What is the 401(k) Fee Disclosure Bill?
Posted by Eric on June 25th, 2009
House Panel Approves 401(k) Fee Disclosure Bill
The House Education and Labor Committee on June 24 approved legislation aimed at giving investors more information about fees that are charged to their 401(k) retirement plans. By a vote of 29-to-17, lawmakers approved the 401(k) Fair Disclosure and Pension Security Bill (HR 2989). The legislation is designed to provide employees with more information about fees taken from their retirement plans, and more options when they choose their investment plans. Rep. George Miller, D-Calif., chairman of the Education and Labor Committee, said the bill is a response to employee worries about the value of their retirement plans during the current economic recession.
The legislation would require retirement plans to give investors a quarterly statement that includes a dollar figure representing all fees taken from their 401(k) plan. Service providers and plan administrators would be required to categorize fees as administrative fees, investment management fees, transaction fees and other fees. The measure would also require service providers to disclose any financial relationships so that companies that sponsor 401(k) plans can make sure there are no conflicts of interest.
A spokesman for the Education and Labor Committee said Miller will determine the next step for the legislation after consulting with the House Ways and Means Committee, which also has jurisdiction over 401(k) plans. Meanwhile, a similar bill, introduced by Senate Special Committee on Aging Chairman Herb Kohl, D-Wis., and Sen. Tom Harkin, D-Iowa, is pending in the Senate. Their bill, the Defined Contribution Fee Disclosure Bill (Sen 401), would require a 401(k) plan to provide a written statement of services provided, as well as the expected total annual service charge.
By Stephen K. Cooper, CCH News Staff
401(k) Fair Disclosure and Pension Security Act of 2009, HR 2989
Defined Contribution Fee Disclosure Act of 2009, Sen 401
Carnival of College Admission: No More Pencils, No More Books, No More Teachers Dirty Looks! HELLO SUMMER!
Posted by Eric on June 23rd, 2009
Once again I have the pleasure of hosting this edition of the Carnival of College Admission on behalf of Mark Montgomery , his great college advice and the rest of my fellow bloggers. Summer is finally here and school is out! I know you’re ready to head to the beach, sleep late and do nothing all day… but don’t forget, in two months you’ll probably be heading off to college or you have a student that will be leaving the nest, so here’s some info for you to read in-between naps and tanning.
Today we’ll dive deep into the college planning world and look to all of the following great resources for tips on everything from writing your college essay to exploring urban legends about life after high school graduation. All of these blogs will help you navigate the college process and hopefully aid in your preparation to go to college for the first time or provide you with the details you need to continue with your education in the most efficient manner possible.
Hey, if someone you know just graduated from High School, then you’re probably wondering, ” What is the perfect gift for them?” Let Brett from 2EAST show you some of the best gift choices for anyone going to college. Some cool sheets to “never-be-washed” over four years perhaps? Or what about a crock pot to make hundreds of bags of Ramen noodles? Maybe I’ll let Brett handle that stuff.
We’ve got a lot of postings for Online schools this week. If you’re bored this summer and you think your brain is turning to mush after all that Reality TV, then check out Mark’s post about the 10 Best sites to test your memeory. Wait… what were we talking about? Oh, yeah… Online schools.
Moving on, topcollegecourses.com joins us with the Best Online Colleges and Universities for 2009, while Sarah gives her advice about how to use twitter for things other than telling me how I can get 100,000 followers in one day with her post: 50 Ways to use Twitter in the Classroom.
Speaking of social media, take a look at these 5 Social Media Sites for your Health brought to us by Masters in Nursing.
Want skip all that classroom stuff and get an accelerated degree Online? Check out all the Online College reviews and which one might be right for you by clicking right here!
Need a letter of recommendation for Graduate School? I recommend you check out The Higher Education Weblog for some awesome advice about why they are essential to your success.
Not heading off to college yet? James from Overnight Sensation wants to give you a list of 10 things to do while in High School. If you are still in High School… James from detentionslip.org will tell you how the current recession is going to affect you. The recession is making life tough for all of us and banks are looking closer than ever at our credit for loans (Yes student loans also), so Jim from bargaineering.com wants to help students make smart credit choices and gives you 10 Smart Credit Rules to follow for the coming years.
If you’re one of the millions of kids who just graduated and are gearing up for the best four, or five… maybe six years of your life, then you want to hear what CEOmum has to say about what you should be doing this summer before college. In relation to this posting, check out Diane’s advice about some summer activities you could be doing to Boost Your College Application for next year if you’re not joining the masses of college bound crazies this fall.
