information and your calculated EFC. If you notice errors or have other schools to add, you can make those changes on your SAR and return it. FAFSA transmits your new information to the schools and state grant program, if listed. The school uses your EFC as they look at your financial aid eligibility. This does not mean that you will pay what the EFC indicates. It is a general guideline, but the rest of the financial picture is determined when your school notifies you of your financial aid eligibility.


Check your college financial aid website to see if you must submit other forms scholarships, grants, or institutional aid that they offer and respond to any requests for information they may send. If you have special circumstances or your financial situation has changed since last year, contact your financial aid office directly for guidance. Applying for financial aid might seem intimidating at first, but follow these steps and you should be able to navigate the process with ease.