Ease the tuition squeeze

By: Asim Mohammed

Magazine) -- You've been waiting for this moment for nearly 18 years: Your baby is almost ready for college. Your finances, not so much. The market's protracted free fall means that your college fund is now worth just a fraction of what you need. Your home's value has no doubt dropped sharply too - no help there. The only thing that keeps going up, you guessed it, is college tuition. So it's goodbye, Dream School U., hello, Central State, right?

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Ways to Pay for College

Posted By: Asim Mohammed

Even though parents save up for their kids future college tuition, many parents still are in shock that they didn’t save enough after all the years.

For example the Matheny’s saved up $50,000 in college savings for both of their children. However, both of them are attending private schools this year and they Matheny’s are looking at $100,000 bill for the upcoming school year.

There are some options available to start helping to pay for colleges this year. Starting with the new economic stimulus plan President Barack Obama signed today creates yet another new tax break for college. The American Opportunity Education Tax credit increases maximum credit from $1,800 to $2,500 per year per student allowing more families to qualify. Claiming one of these tax breaks reduces your federal tax bill dollar-for-dollar, for a potential $2,500 savings. That makes it worth more than a $4,000 deduction, saving families at most $1,400 in federal tax.

Other ways a family can save and help pay for college is to fill out the FAFSA aid helping to get subsidized loans. Also many colleges have payment plans, allowing families to stretch the payment plans for a semester or even the year. Other options include, to max out the federal aid, generally the Stafford loan. Using the home-equity lines of credit, especially since they are averaging 6.1%, this may seem as an appealing option.

Even though the economy looks bleak into the future, and families are worrying over paying for college, there are options out there for families to look into, especially with a new government and stimulus plans being sent out.

http://money.cnn.com/2008/04/23/pf/college/college_cost.moneymag/index.htm?postversion=2008042404

http://www.forbes.com/2009/02/17/college-hope-credit-personal-finance-taxes_0217_college_stimulus.html

http://money.cnn.com/2008/12/10/pf/college/work_college.moneymag/index.htm?postversion=2008121110

How the stimulus will change college loans

By Jen Lynch

The current system has "needlessly cost taxpayers billions of dollars" and has subjected students to "uncertainty because of turmoil in the financial markets," the proposal said.

In President Obama's most recent legislation concerning college financing, the government has decided to discontinue subsidizing banks, and provide student loans directly. There are currently two ways college students receive loans, either borrowing directly from the government, or taking out loans from private lenders that are government subsidized. In Obama's 2010 budget proposal, he asks Congress to change the entire college-loan system to direct government loans and eliminate bank subsidies. 

According to an article by the New York Times, this will be the biggest change in federal student aid programs since the Higher Education Act was enacted in 1965. Experts say that eliminating federal loans through banks could save the U.S. approximately $4 billion a year. However, this proposal for direct government funding of student loans will completely cut out an entire private industry of companies like Sallie Mae, Student Loan Corp. and Nelnet Inc. All of these stocks fell sharply after the proposal was announced Thursday. This will be the likely  source of argument coming from Republicans in Congress when the proposal is debated. 

Overall, the stimulus plan will have several very positive effects on college financing. The plan is contributing an additional $200 million to the work-study program, which allows working students who are often paying their own tuition, to make more money per semester. Tax credits for college students will also now cover 100 percent of the first $2,000 of college-related expenses and 25 percent of the next $2,000 in the next two years. So regardless of the effects on private industry, the proposal will be of more benefit to college students overall.

Shares of student lenders fall on Obama proposal

Student loan companies' shares plunge on Obama proposal

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Expanded college financing part of federal stimulus package