Once that application has been prepared, make sure you follow Daniel’s advice about choosing the right college and make a rational decision. The last thing you want to do is waste a ton of money on a school that is not for you. Just because your girlfriend is going there, doesn’t mean it’s where you want to be… do your research based on the campus, the degree you are going for and of course, the cost of attendance.
Jeannie joins us with an article about students and their sense of entitlement toward good grades. Now that you’re in college… NOTHING will be given to you, so take her advice, study hard and know that your dedication while in college will pay off in the future when you enter the job market.
Alvina Lopez has been hard at work to provide four great postings. The first two are geared toward anyone with dreams of teaching out there and provides 100 helpful websites for new teachers and a site to find teaching scholarships as well. Apparently she really likes to do things in hundreds… so check out 100 FREE i-phone apps for college students and 100 Ivy-league learning tools anyone can access.
Nate doesn’t have 100 FREE resources, but he does have 6 FREE Resources to help you prepare for the GRE.
Are you going to school for forensic science? You should perform an autopsy on this blog posting from James and his Top 5 Open Courseware Collections for Scientists.
I know some of my topic lead-inn’s are totally lame, but I’m trying.
Got some things around the house this summer that need fixing, why not do-it-yourself? Shoune Smith is a real Bob Vila and gives you the Top 10 DIY Home Repair Reference Sites to help you get off the couch and be productive already!
Okay, if you’re not the DIY type, maybe you should just relax some more and plan a vacation… not to your Grandmother’s condo in Boca, but to Park City Utah! Why not stay in an awesome Park City Condo! The mountains… the fresh air…, sounds pretty good and looks even better.
Lastly, you’ve probably been so engrossed in this blog… hours have passed with you sitting at your computer so Ruoall wants you to think about your spyware protection before you sign off.
Now GO OUTSIDE!, it’s summer for God’s sake… this will be here when you get back. Thanks to all of the contributors this week and thanks for letting me host.
Another Alternative to Help Pay for College - Start A Home Based Business
Posted by Eric on June 15th, 2009
HIRE YOUR CHILDREN IN A HOME BASED BUSINESS
If you have or thinking about starting a small home based business or a small business filing tax form Schedule C, you have a great opportunity to shift income from your high tax bracket to a lower tax bracket and save taxes that could be used to help pay for college expenses or other costs that you are currently paying with after tax dollars.
According to IRS rules, you do not have to pay Federal Insurance Contributions Act (FICA) taxes and unemployment insurance on the child’s income as long as they are under the age of 18.
Special rules apply to wages paid to a family member by a sole proprietor. A sole proprietor is an unincorporated business that reports earnings and losses on an individual’s Form 1040, Schedule C.
Payments for the services of a child younger than age 18 who works for his or her parent in a trade or business are not subject to Social Security and Medicare taxes, if the trade or business is a sole proprietorship. Payments for the services of a child under age 21 who works for his or her parent, whether or not in a trade or business, are not subject to federal unemployment (FUTA or FUI) tax.
Income tax may be required to be withheld depending on child’s wage level (based on the child’s standard deduction). However, if the child does not expect to owe tax at the end of the year, they can claim exempt on Form W-4.
For example: If your are in the 31% (federal and state taxes) income tax bracket and you earned $5,500 in taxable wages from your small or home based business, your would pay approximately $1,750 in income taxes. In addition, if this income is subject to Self-employment taxes (15.3%) you would pay an additional $842.
If you hired your child in your sole proprietor business and paid them $5,500 in wages (2009), they would owe $0 federal income tax on the earnings (due to the child’s standard deduction). If the child is under the age of 18, you would not be required to withhold Social Security, FUTA, or FUI taxes as well.
The child can use the $5,500 to help pay for some of the expenses that you are currently paying personally (cloths, spending money, future college expenses, etc.). This is a tax savings of $2,592.
The wages you pay the child is NOT and additional expense to you because you are spending this money any way.
Generally, a child is not entitled to the earned income tax credit and therefore they cannot get an advance of it on their paycheck.
You would include the child’s earnings in box 3 of your quarterly Form 941, but not in boxes 5a or 5c. At the end of the year, you would issue a Form W-2 for your child’s wages and include the amount in box 1 of that form, leaving boxes 3 through 6 blank.
Operating or starting a home based or small business and hiring your children in the business can create large amounts of tax savings that could be used to help pay for personal expenses of the children.
