Happy Friday! Wanted to share this entertaining Judge Judy clip, where the defendant used $2,500 from his step-daughter’s Pell Grant to purchase rims for his car and decided not to pay her back.
In the words of Judge Judy:“The government doesn’t put $2,500 on your rims! A Pell Grant is for education so somebody can increase their mind, can get a better job, make a future for themselves!”
Anyone willing to admit using their Pell Grant for something other than their education?
The Virginia College Savings Plan, the largest 529 college savings plan in the U.S., has come up with a creative way to reach potential students and parents: on September 11, 2009, it will be the official sponsor for the NASCAR Nationwide Series race at Richmond International Raceway.
The race, called the Virginia 529 College Savings 250, will be run one night before the race that sets the 12-driver field for the Chase for the Sprint Cup championship.
Mary Morris, the CEO of the Virginia College Savings Plan (VCSP), is looking forward to the Nascar opportunity to pitch the state 529 plan as an affordable way to save for college.
What is a 529 Plan?
A 529 college savings plan is a state-sponsored, tax-advantaged investment account designated specifically for saving money for college. Officially authorized by Congress as Qualified Tuition Programs (QTPs), these savings plans are commonly referred to as “529 plans,” “state 529 plans,” or “section 529 plans” after the section of the IRS code that provides the plans’ special tax breaks.
All 50 states sponsor a 529 college savings plan.
You Don’t Pay Tax On the Money Saved In 529 Plans
The primary advantage of using a 529 Plan to save money for college is that you don’t have to worry about paying taxes on the income that accumulates: contributions to the account are not taxed. You won’t have to pay any tax on it when you withdraw the money, either, as long as you use it to pay qualified higher education expenses. Qualified expenses include tuition, fees, books, supplies, and equipment required for study at any accredited college, university, or vocational school in the U.S. (and at some foreign universities). Room and board may also count as qualified expenses, as long as the student beneficiary of the 529 plan is enrolled in school at least a half-time.
Anyone can contribute to a student’s 529 College Savings Plan, whether the 529 plan is for the contributor’s own child or for a friend or family member’s child.
About half of U.S. states offer state income tax deductions for all or part of donors’ contributions to 529 Plans.
2 Types of 529 College Savings Plans
There are 2 types of 529 plans: prepaid tuition plans and savings account plans. Prepaid tuition plans allow plan contributors to buy tuition credits for the student beneficiary, at today’s rates, to be used in the future. Therefore, the amount of money accumulated by the time the student needs it depends on how much tuition has increased since the credits were bought. (Are the original tuition credits enough to cover the current tuition?)
The money that grows in a savings account plans depends on the performance (growth or loss) of the investments in the account, which are usually mutual funds. Most 529 savings plans offer a number of investment options based on the age of the student beneficiary: the closer the beneficiary gets to college age, the more conservative the investments are, to better preserve the money that’s accumulating.
The Virginia College Savings Plan suggests considering these factors when creating a plan for your student beneficiary (or beneficiaries): personal timeline, risk tolerance, tax advantages, and diversification. These sound like appropriate considerations no matter what state you live in.
Find Out About Your State’s 529 College Savings Plan
All 50 states have 529 College Savings Plans— and sometimes more than one, in order to accomplish different investment goals. Talk to your local bank, tax adviser, or state higher education agency to find out about the 529 College Savings Plans available to you in your state, and start saving for your children’s college education today.
With the fall semester right around the corner (yikes!), many students and their families have got college financing on the brain. In this week’s financial aid news roundup, there’s something for everyone.
Wall Street Journal: Weighing Price and Value When Picking a College
As families continue to be more price-conscious and value-conscious, a rising trend in awareness is happening as parents & students evaluate the true value of a degree. This article discusses the struggles today’s students have with their financial future when determining where to go to college.
