There has been a significant change in the qualifying college expenses for 529’s.  Computers and eduction related software are now considered allowable expenses for 529 funds.  Previously, only that equipment that was specifically required by the college for the program of study was an allowable expense.

Not only is the computer an allowable expense, but it doesn’t even have to be the student’s computer.  It just has to be a computer that the student uses.  This could be your home computer sitting in your den.

Here is the new rules as it is written…

(iii) expenses paid or incurred in 2009 or 2010 for the purchase of any
computer technology or equipment (as defined in section
170(e)(6)(F)(i)) or Internet access and related services, if such
technology, equipment, or services are to be used by the beneficiary
and the beneficiary’s family during any of the years the beneficiary is
enrolled at an eligible educational institution.

Clause (iii) shall not include expenses for computer software designed
for sports, games, or hobbies unless the software is predominantly
educational in nature.

This amendment to Code section 529(e)(3)(A) only applies to expenses
paid or incurred after Dec. 31, 2008. Therefore, an account owner may
not take reimbursement out of a 529 account for a computer purchased
and paid for before Jan. 1, 2009.

The changes are part of the new administration’s economic stimulus plan.  This part is designed to hopefully give the computer industry a shot in the arm.  Also notice that currently this only applies to the 2009 and 2010 calendar years.  At this time, only the 529 is included in this definition, not Coverdell ESAs nor education distributions from IRAs.  However, I don’t doubt that will be changed soon.

This is good news!  Go buy a new computer and use the 529 to do it.

Here is a link to a Morningstar article by Susan Bart if you would like to read more about this.

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Where have you heard this before?  “If we could simplify this to just the few important pieces of information, we could get this form on a postcard.”

Well… this time, it’s not about your income tax return.  It’s about the FAFSA.

The College Board has again been studying how to simplify the financial aid process.  And again, they have come up with many suggestions of how the FAFSA (administered by the Department of Education) could improve it’s form to make it less intimidating to lower-income families.

But as for the College Board’s own Profile form, I quote from Jared McDonald’s article in the The Daily Pennsylvanian on April 14th, 2009…

For students with “complicated finances” applying to more expensive,
private schools like Penn, Baum said, an extensive amount of
information is inevitably required and is gathered through the College
Board’s Profile form.

Honestly, I’m really getting tired of the ivory tower mentatlity of the College Board.  The federal government with its 120 question FAFSA needs to be whittled down to a postcard.  But the College Board’s Profile with as many as 300 questions is just inevitable.

Don’t hold your breath for any simplification folks.  This latest study is just more smoke and mirrors.

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Tuition locks are becoming common at many colleges, but schools are making up the difference by increasing fees.  That’s the jist of the story from reporter Pete Nickeas.  In his recent article titled… Tuition Law May be Having Unintended Consequence, Pete describes how many states (Illinois in this particular case) passed laws to lock in tuition at their public universities for incoming Freshmen.  That way, students and their families would be able to plan on consistent costs throughout their time in school.  At least that was the intent.

But as with most things government does to regulate costs, it doesn’t work out the way you want it to.  Colleges still have costs they have to manage, and those costs don’t care about a law passed by some legislative body.  There were two very noticable consequences:

1. Colleges and Universities resorted to increasing various fees to make up the revenue short fall.  These fees included items such as:  Sports Fees, and Building & Grounds Maintenance Fees.
2. There were dramatic increases to first year tuition rates at the state universities.

The second consequence has really put state schools at a disadvantage.  By increasing their first year tuition costs in anticipation of freezing those costs for the students throught the next four years, the state universities in Illinois have driven their prices through the roof.  This makes schools like the University of Illinois and Western Illinois University much less attractive.  At this time, you can send a student out of state to any of the Missouri Univerisities next door at a lower cost than the in-state rates at the Illinois colleges.

This also means that the private colleges are going to find it much easier to compete with colleges that have adopted frozen tuition policies.  Because the state colleges typically do not have the per-student resources common at many private colleges, private colleges will find it much easier to lower the student’s out of pocket costs when compared to the state schools.

So here are my recommendations based upon Pete’s article:

1 — Do not be taken in by the good sounding marketing of tuition freezes.  You have to pay attention to your bottom line, out-of-pocket costs.

2 — Do not ignore out of state colleges.  Just like in the case of Missouri vs Illinois, many out of state rates may be less than your state’s in state rates.

3 — Do not ignore private colleges.  Private colleges may appear to be more expensive at first glance.  But the private colleges typically have much more in per student funds available to lower your out of pocket costs at those schools.

If you would like to read Pete Nickeas’ article, click here.

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Watch out for secretive changes to your FAFSA.

Yesterdayl, a client emailed us wondering about a notification they had received from the Department of Education regarding a recent change to their FAFSA.  It was a surprise to them.  They hadn’t made any changes to their FAFSA.

A finanical aid officer at one of the schools their daughter had applied made the changes.  Now in their particular case, it didn’t produce any negative effects… but in many cases, the results can be very damaging.

Yes… financial aid officers at the schools have the ability to go into your student’s FAFSA and make changes as they see fit.  Sometimes those changes cost you money and often make no sense.

Keep a close eye on those notifications from FAFSA.  You never know what kind of shenanigans are going on behind the scenes.

PS… If you find out changes have been made without your consent; I’d make my displeasure known loudly and quickly.

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There were some significant changes in the FAFSA with regards to dependent/independent status of students. This is very important considering independent students are often eligible for much more financial aid than dependent students.

Previously, the FAFSA had a very hard 7 question test to determine whether or not the student was a dependent or independent student.

• Is the student older than 23?
• Is the student working on a graduate level degree?
• Is the student married?
• Does the student have children that they support more than 50%?
• Does the student have other dependents living with them?
• Are the student’s parents deceased, or is the student a ward of the court?
• And finally, is the student a veteran?