If you are interested in learning how to start a home based or small business, check out our E-book “Get the IRS To Help Pay For College Expenses” under the Membership Page.
Also you can give us a call at 603-226-8665 or send us an e-mail at info@dreamstrategy.com if you have any questions.
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.
College Coaches Now Using Twitter and Facebook to Recruit Top High Scool Athletes
Posted by Eric on June 8th, 2009
Forget the future of recruiting. This is its present - for now at least.
Football and basketball coaches spent the off season increasing their presence in cyberspace at a furious pace. By the end of May, dozens of head coaches and assistants in both sports had established Twitter pages. A few more had beefed-up their presence on Facebook. And that was before many of them knew the NCAA considered email-based correspondence on social networking sites to fall under the same rules as email, meaning they basically can be unlimited in nature.
Under NCAA rules, coaches in Division I and II can communicate with prospects via one-on-one messaging from social networking sites even if a recruit wants to receive the coach’s message as a text. Phone-to-phone text messages and instant messaging, even through a social networking site, remain off-limits. In 2007, Division III prohibited social networking in recruiting along with text messages.
The exception for direct messaging via social networking sites is a change of pace for coaches, who have seen their ability to contact and evaluate prospects curtailed in recent years. The NCAA banned coach-to-recruit text messaging in 2007. And last year, the NCAA barred head coaches from leaving campus to recruit during the spring evaluation period.
Coaches, though, question how long Facebook and Twitter will be permissible as a recruiting tool. Illinois coach Ron Zook, for one, wondered if social networking could be effectively policed or legislated.
“I’m not sure the NCAA understands exactly what it is,” he says. “I sure don’t.”
The ban on text messaging came after recruits complained the constant messages from coaches became too intrusive and too costly. The NCAA looks favorably on direct messaging on social networking sites since it allows prospects to avoid those two concerns. Setting up accounts on Twitter, Facebook and MySpace is free, and users can control how they want to receive messages through the site, by email or by text message. A user also can elect whether to receive messages from particular users.
Many of the same recruiting rules apply. Coaches may not comment on a prospect or communicate publicly with a recruit (i.e., on a Facebook wall or a Twitter @reply, which would be visible to any visitor to the coach’s or athlete’s page). A coach and recruit are permitted to be Facebook “friends” or Twitter “followers” since that information is viewed as the coach merely confirming recruitment of a prospect, which the NCAA allows.
Still, the use of Twitter and Facebook already has led to some trouble. Tennessee reported a secondary violation when coach Lane Kiffin’s pages on both sites announced the commitment of LaGrange (Ga.) Troup defensive end J.C. Copeland - who will be a high school senior this fall - to the Volunteers.
The post read, “It’s a beautiful day in Knoxville, Tennessee today. I was so exited [sic] to hear that J.C. Copeland committed to play for the Vols today!”
Under NCAA rules, coaches aren’t allowed to comment on prospects until they have signed. Tennessee blamed the gaffe on Kiffin’s new personal assistant.
Some coaches are wary of getting too fond of the new rules. What is legal today might not be legal a year from now, as coaches learned when text messaging was banned.
“I would not be surprised in a year or so if it’s completely banned,” Scott says. “Now it’s time for them to gather information. That’s usually the way this stuff happens: Coaches find out about it before the NCAA is able to research and find out what’s really going on.”
Before the NCAA’s interpretation on social networking sites and recruiting, coaches already had latched onto Twitter as a public-relations tool. Most used their pages to talk about speaking engagements, congratulate graduates and pro draftees or post inspirational quotes, but some are having fun with the new technology.
Indiana basketball coach Tom Crean and Kentucky counterpart John Calipari traded friendly barbs and competed for followers on Twitter; Calipari has a sizable lead, with more than 135,000 to Crean’s 6,800.
Carroll, who has more than 22,000 followers, implored his fans to persuade comedian Will Ferrell to join Twitter, and Carroll has tweeted back and forth with the Lakers during the NBA playoffs. Recently, he polled fans on which USC player’s number should appear on jerseys for sale during the upcoming season.
More than a third of the 120 Football Bowl Subdivision head coaches have Twitter pages, which they maintain to varying degrees.
“It’s hard to stay up with technology as fast as things are moving,” Southern Miss Coach Larry Fedora says. “I’m learning as I go. But I do see where the future is. In this business, we’re obviously recruiting 17- and 18-year-old kids and they’re up to date on everything out there. We have to stick with them or fall behind.”
How Safe Are Your 529 Plans?