Frugal Dad: Best 529 College Savings Plans
Frugal Dad outlines his game plan for his children’s 529 college savings. He points out,
“Like most people, we went with our in-state option since it was a decent plan according to most rankings, and we could benefit from a state tax deduction on contributions. However, after reviewing performance of the limited fund options I’m not so sure it is the best place to park the kids’ college savings funds, tax deduction or not.”
Based on his research, he’s impressed by Utah and Virginia’s 529 plans, but stresses the need to do the math to ensure you’re planning the best course of action for yourself and your college student.
Give Me Scholarships! 10 Scholarship Screwups
Josh Barsch is a real scholarship judge, and offers some tough love for students writing scholarship essays. Among them, we wanted to point out the #1 scholarship mistake students make:
“Unless the scholarship you’re applying for is sponsored by an explicitly political or religious organization, you have almost no chance of winning if you write an essay ‘taking a side’ on controversial issues like abortion, affirmative action, the Iraq war or any other polarizing issues.”
It’s crucial to remember that these judges, while encouraged to be impartial, have personal and political beliefs of their own, and you’re taking a gamble by potentially offending them and sacrificing your chance of winning.
Forbes: Student Loan Repayment Options Explained
Dave Randall puts together a crash course in repaying your student loans. He outlines 5 different options, and while all of these options have their pros and cons, defaulting on your loans is never good.
A new GI Bill for college takes effect this week. On August 1, 2009, the Post-9/11 GI Bill will open a whole new chapter of higher education opportunities for U.S. armed services veterans and personnel. The new GI Bill for college does not replace the Montgomery GI Bill (MGIB). It is an alternative program with features and rules that may or may not benefit you.
Features of the Post-9/11 GI Bill include:
New GI Bill Eligibility
Active-duty and National Guard/Reserve Veterans who have served at least 90 days of active duty service after September 10, 2001, and received an honorable discharge qualify for the Post-9/11 GI Bill (Chapter 33 Education Benefit). Veterans who served 30 days and were discharged due to a service-connected injury or illness are also eligible for the new GI Bill. To qualify for 100% of the benefit, a veteran must have served at least three years of active duty service after September 10, 2001, or have served 30 days before being discharged due to a service connected injury or illness. Veterans serving more than 90 days but less than three years of post-9/11 active duty service are eligible for a percentage of the full Post-9/11 GI Bill benefit, based on cumulative time served. Visit the Iraq and Afghanistan Veterans of America GI Bill website for more about eligibility.
Comparing GI Bill Benefits
You cannot participate in more than one GI Bill program at a time. If you’re already signed up for the MGIB and you decide the Post-9/11 GI Bill will better suit your education goals, you can transfer, so long as you qualify for it. But the switch is permanent; you won’t be able to switch back. So it’s essential to understand the differences between the programs before making any changes.
For many eligible participants, the new Post-9/11 GI Bill for college will have more to offer than earlier VA education programs. But others may find that they come out ahead financially if they stick with the MGIB. For still others, the biggest factor in choosing a GI Bill program may not be how much money they can get, but having the opportunity to transfer their education benefits to their spouses or children.
To determine which program is right for you, you’ll have to compare the Post-9/11 GI Bill’s benefits, restrictions, and eligibility criteria to those of existing VA education programs. The VA’s GI Bill resource center recommends using these questions to help you decide:
1. Which benefit pays you more? Don’t look at only the amounts you qualify for under each Bill…also look at the financial aid you receive from other sources. If your state allows veterans to attend college free of charge anyway, participation in the Post-9/11 Bill won’t get you the equivalent of the tuition and fees in cash; you’ll only get the $1,000 book stipend and a housing stipend of some amount (if you qualify for it). But with the MGIB, if your state allows you to attend college for free, you’ll still get the fixed monthly payment of $1300 to spend any way you wish: books, housing, whatever.
2. What type of education or training program are you planning to pursue? The Post-9/11 Bill only covers undergraduate and graduate degrees at colleges and universities, and some licensing/certification programs. The Post-9/11 Bill does not cover certificate and diploma programs offered by institutions that do not grant degrees. The MGIB covers degree programs AND technical/vocational school training, flight training, apprenticeships, entrepreneurship training. Both bills cover accredited fully online programs and distance learning.