The questions were virtually impossible to get around. Although the student may have been a position of recieving no support from their parents, they could not be an independent student unless they could answer “yes” to one of the above questions.

Now let’s look at the new set of qualifying questions FAFSA is using for 2009…

1. Are you older than 23?
2. Are you married?
3. Are you working on a graduate level degree?
4. Are you currently serving in the US Armed Forces other than training?
5. Are you a veteran?
6. Do you have children you support more than 50%?
7. Do you have other dependents you support more than 50%?
8. At any time since you were 13 regardless of present condition… are your parents deceased, or in foster care, or a ward of the court?
9. Are you or were you an emancipated minor as determined by a court?
10. Are you or were you in legal guardianship as determined by a court?
11. At any time on or after July 1, 2008, did your high school or district determine you to be an unaccompanied youth who was homeless?
12. At any time on or after July 1, 2008, did the director of an emergency shelter or federally funded transitional housing program determine you were a unaccompanied, homeless youth?
13. At any time on or after July 1,2008, did the director of a runaway or homeless youth center you to be an unaccompanied youth who was homeless or were self-supporting at risk of being homeless?

If the student can now answer “yes” to any of the above questions, they are considered independent and typically eligible for much more financial aid.

The question that is likely to get a lot of attention from many parents is #9 — Are you an emancipated minor as determined by a court. Over the years, I have had a number of people ask me if it would make any difference if their student was declared emancipated. Previously, the FAFSA had no means of indicating emancipation. Obviously, that has changed. This could mean the potential of thousands of students seeking emancipation.

My concern is what are the hidden ramifications of emancipating a minor. I asked Attorney Elizabeth Cervantes for an opinion. Here is a summary or her comments…

Emancipation in some states is not a cut and dry process. Some states have a defined process, others are vague.

Courts most often will require the minor to show they can support themselves.

Courts typically want to keep the family intact.

Eligibility for additional financial aid may not be a sufficient reason for the court to grant emancipation.

If you are going to investigate emancipation, I highly encourage you to seek professional, legal advice early in the process. You can contact Elizabeth Cervantes at the law firm of Katz, Huntoon & Fieweger in Moline, Illinois at the following email address — ecervantes@katzlawfirm.com

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For a number of years there have been two competing federal loan programs: FFEL (Federal Family Education Loan program), and the Direct Loan program.  The only real practical difference between the two is who you get to talk to if you have a problem.

Under FFEL, many local and national banks administered the various Stafford loans.  Under the Direct program, you talked to the government if you had a problem.  Now the Obama Administration wants to eliminate the FFEL all together.  All of the Stafford loans would be directly through the federal government.

The benefits of this proposal are dubious.  The downside is very evident.  Let’s face it… the federal government is not good at customer service.  In fact they really stink at it.  I recommend you contact your representative and voice your disapproval on this matter.  You can get more information below and sign an online petition.

Federal Takeover of Student Loans a Grave Mistake

Petition against the takeover

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There were some significant changes in the FAFSA with regards to dependent/independent status of students.  This is very important considering independent students are often eligible for much more financial aid than dependent students.

Previously, the FAFSA had a very hard 7 question test to determine whether or not the student was a dependent or independent student.

• Is the student older than 23?
• Is the student working on a graduate level degree?
• Is the student married?
• Does the student have children that they support more than 50%?
• Does the student have other dependents living with them?
• Are the student’s parents deceased, or is the student a ward of the court?
• And finally, is the student a veteran?

The questions were virtually impossible to get around.  Although the student may have been a position of recieving no support from their parents, they could not be an independent student unless they could answer “yes” to one of the above questions.

Now let’s look at the new set of qualifying questions FAFSA is using for 2009…

1. Are you older than 23?
2. Are you married?
3. Are you working on a graduate level degree?
4. Are you currently serving in the US Armed Forces other than training?
5. Are you a veteran?
6. Do you have children you support more than 50%?
7. Do you have other dependents you support more than 50%?
8. At any time since you were 13 regardless of present condition… are your parents deceased, or in foster care, or a ward of the court?
9. Are you or were you an emancipated minor as determined by a court?
10. Are you or were you in legal guardianship as determined by a court?
11. At any time on or after July 1, 2008, did your high school or district determine you to be an unaccompanied youth who was homeless?
12. At any time on or after July 1, 2008, did the director of an emergency shelter or federally funded transitional housing program determine you were a unaccompanied, homeless youth?
13. At any time on or after July 1,2008, did the director of a runaway or homeless youth center you to be an unaccompanied youth who was homeless or were self-supporting at risk of being homeless?

If the student can now answer “yes” to any of the above questions, they are considered independent and typically eligible for much more financial aid.

The question that is likely to get a lot of attention from many parents is #9 — Are you an emancipated minor as determined by a court.  Over the years, I have had a number of people ask me if it would make any difference if their student was declared emancipated.  Previously, the FAFSA had no means of indicating emancipation.  Obviously, that has changed.  This could mean the potential of thousands of students seeking emancipation.

My concern is what are the hidden ramifications of emancipating a minor.  I asked Attorney Elizabeth Cervantes for an opinion.  Here is a summary or her comments…

Emancipation in some states is not a cut and dry process.  Some states have a defined process, others are vague. 

Courts most often will require the minor to show they can support themselves.

Courts typically want to keep the family intact.

Eligibility for additional financial aid may not be a sufficient reason for the court to grant emancipation.

If you are going to investigate emancipation, I highly encourage you to seek professional, legal advice early in the process.  You can contact Elizabeth Cervantes at the law firm of Katz, Huntoon & Fieweger in Moline, Illinois at the following email address — ecervantes@katzlawfirm.com

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