Posted by Eric on June 3rd, 2009
How Safe Is Your College Savings Account?
Some families could be hit hard by the 529 savings plans losses in Oregon, Pennsylvania, and Alabama
By Kim Clark Posted May 29, 2009
Many college savings plans have been hammered by the same kinds of investment bubbles and scandals that other investment plans have faced in the past year, causing thousands of Americans to halt their contributions to college savings and a few to file lawsuits alleging they were misled. But a few glimmers of hope are emerging for those planning for a college degree. Congress is mulling a bill that would give many savers tax breaks, and some states are slowly tinkering with their portfolios to replace risky strategies with safer alternatives. And experts hope the losses have taught parents to check out the safety of all of their portfolios, including college savings. Experts such as Morningstar, Savingforcollege.com, and Consumer Reports analyze the investment mix of college savings plans.
These improvements and hard-learned lessons are scant comfort, however, to tens of thousands of savers who put money in such investments as: Oregon’s “Conservative” 529 option, which lost more than 30 percent of its value in the 12 months that ended March 31 because OppenheimerFunds put some of the money into derivatives.
Pennsylvania’s “guaranteed” college savings plan, which promised parents their contributions would grow at the same rate as tuition. But the state recently informed parents that the guarantee actually is only backed by the fund itself. Because of the stock market crash, the fund now has enough money to pay college bills only for the next eight years, even though some families invested in the hopes that their young children would be protected 10, 12, or even 18 years from now.
Alabama’s PACT, which encouraged parents to plunk down money years ahead of time to lock in a share of tuition at the state’s public universities. Alabama’s Prepaid Affordable College Tuition program now says it has enough money to cover students’ tuition only for the coming academic year. Younger children’s prepaid tuition will be covered only if the markets bounce back soon, or the state government bails out the fund.
“A ‘pact’ is a solemn agreement or contract,” fumes Todd McLeroy, an attorney in Cullman, Ala., who prepaid four years of tuition for all three of his children years ago. His oldest is now 15, and the fund might run out of money before McLeroy’s first college bill arrives. McLeroy has sued Alabama on behalf of another investor, complaining, among other things, that the fund lost more than 50 percent of its money because it took too many investment risks.
Analysts say that investors in many other state 529 plans-which are named after the section of federal law that created the state-sponsored, tax-protected college savings accounts-have suffered similar, though often smaller, losses. Little wonder, then, that investors across the country appear to be pulling back on their contributions. (According to a new national survey conducted by Gallup and Sallie Mae, the current recession has caused 48 percent of parents of collegebound students to decrease their college savings or not save at all.) The 529 industry reported taking in a net of $1.6 billion in the first quarter of 2009, down from $2.1 billion a year ago. During last fall’s big market drop, investors pulled more than $3 billion from their college savings accounts.
That’s a shame, says Rep. Earl Pomeroy, a North Dakota Democrat. Pomeroy is pushing legislation that would give big federal tax credits to low- and middle-income families who sock away money for college, creating a federal match similar to those some employers offer workers who contribute to 401(k) savings accounts. The painful losses “have made us sadder but wiser investors. But the answer is not to forget about savings. It is more important than ever,” he says.
The federal government has already made some small, temporary improvements, allowing investors to change their portfolios twice this year, instead of the standard once, and adding computers to the list of permissible college-related expenses 529 money can be spent on tax-free. And many state officials are launching reforms to strengthen the safety of their college savings programs.
Oregon’s attorney general has sued OppenheimerFunds, alleging the firm misled state overseers about the safety of its portfolio. The AG is asking Oppenheimer to make up for the losses. The state treasurer has also hired a new overseer to check out 529 investments and is preparing to hire a new firm to replace Oppenheimer. Oppenheimer says that it told state officials about the derivatives and that no one could have predicted the collapse of the market. The director of Alabama’s college savings program says the state is about to re-evaluate the fund’s investment mix and has stopped accepting new investors. She declined to comment on the lawsuit filed by McLeroy.
Andrea Feirstein, a consultant to 529 plans, says that many other states are boosting the safety of their investments. At least six states, for example, now offer FDIC-insured savings options. Two, Utah and Wisconsin, launched new guaranteed opportunities in the last year. But, Feirstein added, the losses of the last year should also spur investors to take actions of their own, by, for example, researching the asset allocation of age-based 529 portfolios. “Buyers have to do their homework. Those are the lessons we’ve learned,” she says.