3. Which of the 3 separate pieces of the Post-9/11 GI Bill are you eligible for (tuition; housing; books)? If you’re on active duty while you’re in school, or if you’re enrolled in a fully online program, you won’t get the Post-9/11 Bill’s housing stipend.
4. Do you plan to attend school less than full-time? Same answer. If you attend half-time or less, you’re not entitled to the housing stipend the Post-9/11 Bill provides.
5. Where will you be living when you’re in school? The Post-9/11 GI Bill includes a housing stipend, but depending on where you live, the costs of college and housing together could be less than the fixed, non-restricted payment you would receive under the MGIB.
6. Is your education plan likely to involve undergrad and grad work? You can’t participate in both the Post-9/11 and MGIB programs at the same time, but you can use up all your MGIB benefits and then get another 12 months of Post-9/11 benefits (assuming you qualify for the Post-9/11 program).
7. Is the amount of time you have to use your education benefits important to you? The Post-9/11 GI Bill gives you 5 more years than the MGIB to use your benefits before they expire.
8. Will you be a member of the Armed Forces on August 1, 2009? You must be serving in the armed forces either on active duty or in the selective reserves on this date to get the option of transferring your education benefits to a family member.
9. Do you plan to transfer your unused benefits to an immediate family member? Only the Post-9/11 Bill will let you do this; the MGIB will not. To be eligible to transfer benefits to family members, you must first qualify for the Post 9/11 GI Bill and be serving either on active duty or in the selective reserves on August 1, 2009. The transferability provision is not available to anyone who has retired or separated from the service before August 1, 2009, or to members of the Individual Ready Reserve and Fleet Reserve.
GI Bill for College Information Resources
The NewGIBill.org site has a great plain English “Get answers to your questions” section and a Benefit Calculator that you can plug your school information into. The calculator can help you figure out which GI Bill will cover your education costs better and show you all the various factors that are taken into consideration.
The VA website has detailed charts comparing the benefits and eligibility criteria of each GI Bill program as well as a number of case studies illustrating how different individuals would benefit under the Post-9/11 GI Bill vs. the older education benefit programs. The case studies are particularly helpful because you can see how the different eligibility rules are applied in addition to seeing how the math adds up.
In addition to the VA website, the Department of Defense website has an excellent section on the Post-9/11 GI Bill, along with information on switching from one GI Bill program to another, and on the new opportunity to transfer Post-9/11 GI Bill benefits to immediate family members. There are also good articles on the loopholes and flaws already coming to light in the new Bill, and what action is being taken to fix those problems.
New GI Bill for College: Please Accept Our Thanks for Your Service to the Country
The creation of the Post-9/11 GI Bill provides armed services veterans and personnel with the most comprehensive education benefits since the original bill, the Servicemen’s Readjustment Act of 1944, was signed into law nearly 70 years ago. It may take a little while to get all the kinks worked out, but whether you stay with the tried and true MGIB or sign up for the Post-9/11 Bill, using your GI Bill benefits for college is a well-earned investment in the rest of your life.
Note: An error in the information in #8 was pointed out to us and corrected on August 7, 2009. The information currently posted is the correct information.
University of Michigan and Michigan State University college students joined forces in the state capital this week to fight steep cuts to state financial aid. In its continued struggle to recover from the devastating impact of the recession, the Michigan legislature decided it would have to eliminate the Michigan Promise Scholarship and additional need-based financial aid from the state budget.
Michigan Daily News: ‘U’ and MSU students protest cuts to Promise Scholarship and financial aid
Cutting these programs would deprive about 96,000 college students of nearly $200 million in state financial aid.
This is a real Catch-22 for Michigan. You can appreciate how impossible it must seem to state legislators, trying to figure out what the heck Michigan can live without in order to make up for a nearly $2 billion budget shortfall. And the Michigan Promise Scholarship is technically a merit scholarship, not based on financial need. But who in Michigan doesn’t have financial need at this point?
