Many parents and college students will be able to offset the cost of college over the next two years under the new American Opportunity Tax Credit. This tax credit is part of the American Recovery and Reinvestment Act of 2009 signed by the Obama administration.

What the IRS wants you to know about the new American Opportunity Tax Credit:

1. This credit, which expands and renames the existing Hope Credit, can be claimed for qualified tuition and related expenses that you pay for higher education in 2009 and 2010. Qualified tuition and related expenses include tuition, related fees, books and other required course Materials. (Note: room & board and meal plans are not on this list) This credit does not cover the ‘Total’ Cost of Attendance.

2. The credit is equal to 100 percent of the first $2,000 spent and 25 percent of the next $2,000 per student each year. Therefore, the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualifying expenses for an eligible student.

3. The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return. The credit is gradually reduced for taxpayers with incomes above these levels.

4. Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.

5. The credit can be claimed for qualified expenses paid for any of the first four years of post-secondary education.

6. You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction. Consult your CPA to find which one is better for your specific situation.

Complete details on the American Opportunity Tax Credit and other key tax provisions of the Recovery Act are available at the official IRS Web site at www.IRS.gov/Recovery

While it is important to know these deductions and credits, it is equally as important if not more important to understand the rules of the game. AZ College Consulting’s founder J.D. Wyczalek (why-zall-ick) says “It is important to understand the rules of the game. You wouldn’t use the rules for a baseball game with an opponent who is playing by NFL rules on a football field, would you? Nor would you use a 1040 tax form that was dated 1982. Understanding and implementing current college admissions and financial aid rules is critical. By understanding these current rulings, we can legally and ethically stack the deck in our favor. Let the fat cats figure out how to squeeze another dollar out of the other guy, not our child, not our future college student.”

The answer to your college problem is our solution, whether it be assisting in finding best fit colleges for your child, or finding colleges that have great financial aid packages or figuring out how to lower your college costs and coming up with the best plan to pay your share of college in a comfortable manor, we are Arizona’s premier college planning firm. We are just a click away.

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A new law will help a lot of struggling students and parents — but others will be very disappointed. The Good, Bad and Ugly of the New Student Loan rules.

The Good: undergraduates that are eligible for subsidized loans will note the rates will be a lot lower. Congress passed a law cutting them in half, from 6.8% to 3.4%. Don’t expect your rate to go down tomorrow; these rates will adjust over the next 5 years. The lower rate affects Stafford loans for students who qualify for federal subsidies, meaning Uncle Sam pays the interest on the loans while you’re still in school. Plus limits on Pell Grants for low-income students will gradually rise from $4,800 in 2008 to $5,400 in 2012. (Pell grant recipients family AGI’s are typically 60-50k or less.)

The Bad: news is many other students won’t get help and may even end up paying more. That includes undergraduates with unsubsidized federally backed loans, graduate students and graduates who may want to refinance their loans. Unsubsidized undergrad rates as well as all graduate school rates will remain at 6.8%, while loans taken out by parents under the federal PLUS program will hold at 8.5%.

Students seeking to consolidate all their federal loans into one loan under a fixed rate will see plenty of perks vanish. Why? Congress also is eliminating $21 billion in federal subsidies to student lenders. And that is going to cut deep into lenders’ bottom lines, meaning lenders will need to scale back incentives they use to lure business away from their rivals.

The Ugly: while the Federal Government looks to bully its way into the student loan arena many are disappointed that the long overdue changes are not enough and do not do enough to help parents and students capitalize on the over $100 billion dollars of financial aid. It would seem that the Federal Government is looking out for its best interest by capturing this fragile market with empty promises.

Some are so bold as saying that the Federal Government is strong arming its way into the student loan arena with it eye on the prize. This prize is a long term goal to capture interest payments from student loans as another revenue source for the fat cats on Capitol Hill.