How to Get Back $2500 in Tuition Money
Posted by Eric on June 3rd, 2009
US News and World Report
How to Get Back $2,500 in Tuition Money
May 05, 2009 04:05 PM ET | Kim Clark
Millions of students and parents struggling to raise cash for college this fall could have a happy surprise early next year: an extra tax refund of up to $2,500. The new higher education tax credit, which was part of the stimulus bill signed into law in February, is expected to put hundreds, if not thousands, of extra dollars into the pockets of millions of Americans who write tuition checks this year. Better yet, students don’t have to fill out any extra financial aid applications to get the new money. They just file their taxes.
“This will definitely help people,” says Jackie Perlman, an analyst for H&R Block’s Tax Institute. Of course, like anything in the federal tax code, the rules are a little complicated. But experts like Perlman say the new credit is bigger and more inclusive than previous higher education tax credits, which were so complicated that more than a quarter of eligible taxpayers failed to get a penny, and those who were able to collect typically got less than $900.
I asked Perlman and other experts to help answer some questions taxpayers will have about the new bonus: How much can I get? You can get a reduction in your 2009 tax bill of up to $2,500. Even if you don’t owe a penny in taxes, you can still get a cash refund of up to $1,000. When can I get the money? The credit covers only tuition, fee, and book expenses paid in 2009 and 2010. So the soonest you can get the money is in early 2010, after you file your 2009 taxes. Congress might at some point decide to extend the credit beyond 2010.
Does every student qualify for the money? No! The credit is only available for undergraduates who attend college at least half time. And only tax filers with adjusted gross incomes of less than$80,000 a year (if they are single) or $160,000 (if they file jointly) qualify for the full credit. It is phased out for people who earn more than that. Anyone who earns more than $90,000 (or $180,000 for joint filers) won’t qualify at all. In addition, the credit covers only tuition, fees, and books. So if you get a scholarship or grant that covers those costs, you can’t get the credit, even if you have to spend a lot of money on, say, room and board. Also, students with felony drug convictions are disqualified.
How do I get the maximum? You can claim 100 percent of your first $2,000 spent in 2009 on tuition, fees, or course materials. You can claim 25 percent of the next $2,000 spent on the same things. So if you have $4,000 in course-related expenses, you can take $2,500 off whatever you owe the IRS. If you earn so little that you don’t owe the IRS that much, then the government will send you a check for 40 percent of whatever extra credit you qualify for, up to a maximum of $1,000.
What if I borrow to pay for tuition or books this year? No problem. You can still collect the credit. What if I take money out of my 529 to pay for tuition or books this year? Here’s where it gets complicated. Parents who have profits in their 529 college savings accounts (of course, many don’t after the market meltdown) and plan on withdrawing some of those profits to pay tuition could benefit from checking first with their tax accountant or financial adviser, says John W. Roth, senior tax analyst for CCH Inc. Because the government has already given savers a tax break on 529 profits, it doesn’t want to allow people to double-dip by giving them a credit on the same school expenditures, he notes. So you’ll end up paying tax (though not a penalty) on the profit portion of your 529 withdrawal for which you then also could claim the new credit.
But there are lots of ways to get around this, such as using the 529 money to pay for room and board, and using money from your checking account to pay the first $4,000 of tuition. Even if you do end up using 529 money to pay for tuition, Roth has estimated that the tax bite would very likely be comparatively small-perhaps a few hundred dollars for most filers. So the credit is still worth claiming, he says.
If I am paying for two children in college this year, can I collect two credits? Yes! The credit is for each student. So the Octomom could collect eight. What if I earn too much or am otherwise ineligible. Are there any other education breaks I can get? Yes, although they are generally less valuable than the credit. The lifetime learning credit of up to $2,000 is available to many more kinds of students, including those who’ve already graduated, part-timers, and those in job-related courses. Students can claim a deduction on their tax forms for tuition and fees and student loan interest. Important: No doubling up. You only get to take one of the breaks for an expense.
Are there any catches? Of course! This is the tax code, after all. To get the credit, you’ll have to fill out next year’s IRS form 8863. And you should keep records of your tuition and book expenditures just in case. But H&R Block’s Perlman says taking the credit does not increase the odds of an audit. “That’s a common misconception,” she says. “You want to take every credit for which you are eligible.”
Recession Imperils Loan Forgiveness Programs - Teachers May Be in Trouble.
