What you need to know about student loans and taxes

With tax season upon us, I’d like to share some good news with you: if you’ve been repaying your student loans this year, you may be able to get some money back.1 The IRS allows for the deduction of up to $2,500 in student loan interest in some cases, even on any voluntary payments you made!

How do I know if I’m eligible to deduct my student loan interest?

By the IRS rules, you can claim the deduction if you meet all of the following requirements:

•Your filing status is any filing status except married filing separately.

•No one else is claiming an exemption for you on his or her tax return.

•You are legally obligated to pay interest on a qualified student loan.

•You paid interest on a qualified student loan.

•You incurred the loan as/for a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential.

•You made a Modified adjusted gross income (MAGI) of less than $75,000 (or $155,000 if married filing jointly) in 2013. See IRS publication 970 to figure out your MAGI.

What can I deduct?

Deduct any interest you paid on a qualified student loan—up to the $2,500 cap—in 2013. A qualified student loan is one you took out solely to pay qualified education expenses that were:

•For you, your spouse, or a person who was your dependent when you took out the loan

•Paid or incurred within a reasonable period of time before or after you took out the loan

•For education provided during an academic period for an eligible student.

This means that federal student loans, private student loans, and even credit card payments for student expenses (for books, tuition and housing—not Saturday night pizzas) are all eligible forms of loans. Interest here even includes any loan origination fees you may have incurred. As an unusual move by the IRS, you can even claim any payments made on your behalf so long as you meet the criteria above. However, loans from a related person or an employer plan are not qualified student loans.

What are the income limits for the student loan deduction?

If you make less than $60,000 (or $125,000 if married filing jointly), you are eligible for the full deduction. A MAGI between $60,000 and $75,000 ($125,000 to $155,000 if married filing jointly) gives you a partial deduction. A MAGI of $75,000 ($155,000 if married filing jointly) or more disqualifies you from the deduction.

Of course, you should always consult with your tax advisor to see how these rules apply to your exact situation, but good news may be coming your way for asking.

 

1: Consult your own tax advisor

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Lessons of success from two remarkable women

Since March is Women’s History Month, I was thinking about the advice that successful, practical women can give us. This led me to the idea of presenting lessons of success from two history-making women: a woman of the past who was born to poor ex-slaves and became the first self-made female millionaire and a woman of today who is a media mogul.

Let’s start with Sarah Breedlove [aka Madam C.J. Walker]. She is the first American self-made female millionaire and one of the most successful black/ African-American entrepreneurs of all time. Born in 1867 on a cotton plantation near Delta Louisiana to poor ex-slaves, Sarah was an orphan at age seven, a wife at fourteen, a mother at seventeen and a widow at twenty.

In response to her own hair loss and suffering self-esteem, Sarah created a hair remedy which she promoted by traveling the country. She gave lecture-demonstrations and trained other black/ African-American women to be door-to-door beauty culturists, eventually opening her own beauty college. Her goal was more than making a sale; she wanted to raise black/African-American women’s self-esteem and confidence in their own beauty and intelligence thus helping to free them from a life of servitude and dependence. She would encourage her students by saying, “I had to make my own living and my own opportunity. But I made it! Don’t sit down and wait for the opportunities to come. Get up and make them.”

Madam Walker used her wealth to donate large sums of money to various educational charities, spoke against the practice of lynching and fought for the fair treatment of black/African-American soldiers during WWI. To her, money was something that was best when used for the larger good; she once said, “I am not satisfied in making money for myself. I endeavor to provide employment for hundreds of the women of my race.”

When asked for her thoughts on her career, Madam Walker stated simply: “There is no royal flower-strewn path to success. And if there is, I have not found it for if I have accomplished anything in life it is because I have been willing to work hard.”

A woman making history today is Nely Galán, the founder of Galán Entertainment and former president of entertainment for Telemundo.

Nely was the first Latina president of a U.S. television network [Telemundo], and is an Emmy award-winning producer of over 600 episodes of television in Spanish and English. She was the first Latina to appear on The Celebrity Apprentice with Donald Trump on NBC, owns her own real estate development and investment company, is a board member of Count Me In, The Smithsonian, and sits on the Coca Cola Advisory board.