The Solution: AZ College Consulting, LLC Arizona’s premier college planning firm says to quickly learn the 156 strategies to lower your college costs. By understating the “rules of the game” your child will graduate with less student loans and you can pay your lowered adjusted share of college in a comfortable manor, pay off your house in a shorter period and build up a respectable retirement nest egg using AZ College Consulting’s proprietary college planning formula custom designed for your family.

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The House passes a bill to expand college aid for students, is this a good thing or a ploy to enslave college graduates with billions of dollars of debt?

A bill passed by the House of Representatives will increase the maximum Pell Grant by hundreds of dollars but will change Federal Perkins Loans so that loans will begin accruing interest while students are still in school.

The measure, passed Sept. 17 and known as the Student Aid and Fiscal Responsibility Act, will oust private lenders from the federal college loan business and require all schools to switch to the federal Direct Loan Program by July 1, 2010.

Direct Loans are low-interest federal loans for students and parents that help pay for the cost of a student’s education. The lender is the U.S. Department of Education — rather than a bank or other financial institution.

The bill will now move to the Senate where it is expected to pass.

Larry Chambers, director of student financial services, said he is not convinced the removal of private lenders will result in substantial benefits for students.

“Having both direct lending and the Stafford Loan programs has fostered competition, enhanced services and provided students with choice,” Chambers said. “With only one lender — the federal government — students will no longer have a choice of a lender.”

Chambers said new changes being made to the Federal Perkins Loan will leave college students with more loans that begin accruing interest immediately.

Freshman Adam Melnick said loans that immediately start building interest, often known as unsubsidized loans, make life harder for students.

“We’re not making real money as undergraduates, so it’s hard to chip away at what we owe,” Melnick said. “Then when we graduate, the interest has already blown our debt through the roof.”

Proponents of the bill, however, point to the introduction of variable interest rates as proposed by the SAFRA. After college, the lenders’ interest rates will vary depending on their financial standing. Individuals with a low-income will not be subjected to higher interest rates.

Chambers said the bill would increase the current maximum Pell Grant from $5,350 to $5,550 during the 2010-11 school year, and by 2019, the Pell Grant scholarship should grow to $6,900. Pell grant eligibility is for families that make $50,000 or less annually.

While all this talk of reform is good and long overdue, let’s not lose sight of the bigger picture which is first getting our child into the best college they can get into and minimize the financial burden. This includes maximizing the amount of financial aid that our student can qualify for as well as limiting the amount of student loans upon which they graduate.

There are specific strategies that can be employed that can A. give our student the most financial aid possible, B. minimize the amount of student loans and C. help our child select a career that is best fit for him/her and find colleges that are typically generous with deep pockets. If you would like to discuss these strategies call our office at 1-888-237-2087 ext. 2 or if you have not attended a workshop come on out.

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Is Big Brother (on campus) watching you?

Though some universities, such as Hofstra University in New York, created admissions-specific social networking accounts, new media specialist Amy Peterson said she manages TCU’s Facebook and Twitter sites differently.

“We use Facebook as a way to have a conversation with current students,” she said.

Peterson said she relays questions from Facebook that she is unable to answer to the admissions office, but the admissions counselors have no direct contact with the students who asked these questions.

Prospective students sent more questions regarding deadlines, financial aid and general admissions questions to the university’s Twitter account, Peterson said.

“(Twitter) gets used a lot as a help place, like a help desk,” Peterson said.

Rainwater said the university’s Facebook fan base spanned wider than prospective students. Most of the fans on the university’s Facebook site are college students or alumni.

However, admissions counselors do promote the university’s social networking sites, Rainwater said.

“As part of our marketing process we send an e-mail out to all of our prospective students that we have e-mail for…and we provide them with direct links to the Facebook fan page, the Twitter page and the Flickr page, which we actually use really frequently,” Rainwater said.

Rainwater said that the addition of an admissions-specific Web site would make finding information confusing.

“We really feel like, in terms of communicating students, the official university Facebook page that Amy Peterson manages is just a central location for all information,” Rainwater said.