Posted by Eric on May 27th, 2009
Recession Imperils Loan Forgiveness Programs
Post Brought to you by Chuck Moore of The College Literacy Academy
When a Kentucky agency cut back its program to forgive student loans for schoolteachers, Travis B. Gay knew he and his wife, Stephanie - both special-education teachers - were in trouble.
“We’d gotten married in June and bought a house, pretty much planned our whole life,” said Mr. Gay, 26. Together, they had about $100,000 in student loans that they expected the program to help them repay over five years.
Then, he said, “We get a letter in the mail saying that our forgiveness this year was next to nothing.”
Now they are weighing whether to sell their three-bedroom house in Lawrenceburg, Ky., some 20 miles west of Lexington. Otherwise, Mr. Gay said, “it’s going to be very difficult for us to do our student loan payments, house payments and just eat.”
From Kentucky to Iowa to California, loan forgiveness programs are on the chopping block. Typically founded by their states to help students pay for college, the state agencies and nonprofit organizations that make student loans and sponsor these programs are getting less money from the federal government and are having difficulty raising money elsewhere as a result of the financial crisis.
The organizations say the repayment programs have been hurt by a broader effort by Congress to tackle the high cost of the federal student loan program by reducing subsidies to lenders.
Curbing the programs will make it harder to lure college graduates into high-value but often low-paying fields like teaching and nursing.
While few schools may be hiring now in this economic climate, there may be shortages later, educators say.
“You’re going to diminish the quality of the candidates who are thinking, ‘Do I take my skills in math and science into industry or do I take them into the classroom?’ ” said Tracey L. Bailey, who had loans forgiven in Florida and now is director of education policy for the Association of American Educators.
The Kentucky Higher Education Student Loan Corporation is at the extreme in cutting payments to people in midstream who have already finished their educations and are repaying loans, but organizations in many other states have curtailed their new offers to prospective teachers, nurses and others.
The New Hampshire Higher Education Loan Corporation has suspended its program for teachers, and the Pennsylvania Higher Education Assistance Authority has done so for nurses and people called to active duty in the military.
Iowa Student Loan has reduced the maximum amounts offered to people in two of its three program categories, one for teachers and one for certain types of nurses, in an effort to ensure the programs will last. ALL Student Loan, which is based in Los Angeles, ended a program for nurses last year.
The changes leave students without a critical escape hatch from their federal college and graduate school loans, and they throw up a roadblock for those who dream of teaching but fear an oppressive combination of low wages and high debt.
“I remember sitting in the financial aid office and them saying, ‘Pay for every penny of it, pay for your books through loans, because they’re going to be forgiven,’ ” Mr. Gay said. And he dutifully did, using federal loans to cover some of the costs of his undergraduate degree in communications and all the costs of his master’s program in special education, which he finished in 2006.
If he had known the forgiveness program was vulnerable, Mr. Gay said, he would have chosen a different career, perhaps public relations. “Which I am actually contemplating doing right now,” he added.
Teachers in Kentucky are hoping to get financing restored for the program. But it is not clear where the money could come from.
“We’d obviously love to see something like that happen,” said Ted Franzeim, vice president for customer relations of the organization. He added that the group had never told participants that financing for forgiveness was guaranteed - a point that schoolteachers dispute.
About 7,500 teachers, nurses and public interest lawyers have benefited from the state’s loan forgiveness program since 2003, at a cost of $77 million, Mr. Franzeim said.
The federal government and some states continue to support their programs to lure promising young graduates to less lucrative jobs. The federal Education Department still offers up to $17,500 in loan forgiveness to math, science or education teachers who have worked for at least five years at an elementary or secondary school in a low-income area.
New Mexico, New Jersey and New York pay for their programs directly instead of relying on nonprofit organizations, and they have not been cut by lawmakers. In Oregon the Legislature is debating whether to suspend funding of a program for nurses.
Another problem for some of the nonprofit groups that rely on selling their loans in a secondary market is that financing has dried up.
The Missouri Higher Education Loan Authority, for example, has stopped offering to reduce interest rates for borrowers working in public service fields like teaching and firefighting, said Will Shaffner, director of business development and governmental relations. The only investor willing to buy its loans now is the federal Education Department, which purchases loans with standard terms only.
There is no clear accounting of how many people were swayed by loan forgiveness to pursue teaching, or how many might be deterred by the absence of such programs. But the anecdotal evidence suggests the programs matter.
Mark Henderson said he weighed a job as an auditor at Humana, where he worked as temporary help in 2005, against the chance to teach math, a subject he loved. Kentucky’s loan forgiveness program persuaded him to try teaching.
