Below are some terms that you often come across  as you sort through
the maze of financial aid readings to apply for financial aid…

Expected family contribution (EFC)

Expected family contribution (EFC) is a formula used by the
U.S. Department of Education to determine student eligibility for
such financial aid as Grants, Subsidized Student Loans, or
participation in Work-Study.

The formula assigns a weight to the assets and income of household members
to calculate the EFC. The EFC is stated in dollars.
You can find a worksheet for calculating EFC at the DOE Web site

(www.ed.gov).

FAFSA Deadlines:

Submit 2006-2007 FAFSA on the Web Applications by Midnight Central Daylight Time,
July 2, 2007.

Submit 2007-2008 FAFSA on the Web Applications by Midnight Central Daylight Time,
June 30, 2008

Prepaid tuition plan

Together with college savings plans, prepaid tuition plans are a Qualified
State Tuition Plan (QSTP) that is regulated by Section 529 of the tax code.
These two types of plans are also called Section 529 plans.

As a result of the 2001 tax cut, withdrawals used for qualified expenses
have been exempt from federal taxes since 2002. Depending on the state plan,
contributions or withdrawals may be deductible from state income taxes.

Prepaid Tuition Plans allow you to pay a child’s college tuition today,
usually at current prices. You can usually make installment or lump sum payments.

College Savings Plan

Together with prepaid tuition plans, college savings plans are a qualified
state tuition plan (QSTP) that is regulated by Section 529 of the tax code.

These two types of plans are also called Section 529 plans.
As a result of the 2001 tax cut, withdrawals used for qualified expenses have been
exempt from federal taxes since 2002.

Depending on the plan, contributions or withdrawals may be deductible from state
income taxes. College savings plans invest in a professionally managed mutual fund
or group of funds.

You can save well over $100,000 for most college savings plans.
Since states have some discretion in setting up tax rules, contribution limits,
and management fees, you should read the terms and conditions of the state plan
you are considering.

Section 529 plans

A Section 529 plan is a tax-advantaged account used to save for the college education of
a child, grandchild or other dependent. Section 529 plans are run by state governments
(and some private colleges) and include college savings plans and prepaid-tuition plans.

Section 529 plans are named for the section of tax code that governs them.
Investors contribute to an account that is managed by the investment board or
treasury of the state in which the account is opened.

Section 529 plans are offered in the form of prepaid tuition plans in 20 states
and as college savings plans in 41 states. Tax laws for contributions and distributions
vary from state to state.

Both plan types allow for tax-deferred growth in the account. Since 2002,
the funds taken from a Section 529 plan to pay for qualified higher education expenses
have been tax-exempt.

TAGS: College Savings Plan, DOE, EFC, Expected Family Contribution, FAFSA, grants, Prepaid tuition plan, QSTP, Qualified State Tuition Plan, Section 529, Subsidized Student Loans, tax deferred, U.S. Department of Education, work study

This entry was posted on Sunday, March 25th, 2007 at 11:30 pm and is filed under Student Loans, Financial Aid. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.