Financial Aid

Overview Of College Savings Bonds

Let’s start off by understanding what savings bonds are in the first place. Simply put, Savings bonds are nothing by debt instruments that are issued by the U.S. Government, actually the Treasury department to be more precise, to pay for the ever increasing borrowing needs of the U.S.

So what does savings bond have to do with paying for college or school? The debt explosion that continues to transpire in the United States and abroad have many young people wondering about their education and in particular their college prospects or post-secondary degrees. With the cost of a college education increasing each day, it is important to plan and start saving to pay for college very early. There exist a number of options for families looking to establish a college fund and save for their children’s education. Concerned families hew close to the most established accounts – namely, those associated with 529 prepaid and savings plans – in order to stave off the worst of the recession’s continuing effects and prepare for their children’s futures.

Many families invest in savings bonds – particularly Series I and EE savings bonds that are worth their value in tax-deferred growth and exclusion for 30 or more years as one of the many financial instruments available to deposit large sums of money that pays you back in interest over time. These savings bonds offer students and their concerned families the ability to deposit sums of money without interference from state or federal taxes. As the savings accrue, the student potentially saves hundreds of thousands of dollars for her or his college education at a later time.

Education Savings Bonds Features

Those who invest in these savings bonds can contribute as much as $15,000 by buying Series EE savings bonds, or $30,000 in the case of Series I bonds. Important income limitations prevent investors from injecting too much cash into these bonds. Moreover, married couples who file jointly may suffer the loss of their tax benefits if the adjusted gross income finds itself in the $81,100-$111,100 range. Single taxpayers will lose nearly $54,100-$69,100 in tax benefits.

How does Savings Bonds Impact Financial Aid?

Purchasing the bonds requires that the beneficiary or recipient be at least 24 years old. This serves the U.S. Department of Education and the United States in general by ensuring that the beneficiary possesses a sound mind and the maturity to accept the responsibility for bonds. By contrast, if the bond owner is a parent, then the bond is considered under all applicable laws and the consequences acceding therefrom a parental asset, making said parent and bond owner liable, not the student. If the bond’s proceeds are used for the parent’s education, then the bond is considered a student asset.

The U.S. Department of Education distinguishes between student and parent assets in this fashion, a system designed by the Internal Revenue Service and U.S. Congress in order to better serve families, their students, and the education system in general.

Bonds as Secure Investments

One of the few drawbacks to a savings bond is the fact that beneficiaries and bondholders cannot access the same level of flexibility that you have in 529 plans. On the other hand, this lack of flexibility and all the laws governing savings bonds help make them better, sounder investment options. With the interest rates on Series I bonds indexed to the current inflation rates, 529 plans remain largely exempt from the chronic instability that would otherwise threaten their financial integrity. This counts as an in-built protective measure that exists thanks to the steady, but never fluctuating rate of inflation in the United States.

 

Overview Of College Savings Bonds

Let’s start off by understanding what savings bonds are in the first place. Simply put, Savings bonds are nothing by debt instruments that are issued by the U.S. Government, actually the Treasury department to be more precise, to pay for the ever increasing borrowing needs of the U.S.

So what does savings bond have to do with paying for college or school? The debt explosion that continues to transpire in the United States and abroad have many young people wondering about their education and in particular their college prospects or post-secondary degrees. With the cost of a college education increasing each day, it is important to plan and start saving to pay for college very early. There exist a number of options for families looking to establish a college fund and save for their children’s education. Concerned families hew close to the most established accounts – namely, those associated with 529 prepaid and savings plans – in order to stave off the worst of the recession’s continuing effects and prepare for their children’s futures.

Many families invest in savings bonds – particularly Series I and EE savings bonds that are worth their value in tax-deferred growth and exclusion for 30 or more years as one of the many financial instruments available to deposit large sums of money that pays you back in interest over time. These savings bonds offer students and their concerned families the ability to deposit sums of money without interference from state or federal taxes. As the savings accrue, the student potentially saves hundreds of thousands of dollars for her or his college education at a later time.

Education Savings Bonds Features

Those who invest in these savings bonds can contribute as much as $15,000 by buying Series EE savings bonds, or $30,000 in the case of Series I bonds. Important income limitations prevent investors from injecting too much cash into these bonds. Moreover, married couples who file jointly may suffer the loss of their tax benefits if the adjusted gross income finds itself in the $81,100-$111,100 range. Single taxpayers will lose nearly $54,100-$69,100 in tax benefits.

How does Savings Bonds Impact Financial Aid?