Whole industries have disappeared from the manufacturing states and the thousands of jobs they took with them are gone forever. The only way back to prosperity is through education and training, to prepare workers and researchers for the new industries evolving in energy, technology, communications, and medical science.
But like losing a job and and losing a home, the loss of a state grant or scholarship for college is just another falling domino for those who are trying to make ends meet and educate themselves back to employment again. If you have no money to pay for school, how do you get the training you need to qualify for new work?
With the backing of university and state officials, Michigan students have launched a time-honored grassroots fight to hang on to their state financial aid. Fortunately, “grassroots” is a lot more than handing out flyers at the mall these days: you can sign the petition on MSU’s Facebook page: “Keep Our Promises: Preserve the Michigan Promise Scholarship!” and circulate the word via Twitter.
One thing I’d ask the state legislature: Michigan got more than $1 billion in education funding from the U.S. Department of Education in early June, and is eligible to apply for another $525 million in the fall. True, the funding wasn’t originally intended for state financial aid, but brother, can you spare $196 million?
The key to applying for scholarships is to be thorough, and to carefully follow each available scholarship’s instructions.
1. Confirm that you meet all the eligibility criteria of each scholarship you want to apply for. Don’t apply for a scholarship if you only “sort of” meet its requirements or meet “almost all” the criteria. You won’t be considered and you’ll only annoy the scholarship committee who may evaluate your future application at a later date, when you are eligible to apply.
2. Confirm the application deadline for each available scholarship and note the days you should have those applications in the mail. Applications that are even a day late will not be considered, so leave yourself several days ahead of each deadline for mail delays or other last-minute complications. If you have to fill out an online application in addition to mailing in supporting documents, schedule in some time to get online to do that.
3. Organize your available scholarships by deadline and make a list of all the information each application requires. Most scholarships will ask for:
Depending on the type of scholarship you’re applying for, you may also be asked for:
4. Get in touch with your reference writers. Give them plenty of time to write your reference letter — you will likely get a more positive reference that way.
5. Recycle your essays. If you find you’re writing more or less the same essay for each available scholarship, reuse one you’ve already written and customize it to address the specific differences of each additional scholarship.
6. Proofread your applications and essays carefully for misspellings and errors in grammar and word usage. (Watch out for easy mistakes with your and you’re; its and it’s; were and we’re; and their, there, and they’re.) If you’ve recycled an essay, make sure you’ve replaced the name of the original scholarship or sponsor everywhere it can be found.
7. Review all the pieces of your application packet. Make sure it has everything the instructions required and nothing they didn’t ask for.
8. Make copies of everything in your application packet before you mail it. (What if the original got lost in the mail?!)
9. Submit your application packets earlier than “just in time.” Just in case.
10. Follow up with each scholarship sponsor to verify that each received your application packet. Did your online application forms provide you with a confirmation email?
Many students apply for every available scholarship. Make your application stand out with efficiency, organization, neatness, and clarity.
Like most states these days, Ohio’s budget for higher education is extremely tight, but the Ohio Board of Regents has set out to create more low-cost pathways to attaining a degree and has prioritized their financial aid budget to encourage students to persist in school.
Ironically, I was planning on highlighting the Ohio College Opportunity Grant (OCOG), which originally boasted need-based tuition assistance to Ohio students from low to moderate-income families to increase their access to higher education. However, it was announced yesterday that Ohio’s Governor, Ted Strickland, eliminated all state financial assistance for career college students.
To understand how this decision affects your financial assistance situation, the Ohio Association of Career Colleges and Schools urges students to contact the financial aid department at your school and monitor SaveOCOG.org for updates.
Note that those students planning on attending taxpayer-supported and private, non-profit schools will continue to receive money from state government, though at reduced levels. State grants and scholarships directly lower students’ out-of-pocket tuition costs and generally do not have to be repaid. Some of the state programs still available to students include:
What are your thoughts on Governor Strickland’s decision? Will you be affected by the elimination of career college financial assistance? Share your story in the comments.
