Taxes for students

After a person starts working, he or she must file taxes. Technically, if you make under a certain amount you do not have to file but when I made under that amount, I did file so I could get the money I paid in, back. Taxes for young people are normally easy. So easy in fact that the federal form is call 1040 EZ. You can file using that form or google turbo tax free file and you can file your federal tax online. Some states also have free filing. If you do not have a complicated return do not go pay someone something that you can do in less than an hour.

You need to file your tax return to fill out your FAFSA so try not to wait till April 15, 2010.

FAFSA- Free Application for Federal Student Aid

The FAFSA is the main way for students to get financial aid for college. You can get scholarships if you do not do the FAFSA but grants and federal loans require it. To do the FAFSA the student and the parent (if the student is under 22) need to gather their tax information. The same information a person needs to file their taxes is needed to file your FAFSA. Given that some of the money is first come first serve and some states have very early deadline, it is a good idea to complete your taxes and then your FAFSA as soon as you get all your paperwork from companies you work for or earn interest from.

Now for the tricks.
1. Money belonging to the student is assumed to pay for college where the money belonging to the parent is considered only partially set aside for college. So any money belonging to the student should be used up first or moved to the parents name.
2. Also if the grandparent or other relatives want to help, do not give the student cash until the bill is due. For example a textbook would be better than the same amount in cash. The money the grandparent or relative has is not counted but once it is the students hands it is counted.
3. Income from a job is considered to be used for expenses for college and may keep the student from financial aid. However jobs on campus (work-study) are considered part of the financial aid. You can get a job off campus using work-study if it met certain requirements from the financial aid office.
4. The FAFSA does not count into the formula any debt you have, however it will count any cash, therefore pay off any debt you can before filling out the FAFSA. Pay all your bills that you can before you apply as well.

Wonderful Article

I came across an article that talks about what questions people should ask after they get engaged but before they are married. I am engaged and these questions sound like a great starting point.

This article may not seem appropriate for this blog but this blog is about helping young people start their lives off right, financially and marriage may be a part of that.

http://online.wsj.com/article/SB126609755215845867.html?mod=rss_Today%27s_Most_Popular

Perkins Loans

The Perkins loan is only for undergraduate students with extreme need. However what is extreme need? That is up to the school itself. Often it means that your parents have a low income and more than one student in school. If you are eligible for a pell grant you are more likely to be eligible for a Perkins loan. The Perkins loan is however, the best kind of loan to get for now, it has an interest rate of 5% fixed and lower fees than the stafford loan. However as time passes the interest of the stafford loan will decrease until it is only 3.4% and combined with the pell grant, that may be the better choice. It all depends on how much money you need for your expenses that year and what year it is.

If however you get a pell grant and do not receive the perkins loan and need more aid, go talk to your financial aid office. This is the one loan they have control and flexibility over. Do not, however, talk to the front desk person, make an appointment with someone behind the front desk, who has decision making abilities and you may get more help than you expect.

PLUS loans

Plus loans are either for parents of undergraduates or for graduate/professional students. These loans are different than other federal loans in that they require a check check and minimum score. It is possible to have a co-signer for both types of loans if the parent or student (depending on the type of loan) does not have a good enough score.

The yearly limit on both types of PLUS loans is equal to your cost of attendance minus any other financial aid you receive. The interest rate is dependent on what program your school works with, either 7.9% or 8.5%. There are also fees of up to 4% to get the loan. Graduate/ professional students also must have applied for their annual loan maximum eligibility under the Federal Subsidized and Unsubsidized Stafford Loan Program before applying for a Graduate/Professional PLUS loan. This a good things because the fees and interest rates are better for stafford loan than plus loans.
Just like a stafford loan, to receive a PLUS loan, the student/parent must fill out the FAFSA.

Federal Student Loans- Overview and Stafford Loans

There are actually many different types of federal loans. 1. Stafford Loan, which this article will cover. 2. PLUS loans for parents and graduate students. 3. Perkins loans. Perkins and PLUS loans will be covered in later articles.

Stafford loans are broken into two categories subsidized and unsubsidized. The difference is that for subsidized loans the government subsidized the student by paying the interest until the student stop going to school at least part time. With the unsubsidized loan the student must pay the interest accrued during school. Therefore subsidized loans, if you can get them, are a better deal than unsubsidized loans. Even if this is not enough to convice you subsidized loans have an interest rate of 5.6% this year for undergraduates vs 6.8% for unsubsidized loans or subsidized loans for graduate students.

Therefore why would someone get a unsubsidized loan? Mostly because anyone who fills out a fafsa (free application for federal student aid) can get one. This means that no first time student should be unable to get this aid. Or maybe the aid one gets is not enough to pay for the expenses.

This chart shows how large a loan a student may potentially get and how much may be subsidized.

	Dependent student	Independent student
1st-year undergraduate	$5,500 (maximum $3,500 subsidized)	$9,500 ($3,500)
2nd-year undergraduate	$6,500 ($4,500)	$10,500 ($4,500)
3rd- and 4th-year undergraduate	$7,500 ($5,500)	$12,500 ($5,500)
Graduate/professional	NA (All graduate and professional students are considered independent.)	$20,500 ($8,500)

If a student is getting aid from the university or college in the form of a tuition waver or scholarship, the amount of student loan aid can be decreased. Thankfully the unsubsidized loan aid will be decreased before the subsidized loan aid.

This is in reverse if the student or parent makes additional income. It is always better for a student to get a scholarship or grant than a job off campus. Later articles will cover working on campus and why that is better than a job off campus.

Student Loans-Overview and Private

Most students will end up taking out loans for school. But it is hard to know what loans to take and which to avoid. Student loans are broken into two basic categories federal and private. Federal student loans are backed by the federal government whereas private student loans are not consider to be back by the government. This article will cover private student loans and future articles will cover the different types of federal student loans.

Private loans are the WORSE type of loan to get. The consumer aka the student and parent if he or she cosigned have less protection that they would with a credit card and often the rate can be worse than a credit card. I once tried to see about getting a private student loan and called up a company that had sent me an offer. They were unable to give me an approximation of my rate unless I applied, even when told my credit score was over 760. The best approximation they could give me was 6-25%. Given that my credit card from my credit union had a fixed rate of 9.9, I was not very impressed.

With the credit card regulations in play private student loans are an even worse deal, than credit cards. There are no regulations on how they change your rate and student loans, even private ones, cannot be discharged by bankruptcy. So basically private student loan companies hold all the cards and have no reason to work with you.

Unfortunately the new credit card regulations also limit the ability of someone under 21 to get a credit card, unless their parents cosign or they have "sufficient" income, however no one has defined sufficient to me or anyone else.

If one still feel that he or she must get a private student loan, most credit card companies or banks offer them, however because of the credit crunch many of these companies are beginning to stop offering them.