Purchasing the bonds requires that the beneficiary or recipient be at least 24 years old. This serves the U.S. Department of Education and the United States in general by ensuring that the beneficiary possesses a sound mind and the maturity to accept the responsibility for bonds. By contrast, if the bond owner is a parent, then the bond is considered under all applicable laws and the consequences acceding therefrom a parental asset, making said parent and bond owner liable, not the student. If the bond’s proceeds are used for the parent’s education, then the bond is considered a student asset.
The U.S. Department of Education distinguishes between student and parent assets in this fashion, a system designed by the Internal Revenue Service and U.S. Congress in order to better serve families, their students, and the education system in general.

Bonds as Secure Investments

One of the few drawbacks to a savings bond is the fact that beneficiaries and bondholders cannot access the same level of flexibility that you have in 529 plans. On the other hand, this lack of flexibility and all the laws governing savings bonds help make them better, sounder investment options. With the interest rates on Series I bonds indexed to the current inflation rates, 529 plans remain largely exempt from the chronic instability that would otherwise threaten their financial integrity. This counts as an in-built protective measure that exists thanks to the steady, but never fluctuating rate of inflation in the United States.

References

• http://www.sec.gov/answers/savingsbond.htm

In this article we touch upon the subject of financial aid with an overview of the process. We will continue to detail in depth all the various financing options that a student can tap into to pay for college.

Today, students everywhere face the uncertainties that come with high school graduation. These uncertainties, myriad in their number, boil down to one inescapable reality: the expenses affiliated with a college education.

Find Financial Aid For College

Understanding financial aid and the process of finding financial aid is essential to any student considering college. The costs of today’s education are such that a good education comes with a hefty price tag. The good news is that there are many options to finance your education and getting to know each one is as important as choosing a college. Infact, to a certain extent, financial aid and choosing a college go hand in hand. Studentelligence.com has many articles that talk in details about the various forms of student aid, from scholarships to federal grants, from federal student loans to private student loans. Reading these will help in understanding and formulating a plan that can be then implemented to master your financial aid options for college education.

Getting the most out of financial aid – be it scholarships, grants, federal and state loans – depends entirely on a student’s personal initiative, the ability to push past seasonal deadlines, and clarification about an otherwise complex process.

The first step in the process of finding financial aid must be to look at ones own finances and draw definite conclusions. Below are a few questions that any student considering post secondary education should consider before embarking on the long journey to financial aid

• What is the average size of debt owed by the student’s family to various lending and other institutions?
• What will the student’s unmet financial needs look like?
• How long might it take for the student to graduate from a desired program/university?
• What are the deadlines for merit and need-based financial aid opportunities?
• What does the total sum of loan interest rates, repayment requirements, and tax breaks look like for said student?

At a very high level, the following form the four basic steps that a student goes through while evaluating, applying, receiving, accepting and repaying financial aid

Groundwork and Evaluate your options – Learn everything you can and more about College financial aid

Before a student begins the cumbersome financial aid process, it’s important to gather all the information possible. This is needed to make the best possible decision. Here’s a sample of the steps a student will in all probability be taking

Do well on or retake standardized tests

All university systems and colleges use the SAT and ACT to make admissions decisions. The better the score, the more likely the student is to enter a competitive undergraduate program. Many students who fail to meet their expectations on these exams retake them in order to increase their competitiveness. Some merit based scholarships also take into consideration your performance on these standardized tests.

Cross-reference financial requirements and deadlines

Research and gather all available options for financial aid. Students typically start with scholarships and grants and then move on to federal student loans. The reason for this is simple, scholarships and grants do not have to be repaid. This is essentially free money for college. It is the preferred method of financing your college education. You will find yourself spending a lot of time gathering information about various scholarship and grant options. Make sure you keep track of requirements, essay submission deadlines, application deadlines so that you are on top of things and not let free money pass you by.

Apply for Student Financial Aid

As far as scholarships go, most private institutions and foundations, colleges and universities maintain specific deadlines. Scholarships and grants are most important. It is important that you apply early. Work really hard on your scholarship applications since the competition is fierce. Grants, similar to scholarships have their own defined process. Understand eligibility and application deadlines. It is in the best interest of the student to apply to as many grants as he or she is eligible for and apply early.

When it comes to federal aid such as grants like the Pell Grant or federal student loans such as the Stafford loan, it is required that the student file out and submit the Free Application for Federal Student Aid (FAFSA). The FAFSA gathers your personal and financial information to determine your current financial situation. The amount that a student is eligible for as disbursements from grants or student loans along with your expected financial contribution or EFC is determined based on the information your report in your FAFSA. Once a student has submitted their FAFSA to obtain federal and state grants, A Student Aid Report, or SAR, follows the FAFSA, allowing students to approximate how much in aid is available for their college education.

Determining the Appropriate Financial Aid Award and College

After a student has finished applying to his or her preferred list of colleges – and after he or she has received award and acceptance letters – it is important to compare each of the financial aid awards from the various colleges where you’ve been accepted. Some will offer more financial aid than others, that said, the amount of financial aid cannot be the sole criteria for deciding your choice of college. A lot of times, students will choose universities that make less financial aid available in order to enter their preferred program and or college.