Nely brought her passion to life in founding The Adalante Movement, an organization which focuses on uniting and empowering Latinas economically.  She told WomensDay.com, “Once you know what you want, write down a plan to achieve it. I like to plan for a year, then break it down to each month, week and day. Focused intention and small actions every day create results.”

Ms. Galán also shared these tips which helped bring about her success:

  • “If you have a business idea, you have to make sure that what you’re thinking about doing can make money. We often have ideas and really haven’t figured out if it’s something people want. “
  • Feed yourself first. “When helping others so much, you may become resentful when you see them begin to succeed. If you feed yourself first, you won’t.”
  • Use your jealousy as a guide. “Seek out those you find yourself being jealous of and become friends with them. Learn from them if they really have what you want.”

Ask for Mentorship. “We can’t do this alone. Allow yourself to learn from others.”

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When Federal Aid Isn’t Enough

You’ve filled out your FAFSA, you’re getting close to making your college decision and your financial aid award letter comes in the mail, typically around mid-April. You’re excited because this is one extra piece to help you make a decision.  After you receive your letter, you realize that the amount of money in your award letter (expected family contribution, school’s financial aid package) does not equal the cost of attendance. Now what do you do?  Here are some steps that you can take to improve your financial aid package.

1)      Appeal the financial aid award letter. If the entire package comes up short, call someone at the financial aid office at the school and talk to them about it. Maybe there was a paperwork snafu, they misread your paperwork or you had a change in your situation since you filled out the FAFSA like a loss of job or death in the family.  Either way, you won’t get any more money if you don’t ask.

2)      Look for various scholarships. Scholarships aren’t just for Mensa members and athletes, everyone can earn a scholarship. There is paperwork to fill out and often some creative aspect of the application, but you can potentially recycle your college essays, your senior year thesis or the results of your science project. (That’s what I did and earned over $1,500)  Ask your guidance counselor or search scholarship databases online for a list of scholarships that you may be eligible for.

3)      Consider a part-time job. That is, if you feel like you have time for it and did not qualify for a federal work study program.  Work-study is also something that you can appeal above if it was not part of your package. If you feel you can work more hours than a work-study program, a part-time job at the grocery store down the street or the burrito shop two blocks away could be a great alternative.  Don’t forget to work as much as you can during the summer.

4)      Reduce expenses. Can you live at home? Do you have an aunt/uncle in the area? Is this your dream school or can you go to the less expensive one? Can you graduate in 3 years or 3.5 years to reduce a semester or two of school? Can you attend a community or local school for two years, then transfer after your sophomore year?  These are all questions that you can ask yourself if money is tight.

5)      Private student loans. So you’ve done everything above and it’s still short. Research private student loans. These loans are not subsidized meaning your interest will accrue while you’re attending school. There are loans for the student and loans for the parents. Do your research online and pick the loan that works for your situation.

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Top 3 things to consider for your college decision

Planning for college is an exciting yet stressful experience, especially when it comes to making that big decision: Where will you attend school? Fear not! The college decision is nothing to worry about, but there are a few important things for you to consider when selecting a college.

It can be tough to make a decision of this magnitude, so it’s worthwhile to be patient; really work through your options and seek out additional advice from teachers, mentors, and those who best understand your wants, needs and long-term goals.

Here at Wells Fargo, we’re dedicated to helping you on the path toward educational success so we put together the following guide of things to consider in your college decision process:

School size, type and campus life

There’s no shortage of amazing schools out there, so after you’ve studied hard throughout high school you deserve to attend a university that fits your future needs.  Colleges come in all shapes and sizes; it all comes down to what’s best for your personal growth and success.

If you’re looking for a big campus with exciting sports teams and large events, a more populated university would fit you well. If this is the case you may want to consider a Division 1 school. If school size and athletic camaraderie are not important to you, attending a smaller school such as a private university or liberal arts college will offer you a more enhanced classroom experience.

