This Month's Highlights:
Pay Off Interest While in School
Financial Aid Insider: Student With a Well-Funded 529 Plan?
It's said that Punxsutawney Phil's predictions are 100% accurate. They're not. In fact, these predictions are wrong 60% of the time. But the Punxsutawney Groundhog Club notes that the predictions aren't geographically specific. In 2024 Punxsutawney Phil didn't see his shadow at Gobbler's Knob in Pennsylvania and predicted an early Spring. As it turned out Spring 2024 temperatures were 3 to 5 degrees above normal, and each month was well above normal. The average high temperature was 61.4°F, which was 2.3°F warmer than the 1991-2020 normal. If Phil never sees his shadow again, I think his accuracy will improve to 100% of the time from now on.
Pay Off Interest While in School
If you're in school and you have unsubsidized federal student loans, I recommend that you periodically make interest only payments. If you're still in college, your student loans likely haven't entered repayment yet. While it's difficult to predict what repayment options will be available in the future, there are proactive steps you can take now. One recommendation is to pay off any interest that accrues while you're still in school. Even small contributions can help reduce the overall cost of your loans in the long run. If your federal student loan hasn't yet entered repayment, you won't be eligible to enroll in a repayment plan yet. Repayment starts six months after graduation or if your enrollment drops below half-time-- unless you enroll in another program, like graduate school-- before the grace period ends. But, you can still make interest payments while you're in school. Paying a little now as you go, can save a couple of thousand over the lifetime of the loan.
Each month, we provide you with tips on your best ways to pay for college regardless of your financial situation.
Student With a Well-Funded 529 Plan?
There are families who were fortunate enough to save money for college. Most of this money that parents saved went into a Qualified Tuition Savings Plan or 529 Plan.
They may have done such a good job that money will cost them financial aid eligibility. Not boo-hoo! College is extremely expensive and even well-funded plans may not cover all four years of college. What to do?
Fortunately, the FAFSA only includes the value of the student applicant's 529 plan. The custodian/ guardian of the account is the owner, and only the owner can change the beneficiary. This change of beneficiary could be to another child or a close family member. The beneficiary doesn't have any say or control over the account, only the owner does. By changing the beneficiary an increase in aid eligibility can be achieved legally and ethically.
Families with multiple children should consider setting up separate 529 plans for each child, enabling more tailored investment strategies, potentially larger tax benefits, and greater contribution limits. And as in the example above, one can also temporarily change the beneficiary to a sibling before filing the FAFSA and then legally and ethically change the beneficiary back to the student before taking a distribution.
Until next month...
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