“I thought, at least if I have somebody repay it, I can last five years and get rid of this debt,” said Mr. Henderson, 26, a math teacher in Louisville. He enrolled at Spalding University and graduated in 2006 with a master’s in teaching; he is not yet in repayment on his loans because he is taking classes to improve his earning potential.
He has ended up teaching at the very high school he attended, Mr. Henderson said, and teaches geometry in the same classroom where he learned it.
“As it turned out, I really liked it,” he said, “and I’ll stick around for a long time.”
NEW 529 Plans?
Posted by Eric on May 26th, 2009
New College Savings Initiative aims to advance college success for all families.
The New America Foundation and Washington University in St. Louis will examine innovative ways to create more inclusive 529 college savings plans.
May 21, 2009 — Today, the New America Foundation and Center for Social Development (CSD) at Washington University in St. Louis announced a new College Savings Initiative to examine and improve “529″ college savings plans so more people have the opportunity to attend and complete college.
“This initiative couldn’t be more timely,” said Ray Boshara, Vice President of Domestic Policy Programs at New America. “Vice President Biden recently said the Obama administration was committed to improving 529s to help achieve college affordability and completion, and President Obama has called for Americans to ‘move from an era of borrow and spend to one where we save and invest.’”
State-sponsored 529 college savings plans were established to encourage families to save money for postsecondary education. Money contributed to these plans grows free from federal and state taxes, and contributions are tax deductible in most states. Unfortunately, 529s have yet to reach their full potential for low- and moderate-income families who have the most difficulty saving for their children’s education. In other words, those who face the most barriers to sending their children to college receive the fewest 529 benefits.
“Saving money is not easy, but research shows many people can save when they have incentives and a way to do so. More low-income families may save with well-designed 529s and incentives,” said Margaret Clancy, Policy Director at CSD. “We will study 529 innovations to see which ones are effective. This will inform 529 policy so that it can benefit families of all income levels.”
“I’ve learned that if families are not preparing for college financially, then they’re probably not preparing in other ways as well. That’s one of the reasons 529s are exciting - they focus both the mind and money on college.” said Jacqueline T. Williams, the newly named Director of the College Savings Initiative at New America.
“Research indicates that saving and asset holding are associated with educational achievement,” confirmed Michael Sherraden, Professor and Director of CSD. “There is evidence that savings for college may focus attention of parents and children on post-secondary education, affecting their outlook, orientation, course selection, discipline, and academic achievement.”
Currently, some states have established programs to better include lower- and moderate-income families in 529 plans - including outreach, initial deposits, matching deposits, low fees, setting up 529s at birth. In Maine, a philanthropist has bequeathed money to set up a 529 plan for every newborn.
“Structured and invested properly, 529s hold enormous, un-tapped potential to get more students, especially those least likely headed to college, on a path to attend and complete college,” said Boshara.
The College Savings Initiative will examine a number of new ideas including how 529s might connect to federal tax and student aid policies. The initiative will also study the potential to automatically open a 529 for every child when they enroll in kindergarten, to enable them to save and think about college from an early age.
“In the United Kingdom, all children now start their lives with a savings account in the Child Trust Fund,” said Sherraden. “If college savings research continues to be promising, perhaps the United States will consider a similar policy.”
The College Savings Initiative is a joint initiative of the Asset Building and Education Policy Programs of the New America Foundation and the Center for Social Development (CSD) at Washington University in St. Louis. It is funded by the Lumina Foundation for Education and the Bill & Melinda Gates Foundation.
529s were created by the Internal Revenue Code 529 as a tax-advantaged savings tool for post-secondary education. States administer 529 plans, and accounts may be used at any eligible educational institution, including public and private colleges and universities, graduate and post-graduate schools, community colleges, and certain proprietary and vocational schools. At the end of 2008, there were 8.8 million 529 accounts in the United States, with some $88.5 billion in total assets.
A TAX ON THE HEADS OF COLLEGE STUDENTS!
Posted by Eric on May 26th, 2009
Rhode Island Mayor Wants Head Tax On College Students
May 14, 2009
Mayor Proposes a College Attendance Head Tax In Rhode Island
by Mark Robyn
The mayor of Providence, Rhode Island, David Cicilline, has proposed an interesting new tax. He thinks that the city should charge a per student tax on college students at a rate of $150 per semester. The argument for the tax is that students are consuming more government service than they pay for. The tax would bring in between $7 million and $8 million per year and would apply to students of the four non-public schools located there: Brown, Providence College, Johnson & Wales University and the Rhode Island School of Design. Students at the two state schools, Rhode Island College and the Providence campus of the University of Rhode Island, would be exempt.