The school size and type will give you a better understanding of campus life. Although plenty of your hours will be spent in the classroom and library, it’s important to choose a university that provides exciting events, organizations and activities that help you foster new relationships and have some fun. Look for a college that offers club sports, volunteer opportunities and activities that allow you to engage with your professors, faculty and fellow students.

Location & distance from home

Whether you’re a city-slicker or a little more country, the most exciting part about college is the capacity to choose your own future. If you’re looking for a college surrounded by sky-scrapers and constant excitement, consider big college cities like NYC, Chicago, Boston or Philadelphia. If you enjoy the sand beneath your toes and a study-session on the beach, set your sights on a university that’s a mere stone’s throw away from the ocean.  The location you choose for your college should mirror the activities you enjoy and the type of person you are. (One caveat here: you are selecting a college, so make sure that you pick somewhere that you enjoy, but where you will also be able to focus on your studies!)

Closely tied to the location of your ideal university is the aspect of how far from home you want to be. For many people, college is the chance to discover a totally different part of the country—or even the world—but for others the proximity of family is important. Figure out just how far you want to venture away from home and what parts of the country most interest you. The most important thing is that you spend your four years immersed within an environment that makes you happy about your decision and driven to succeed.

Costs, scholarships & financial aid

This is the factor that tends to limit many students from attending their dream school, yet cost and financial aid opportunities are often a crucial aspect of college decision-making. Cost is often the first thing that parents think about when the topic of college comes up, and it can heavily influence the application and decision-making process. Survey the schools on your list and be sure to eliminate those that don’t meet your educational budget.  Depending on the type of school, you may have the capacity to apply for scholarships, grants, financial aid, loans and more.

Public universities and in-state schools often offer much lower tuition and room and board, whereas private institutions often charge higher tuition rates and sometimes limit scholarship and financing opportunities for those needing financial assistance.  This aspect of the college decision process might best be worked through with your parents or guardians, to ensure that you avoid unnecessary student debt and receive the best educational experience possible.

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Spring break “staycation” ideas

It’s spring break time for college students! If that doesn’t spell white sandy beaches for you this year, don’t worry. There are plenty of ways to have fun without planning a lavish week-long trip.

No doubt you’ve heard of “staycations” – where instead of traveling, people stay home and play tourist in their own town.  As a college student, this approach is great way to unwind and save some money over your spring break. So, what is there to do on your staycation?  Here are few quick ideas for you:

Make a wish list for your own city. Let’s start with the traditional staycation: acting as a tourist in your own city. Start with a wish list of places you’d like to explore. Are there local museums, parks or tourist attractions that you’ve never visited? Now is your chance to check them out. When buying tickets, ask if they offer a discount for college students. Then it’s time to see the sights! Pack a lunch and some snacks if you’re feeling frugal, or treat yourself to lunch or dinner at a new restaurant—after all, that’s what tourists do!

Do a day trip. Maybe you live in a town where you’ve seen it all, or really doesn’t have much to offer in terms of a staycation. Try a day trip to a nearby city. See if you can gather a friend or two to join in the mini-adventure—it makes the road trip part of the fun!

Treat yourself. Sometimes a simpler change of pace is all you need to feel refreshed on a holiday break. If you’d rather not take the hometown tourist approach, try treating yourself in other ways. Go hiking or biking on nearby trails, try a new restaurant, go to the gym, get your nails done—anything that feels like a special treat to you.

Stay home and put your feet up. If relaxing is your top priority for vacation time, then by all means, literally stay home and put your feet up. Order takeout and watch movies.  Sometimes pure relaxation is just what you need to take on the world (and your classes!) again.

Visit a friend. Catching up with a friend can be great way to spend your break. Take some time to go visit a friend that you don’t see very often—especially one in another city.

Volunteer. Busy college students don’t always have time to volunteer. Consider devoting some of your spring break to a cause you care about, whether it’s an animal rescue, hospital or homeless shelter. Volunteering can give you a sense of purpose and achievement that may just energize you to the end of the semester.