Accept and lastly start repaying your loan once you graduate

Once a student is accepted into his or her preferred university, it is customary for the student to collect financial aid, decline other university offers. Financial aid like certain grants have to be applied for each year and so sadly your financial aid journey does not end here. Each academic year you will find yourself reapplying to receive the grant. The good thing though is that you will now not have to do the research and will be more sure of what needs to be done.

Student loans, both federal and private student loans are deferred until you graduate or if your academic status changes. Usually you will also have another 3 – 6 months of loan deferment after you graduate. This is usually to help the student sort out his or her finances until they can find a job. After your repayment kicks in. Stay on top of your student loans. A missed payment here and there could have an adverse effect on your credit score. This is why finding a scholarship or a grant has no comparison when it comes to financial aid. That said, the loan terms that the federal government offers are pretty good and finally you also have the option of consolidating your student loans into one single payment to help reduce your monthly payments.

Post secondary education in the United States does not come cheap. Tuition costs have been increasing rather drastically each year and infact many feel that it is getting out of control. That said, an education and all the associated costs must be considered as an investment, an investment that will pay back ten fold in the future.

It is important to start planning early. A college or career school education takes money and it is wise to involve your family and understand your financial position quite early in the day. Do not wait till your senior year before you start thinking about college tuition. Between your family and your school’s guidance counselor, you should be able to structure a plan for yourself in terms of your education plans and your financial status and options.

So where do you begin. Well, first off, it is important to be clear in your career goals and aspirations. Next, work towards narrowing down your college wish list. Once you are clear about the college(s) you are planning to apply, you can then begin to work out the costs. Education costs vary from college to college and your choice of school is a big factor in the final cost of your education.

List All Your Education Expenses

The sooner you get to making a list of all the possible college related expenses, the better it will be to plan to meet those costs. After all there is no point in trying to source funds when you don’t know how much you realistically will need.

A big chunk of your finances will be spent on your college tuition fees, room and boarding. Apart from these you will also need to factor for

Miscellaneous College Fees

You should be able to get a list of all miscellaneous fees directly from the college. These miscellaneous fees could include parking fees, activity fees etc

Books and Supplies

If you are not careful, books and school supplies costs could form a big chunk of your financials. Students though are getting smarter and are turning to used books and even renting books from popular book rental websites to allay these costs. School supplies again depend on the type of course you are planning on doing but things like a laptop/computer, notebooks, stationary, bags are something you need to account and plan for

Miscellaneous Costs

Here you would include things like room furnishings, lighting, a work or computer desk and printer, kitchen equipment like a refrigerator, microwave, pots and pans. Also do not forget things like phone bills, clothing and entertainment.

Now that you have a grip on your expected costs and your current finances, it is time to start exploring your funding options.

Need based financial aid are for students that can demonstrate financial need for their education funding. With tuition costs spiraling out of control, the number of students applying for financial aid are increasing each year. More and more students are turning to the federal government for financial aid in the form of grants and student loans to bridge the financial gap. The good news is that financial aid packages have been keeping pace with the rise in tuition costs. Close to a 100 billion is awarded each year in the form of grants, loans and work-study programs by the U.S department of Education.

The primary responsibility for paying for your education is yours but when scholarships which are mostly merit based are not an option, it is time to look at federal aid. If federal aid does not suffice only then turn to private student loans as we always recommend. According to National Center of Educational Statistics, close to two third of the students that apply for need based financial aid receive aid in some form or the other. That statistic alone should give potential applicants cause to be optimistic.

There are two aid applications that are used to evaluate need based financial aid in the United States. The first one is the FAFSA or also known as the Free Application for Federal Student Aid. The second application for financial aid that is also widely used is the College Board’s financial aid application service called the PROFILE application.

The FAFSA is the application that is to be used for all federal aid such as federal student loans like the Stafford Loan or the PLUS Loan. The FAFSA is the first step in the financial aid process to receive federal funding for your education and is required by all educational institutions. The PROFILE application on the other hand is the aid application that is used more for institutional and private funds. The PROFILE application is also commonly used by many colleges and universities and quite often you will find that a particular college that you are applying to will ask you to submit both forms of aid application.

The purpose of both forms of application is to determine how much money you can contribute towards your education. This contribution is commonly called the “Expected Family Contribution” or “EFC” for short. This amount along with the total cost of education are key amounts that determine your need based financial aid package.

It is important to be aware of application deadlines for both FAFSA and PROFILE. The FAFSA application can be submitted anytime after Jan 1st for the year while the earliest date for submitting the PROFILE application is Oct 1st but keep in mind that this must be no later than 2 weeks from the earliest priority date specified by the college or program.

We will soon be publishing extensive guides on how to fill out and complete both the FAFSA and PROFILE applications.