It is probably true that college students in Providence pay little or no income tax. But this is because they have little or no taxable income. The students do pay other taxes though, like sales taxes, excise taxes, and various fees. So it would be incorrect to make a blanket statement like “college students do not pay taxes”.
But the taxes mentioned above are largely paid to state governments. So to some extent it may be true that when it comes to funding local government, college students don’t pay much. Considering only money raised from their own sources, local governments fund services mostly through various fees, property taxes, and sometimes sales taxes (local governments also receive a large amount of funding from their respective state governments and the federal government). Of these, property taxes bear a majority of the burden. Since everyone who lives in a local government’s jurisdiction pays property taxes (owners are charged directly, renters pay through higher rent) everyone pays to fund local government service.
That is, unless the owners of the property are exempt from property taxes, as is the case for colleges and universities. Because institutions of higher education are considered non-profits, a designation that could be disputed considering their often huge endowments and investment income, states and localities have chosen to exempt them from property taxes. This tax savings is then passed on to the students in the form of lower tuition, and other taxpayers like non-exempt property owners pick up the tab. For this reason, the argument that students do not pay enough to help fund local government might have traction.
And this is no small amount of savings. According to the city, the property in Providence owned by the four tax-exempt schools constitutes roughly half of the land in the city and is valued at over $1.7 billion. So it is no surprise that the city would like to get its hands on some of this potential revenue. In fact, in 2003 the four tax-exempt schools agreed to pay the city nearly $50 million over 20 years, the burden of which would at least partially fall on students. But with the economic situation taking a toll on all government budgets, Providence now wants more.
But the college head tax is a bad idea as it would be a punitive non-neutral tax. (It should be noted that the author of this post actually made a suggestion for a college head tax last December, though it was made tongue-in-cheek. Even so, a head tax would have been preferable to the tax being considered in Pennsylvania at that time.) A better solution would be to do away with tax exempt status for colleges and universities. The idea behind not taxing schools is that they are beneficial to society and do not exist as a profit making machine. Indeed, the federal government heavily subsidized higher education for this reason. But at the same time mayor Cicilline wants to tax the students, the very “products” of these socially beneficial institutions. If the social benefit of these schools and the students that come out of them is not enough to justify their tax-exempt status then the schools should not be tax exempt.
Instead of levying a head tax on a select group of people, the tax exempt status of these schools should be eliminated. In doing so the city would treat all property owners equally, schools and their students would pay more to help fund city services, and the city would avoid a punitive non-neutral tax on college attendance.
Credit Card Act of 2009 - How Does it Relate to College Students?
Posted by Eric on May 26th, 2009
The Senate passed the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act of 2009), H.R. 627/S. 414 on May 19, 2009, and the House passed it on May 20, 2009. The President is expected to sign this act into law. This message summarizes the provisions relating to college students.
Title III of the act, sections 301 to 305, affect college students.
Section 301 bans the issuance of a credit card or open-ended consumer credit plans to consumers under age 21 unless:
1. A cosigner age 21 years old or older has agreed to be jointly responsible for the account. The cosigner must have the means to repay the debt.
OR
2. The borrower demonstrates independent means of repaying any debt incurred through use of the credit card. The regulations will include safe harbors with regard to this option.
Section 303 requires written cosigner approval of any increase in the credit limit on a credit card held by a consumer under age 21.
Section 304 requires public disclosure of contracts between colleges and credit card issuers and prohibits giving away tangible items as inducements to encourage college students to sign up for credit cards (but only if the give-away occurs on or near a college campus or at an event sponsors or related to a college). It also includes a sense of Congress statement encouraging colleges to adopt policies that limit the locations where credit cards can be marketed and which provide credit card and debt counseling and education as part of new student orientation programs.
Section 305 requires an annual report by creditors concerning any business, marketing, promotional agreements or affinity card agreements with colleges or college alumni associations. The report will include copies of the agreements, the amount of any payments to the college or alumni association, and the number of new accounts and the total number of accounts subject to the agreement. The information will be aggregated by college and affiliated organizations. This report will be submitted to the Board of Governors of the Federal Reserve System. The Comptroller General of the United States will also use this information to evaluate the impact on credit card debt and periodically issue a report to Congress.
We hope this information is a valuable resource for you, as many of you prepare for your children to head off to college.
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