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Preparing for the waitlist: 3 ways to stay positive

Picture it: You’ve applied to the school of your dreams. You’ve written an entrance essay and presented them with a list of your transcripts and accomplishments. Then, a few months later, you receive an envelope from your dream school informing you that you’ve just been waitlisted.

The news can put even the most confident student in the dumps, but getting waitlisted for college merely means that you may have to wait a little longer to find out you’ve been accepted to your #1 choice on your list of universities. Around May 1st, many schools begin to extend offers to students who have been placed on the waiting list. You should learn whether you’ve been accepted or rejected by August 1st — the date when schools are legally required to give applicants a verdict.

You may be sitting on pins and needles waiting to hear from your top pick, however, there are a number of ways you can stay positive while you wait to find out which school you’ll be attending in the fall. Here are just a few.

Take action!
Show the school of your choice that you’re hungry and can be an asset to their student body. Contact the school’s recruiting or admissions department to set up an interview to discuss not only your accomplishments, but to explain why you are so interested in attending their school. You can also pen a letter to the Dean of Admissions to let him or her know more about your goals and what makes their academic institution so appealing to you. Be honest, sincere, and straight-forward in your letter or interview. Help them to understand why you are both a good fit for their school — and what makes you unique!

Get excited about your other collegiate options
It’s not the end of the world if your first choice school doesn’t “choose you back.” You’ve already come this far and have undoubtedly applied for admission at other comparable schools. If any of these schools extend an offer to you, consider enrolling. In the event your first choice school pulls you from the waitlist and accepts you, you will only lose a small deposit on your second-choice school. However, you will gain immense peace of mind knowing that you have been accepted and enrolled in another excellent institution of higher learning.

Stay busy!
Between posing for senior portraits, attending your last few high school sporting events as a student, and planning for prom, there are a number of milestone moments savor while you wait it out on the wait list. Another great way to stay busy is to volunteer with local organizations. Giving back to your community is a great way to help you keep life in perspective and help others. As stressful as your senior year of high school can be, it’s a once in a lifetime experience. Enjoy every minute of it!

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Comparing college award letters

At this time of year, you seniors are probably anxiously awaiting award letters from the schools you applied to. While receiving an award letter is exciting, it’s important that you understand how to read and interpret your awards.

Your award letters may all present the information a little differently, but the key fact you want to find out is how much you may need to borrow to cover your costs. Your “Expected Family Contribution” may only be part of that figure.

When schools list your aid package, they may include student loans as part of the aid they’re awarding. But remember, that student loans have to be repaid. Look closely at how much of the award package is made up of student loans and how much is made up of aid that doesn’t have to be repaid (grants and scholarships, typically). One school may award you more aid that doesn’t need to be repaid, and less in student loans that do have to be repaid. Keep a careful eye on those figures. If you’re not sure whether an award is a loan, grant or scholarship, contact your school’s financial aid office to clarify.

When comparing award letters, there are four main things you’ll want to understand:

  • How much of the aid awarded is money that doesn’t have to be repaid? This type of aid is usually in the form of grants and scholarships.
  • How much of the aid awarded is in the form of loans? This money will need to be repaid, with interest.
  • After tallying the total aid package (including all grants, scholarships and loans), how much is your family expected to pay? This is sometimes listed as “Expected Family Contribution.”
  • What are your total expenses for college? This should include tuition, room and board, books, fees, and personal living expenses.

Once you know these numbers, you can use this simple equation:

Total expenses – Free aid = Total amount you’ll need to borrow, work to earn, or get from your family contribution

Using this simple math, you can more easily compare your award letters by looking at how much you may need to borrow to attend each school.  Remember to contact your school’s financial aid office with any questions you may have about your award letter.