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One thing that has never been said about the federal financial aid system is that understanding it is a piece of cake. If you have ever had to fill out a FAFSA, you already know that your first college challenge is figuring out how to get money for your tuition from the feds. If this is you, you’ll be glad to hear that it may be possible to change big bureaucracy after all.
On July 21st, the U.S. House of Representatives will discuss the new Student Aid and Fiscal Responsibility Act, which the Hon. George Miller (D-CA), Chairman of the House Committee on Education & Labor, introduced last week. The SAFRA, as it’s already being referred to, contains sweeping changes to the ways federal money for education is allocated and managed. Theoretically, some of the changes would free up funds to pay for all the others, which means that the reorganization would cost us taxpayers nothing.
The new legislation also reemphasizes the Education Department’s plan to more closely align work and higher education.
How does the SAFRA help you find money for your college tuition? There are several changes to the student aid system that will make things easier for students at both the start and the end of the financial aid timeline. SAFRA:
In short, SAFRA makes much more federal money for tuition available, makes it easier to apply for, insulates it a little better from roller-coastery financial markets, and makes repaying it a little less painful (if the legislation survives the House and Senate mostly intact, that is). What’s not to like?
The United States Student Association, a longstanding advocate for college students, gave Mr. Miller’s bill an A+: Students Thrilled with Student Aid Reform Bill. In a previous statement about the substantial budget investments targeted for higher education, USSA President Carmen Berkley commented, “Funding for these programs is important not only for the financial health of the country, but because everyone has the right to an affordable college education.” (Don’t miss USSA’s press release today, which summarizes data from a new report on the Direct Loan program.)
Stay tuned to EducationGrant.com as we follow the coming House and Senate debates about the SAFRA. Sometimes criticism and debate uncover genuine problems with a plan; other times, they are just a lot of posturing and hot air. There is good intent in Mr. Miller’s bill, and so far, the Congressional Budget Office says it will pay for itself. If it becomes law, the process of getting money for tuition from the feds may become a little more user-friendly.
Does the cloud of the current recession have a silver lining? Well, maybe it’s — at last! — a hard look at need-based financial aid for working adults and a new spotlight on the importance of making higher education accessible to nontraditional students.
The flood of job losses has brought career-oriented higher education into the public arena, where the need for effective job training programs and need-based financial aid for working adults have come together in a highly visible way. When it comes to higher education, job training, and financial aid, the U.S. is at a 3-way crossroad.
Fortunately, the Department of Education seems to be on it. The Chronicle of Higher Education reported today that the new undersecretary of education, Martha Kanter, met with state higher education leaders and agreed with them that now is the time to coordinate education and career efforts more effectively.
There are actually two parts to this discussion. One part is education philosophy: looking at the alignment of higher education with job training and preparation for being in the workforce. In the old days, people were apprenticed in a trade, gaining both skill expertise and knowledge of the subject. At some point, a college education for its own sake, whether or not it included training for a specific job, diverged from apprenticeship education. A college education is indeed a valuable and worthy experience, but the current economy is highlighting a re-emergence of career-focused education as a postsecondary alternative.
The second part is public policy: the need for a financial system that can adequately support working adults who go back to school. From the Chronicle article:
“The question of how state and federal governments should help working students came up at a conference session about rethinking student aid. Sandy Baum, senior policy analyst for the College Board, said that one needed public-policy conversation was how to best allocate financial aid to adult students. The central question for many students is not how they are going to be able to pay tuition itself—the focus of much current student-aid policy—but how they can afford to pay basic living expenses while classes and study are preventing them from working as many hours as they could, Ms. Baum said.”
This is the real issue in providing need-based financial aid for adults returning to school: Are the financial needs of working adults, also referred to as nontraditional students, different from those of the traditional 18-year-old dependent going to a 4-year university directly from high school? And if so, how do we enhance the need-based financial aid system to accommodate older, nontraditional students already in the workforce?