J.D. says: “Warning! College admissions offices are using all resources available to find out about your student. Keep your Facebook, Myspace, Youtube videos and other pictures, videos or other internet posts kosher and clean. A posted picture of an under aged minor at a party with empty beer bottles all around could be enough to keep you out of your top choice college even if you did not partake in any alcoholic consumption. Also be careful that if you select a fan page for a particular college, that it really is the college’s fan page. Some spammers and marketing companies are creating bogus fan pages to collect names and email address simply to sell them something.”

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The Obama administration pushes forward with its “Change” agenda which impacts the FAFSA (Free Application For Federal Student Aid).

High income earners tend to not fill out this form based on the Myth that they believe they make to much money to qualify for aid. While it is true that some of these families won’t qualify for federal grants which are reserved for the lowest income students and families. These high income families are leaving money on the table. Filling out this form accurately with understanding of all the nuances could result in a surprising financial aid award letter.

The Obama administration hopes that soon it will become simpler to provide tax return information that is requested on financial aid applications.

The IRS plans to set up a new system where you will be able to visit a secure web page, verify your identity and then retrieve the essential info needed—such as your adjusted gross income (AGI) for the prior year—in order to complete college loan applications, scholarship forms and other types of financial arrangements. The IRS hopes to have the system up and running next year.

Because of these new planed changes it is more important than ever to properly plan and have adequate time to implement these strategies so that you can qualify for as much aid as possible.

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ASU’s video on financial aid

Learn the stratagies that can get you the most financail aid you can qualify for at one of our local workshops.

Click the Free Workshop RSVP for dates and locations.

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Are the new rules for Private Student Loans going to cause more confusion, frustration and chaos? As the Obama administration pushes forward on the “Change” agenda, some are wondering if it will be a positive or negative change.

New rules put in place last week for private student loans stem from the Higher Education Act. They have been hailed as good for student borrowers and were largely uncontroversial among lenders. Financial Aid officers and some higher education experts say the changes do not go far enough.

The disclosure rules require lenders to provide information about interest rates, fees, and terms, including the total cost of the loan at the maximum interest rate, when potential borrowers apply.

Lenders must tell applicants about repayment options and the total cost of each scenario. A sample form put together by the Federal Reserve shows that someone who is considering borrowing $10,000 at a maximum initial interest rate of 17.375 percent, for example, would be told that his or her loan would cost a total of $81,084 if payments are deferred while the person is enrolled, $50,707 if the borrower pays interest while enrolled, and $38,180 if the borrower makes payments on both principal and interest while enrolled. * This is why it is so important to understand and maximize all potential financial aid strategies so that your child is not burdened with an exorbitant amount of debt upon graduation.

Lenders also must inform applicants about federal student-loan options, which are often cheaper than private loans, and must refer them to the Department of Education’s web site for more information.

Upon applicant approval of a private loan, the lender must provide information on rates and fees, including estimates of the total repayment amount at the current and maximum interest rates, as well as the monthly payment at the maximum interest rate.

Private student loans carry risks and costs that fixed-rate federal student loans do not. Interest on private student loans can be variable, sometimes reaching 20 percent. The borrowing limits on private loans are also much higher than those on Stafford (Federal student loans). Due to Stafford loans not covering all the expenses college students require, students and parents have turned to private funding to cover the difference.

As college has grown more expensive, more students have turned to private lenders. Almost two-thirds of students who took out private loans had not exhausted cheaper federal financial-aid options. The new rules seek to reduce that proportion by requiring applicants for private loans to fill out a form indicating their knowledge of their college’s cost and other available forms of federal student aid.

Students and their families forgo available federal loans for various reasons. Some people do not fill out the Free Application for Federal Student Aid, a form required for eligibility to receive federal grants or loans. Some students and their parents may wrongly assume they would not qualify for federal aid. Others may be intimidated by the form, which has been criticized for its complexity and length, drawbacks that federal officials have been working to improve.

J.D. says: “Despite what changes the new regime makes, knowing all the numbers for your child’s college education is critical so that parents aren’t guessing and have an understanding of the process so that they can make an intelligent, educated decision. These are the things that parents and students learn in our free workshops.”

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