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College admission essays

College applications sometimes require an essay submission, which may at first seem intimidating, but there is no need to let that stop you. As an applicant to several schools in the University of California system, I was only required to write a single essay that is known as a “personal statement”. The topic was pretty generic and actually very similar to what all my graduate school applications asked as well – essentially, “tell me about yourself and the experiences that have shaped you”. The best essays are the ones that are authentic and from the heart. Don’t try to tell them the story that you think they want to hear; tell them the story about you. And lest you think you’re not very interesting, trust me – you are. Everyone is unique and has unique experiences and the essays are the perfect opportunity for you to share yours.

 

Judi Hornett:

My nephew Dan, now a freshman at Cal Poly San Luis Obispo, said that this advice helped him the most: prepare for your essays by making a list of all the precise moments in your life that reflect a characteristic of yourself or your character.

 

Dana Fulton:

When I was applying for college, each application asked for between one and three essays, which at first seemed like a lot of work. But as I looked closer, I noticed some very similar themes in the essay questions, so I ended up writing three basic essays. I spent a lot of time on these three essays, and had both my mom and my English teacher review them with me. Once these three essays were as well-crafted as I could make them, I re-read the application questions, selected the appropriate essay, and made minor adjustments to customize it to that school’s application. This process worked so well for me that I got in to every school I applied to—plus a few that I didn’t! (Unbeknownst to me, my mom sent off applications with these same essays to two local colleges, in hopes of keeping me closer to home). By giving myself just a few essays that I could really focus on, I found it much easier to write them well and never made the mistake of sending off a first draft at the last minute just to get something in.

 

Trang Pham:

College admission was a lifetime ago for me.  That being said, I find that it always helps to be authentic no matter the topic at hand. Good luck!

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Planning for Spring Break

Spring break is right around the corner, and for many, the much needed break could not come any sooner.  With the harsh winter weather of recent, a warm destination is probably more than welcome.  If you don’t have your break planned, it is time to start!  Here are some tips to keep in mind while planning for your break:

  • Decide how you want to spend your break.  Are you looking to relax and soak in the rays?  Or maybe, culture and sightseeing is what you crave?  Answering these questions will help you narrow down your options.
  • Know what you can afford.  Figure out what your budget is, and that number will help you determine where you can go and what you can afford to do on your trip.  This could be the difference between your local beach town versus hanging ten in Hawaii.
  • Research, research, research.  Make sure you research your travel options and where you can get the best prices.  Check out airfare aggregator sites, such as Kayak to compare prices before purchasing.  If you have not been to your destination before, research your destination to ensure you are prepared with the proper travel documents and currency (if applicable).  Research any activities you may want to plan ahead for.  You may score some great deals when planning ahead.

Remember, spring break is a week to decompress, recharge and enjoy the company of friends (and/or family).  Have fun and safe travels!

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5 things you should know about financial aid

February is Financial Aid Awareness month, and in that spirit, I’m going to share the top five things I think every student should understand about financial aid. Are you ready? Let’s get started!

Not all financial aid is need-based. This is the first thing to understand. Don’t bypass the financial aid process because you think you won’t qualify for aid.  Some student loans are not based on financial need, but offer low interest rates.  Which leads me to my next point…

Complete the FAFSA: the sooner, the better. FAFSA stands for Free Application for Federal Student Aid and it’s your first step toward securing financial aid for college. Complete the FAFSA as soon as possible after January 1 of your senior year. Deadlines vary for different types of aid, and you don’t want to miss out simply because you didn’t complete the application in time.

Things have changed since your parents were in high school. College isn’t just more expensive than it was when your parents were your age; the financial aid world has changed as well. Private loans, parent loans and federal loans have changed considerably in the past few years. Be sure to attend a financial aid night and talk with your school guidance counselor if you have questions. You can also talk with the financial aid office of the school you’re planning to attend.

Look beyond the sticker price. Many colleges are able to offer financial packages that will reduce their “sticker price” considerably. Talk with the school’s financial aid office to get an idea of what type of aid you might be able to expect.

Scholarships are not just for valedictorians and athletes.  You don’t have to be a superstar scholar or athlete to secure a scholarship.  Scholarships are offered with many different criteria.  But you do need to put in the effort to look for them. Use an online search engine and talk with your school guidance counselor to get started.

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