There are primarily two kinds of financial aid: “need-based” and “merit-based.” A merit-based scholarship or education grant is typically tied to a particular accomplishment or set of accomplishments, such as a high grade point average, community service, and other measures of academic and personal success the sponsor has established as eligible criteria for its financial aid reward.
Need-based financial aid is assessed according to the student’s expected income and ability to pay for education. Most federal education grants for students are need-based, most federal student loans are limited to those under a certain income level, and many private scholarships are adding a need-based qualification to their merit-based awards.
Nevertheless, for working adults, attaining need-based financial aid is not as straightforward as it sounds. For one thing, working a lot of hours even while in school can raise a nontraditional student’s income level to the point where he disqualifies for a federal Pell Grant. The same problem may rule out the possibility of federal Perkins loans and subsidized Stafford loans (although even unsubsidized Stafford loans are still a better bet than private loans). So the current federal financial aid system penalizes hard-working adult students rather than supporting them.
For another, the process of applying for federal financial aid is so complicated, confusing, and redundant that many potential students don’t even try, forfeiting what need-based financial aid they may actually qualify for or taking out expensive private student loans instead. And maybe there’s a need for different categories of independent student where the FAFSA is concerned: a 24-year-old with a cat but no family has different financial aid needs from a single mom with custody of 2 small kids.
The recession, the credit collapse, and the job losses we’ve endured have been a real blow to countless American families. But take hope: one small silver lining has been President Obama’s earnest desire to make college accessible to anyone who wants higher education, and a renewed look at both federal financial aid and the value of community colleges in achieving a worthwhile degree. Just in the last 6 months, we’ve already seen much more progress made toward simplifying the FAFSA, with strong requests to align it with IRS tax processing, and millions of dollars have gone to the states for fast-turnaround career training programs. In the months ahead, keep a lookout for more new initiatives to overhaul need-based financial aid for working adults.
On the surface, Pell Grants are a helpful way for lower-income students who need financial assistance to attend college. But, there are a few common misconceptions and little known facts that you should be aware of:
To “apply” for a Pell Grant, as with most other education grants, you need to submit a FAFSA. There is no other form or separate Pell grant application to fill out. The Pell Grant is available to students through the federal government, so your eligibility and award funding is determined by some of the questions you answer on the FAFSA. Once you submit your FAFSA application, you will be notified by email or regular postal delivery if and when you receive Pell Grant funding.
Pell Grants are awarded to undergraduate students who have not earned a bachelor’s degree or professional degree. One caveat: If you have earned a bachelor’s degree, but are enrolled specifically in a post-baccalaureate teacher certification or licensing program, you still might be eligible for a Pell Grant. But, if you are enrolled in a certification program, be aware that the school you are attending must not also offer a bachelor’s degree in education.
We know – fine print is such a pain. But, better to be informed, right? For more details about this stipulation, visit the Federal Pell Grant section of the Transition to Teaching page.
If you are currently in jail: Your eligibility for a Pell Grant depends on the type of institution in which you are incarcerated. People in federal and state penal institutions aren’t eligible for Pell grants, but students in local penal institutions are.
If you’re not incarcerated: it depends on the nature of your offense. The law imposes restrictions on drug offenses in particular.
To determine whether a drug offense affects your eligibility, go to the Student Aid Eligibility Worksheet.
One of the more significant steps President Obama has taken to boost access to higher education is his proposal for a 2010 Pell Grant increase to $5,500 for the 2010-2011 school year. The total number of Pell Grants that could be available in 2010: about 7 million.
Claiborne Pell was a Democratic Senator from Rhode Island and was best known as the sponsor of the Pell Grant, which was created in 1973 and was originally known as “Basic Educational Opportunity Grants”. Pell grants initially provided grants for prisoners because Pell understood that education while incarcerated resulted in a 65% drop in repeat offense rates, and that resulted in a safer public.