127- Back to College?
Actualizado: ene 15
Written by: Michele Burkholder, Founder of The Burkholder Team
Is it still considered “back” to school if it’s virtual? I remember the first time I saw the Staple’s commercial, with the song playing in the background, “It’s the Most Wonderful Time of the Year.” It really was! The thrill of buying new school supplies, fall clothes and things for a dorm or apartment. August meant getting my children ready to go back to college, and the anticipation of college football starting again. August always brings back these wonderful memories.
This year sure looks different. But a few things haven’t changed. You still need to pay for college tuition, whether it’s virtual or on campus. According to the College Board, the average cost of in state tuition and fees was $26,590 at a public college and $53,980 for private tuition for the 2019-2020 school year. This is a 3.23% increase from the 2018-2019 school year. According to the U.S. Bureau of Labor Statistics, prices for college tuition and fees rose 6.5% annually from 1977 to 2020. Whether in person or online, college tuition costs continue to rise.
If you are planning to send your child to college for the first time, or have a student returning to school, there are some recent regulatory changes that may work in your favor.
First of all, the Secure Act, which passed on December 20, 2019 and became effective on January 1, 2020, expanded the use of 529 funds, while maintaining their tax favored treatment. You can now use these funds for:
1. Trade School – tuition for registered apprenticeship programs
2. Student Loans - A beneficiary or a beneficiary’s sibling can now use an aggregate lifetime limit of $10,000 to pay towards a qualified student loan repayment
Next, the CARES Act automatically suspended federal student loan payments through September 30, 2020 without interest accruing during that time. President Trump’s recent Executive Order would extend that indefinitely.
Finally, as a reminder, under the 2017 tax reform, 529 plans expanded the list of qualified expenses to include up to $10,000 per beneficiary for enrollment at an elementary or secondary school.
More good news for those taking on new student debt. According to Studentaid.gov, student federal loan rates have decreased to record lows for 2020-2021. For undergraduate loans, the interest rate fell from 4.53% to 2.75%. For graduate or professional students’ loans, the interest rate fell from 6.08% to 4.30%.
If you are using money from a 529 plan to pay for college expenses, work with your tax advisor to determine if you are eligible for any tax credits. If so, you will need to pay enough college tuition or expenses to qualify for the credit. Keep detailed records and make sure your college expenses match your 529 withdrawals to avoid any unanticipated tax penalties. If your child’s 529 plan is owned by grandparents, use that money in the student’s last two years of college to avoid conflicts with FAFSA benefits.
If you are fortunate enough to have funds remaining in a 529 plan after graduation, you have two options to continue using the funds without any tax consequences:
transfer the account to another qualifying family member, or
use up to $10,000 to help pay off your qualified student loans.
This fall looks very different for our returning college students. Just don’t take away my pumpkin spice!
Michele Burkholder* is the Founder of The Burkholder Team, a family financial practice whose mission is to Provide Families, Business Owners & Their Employees Optimal Guidance to Help Them Reach Their Financial Goals.
*Registered representative of and securities offered through Hornor, Townsend & Kent, LLC. (HTK), Registered Investment Advisor, Member FINRA/SIPC 161 Washington Street, STE 700 Conshohocken, PA 19428 610-771-0800 The Burkholder Team and 1847Financial are not affiliated with Hornor, Townsend & Kent, LLC. HTK does not offer tax or legal advice.
For Educational Purposes Only – Not to be relied on as financial, tax, or legal advice. All investing involves risk and no investment strategy can assure a profit or protect against a loss in a down market. Life Insurance is subject to certain costs, limitations, terms, and conditions not outlined here. All guarantees are based on the claims-paying ability of the issuing insurance company. 3197577JD_AUG22
 https://research.collegeboard.org/pdf/trends-college-pricing-2019-full-report.pdf  https://www.in2013dollars.com/College-tuition-and-fees/price-inflation, Consumer Price Index, U.S. Bureau of Labor Statistics