Entries for August 2009

"Are grandparents who are paying the tuition of a grandchild eligible to claim the new American Opportunity Tax Credit" of up to $2,500? —Ken F.

Only the taxpayer who takes the student as an exemption on the 1040 tax form can collect the credit, the IRS says. If Ken can declare the student as a dependent (in other words, if the student has lived with him at least half the year and if Ken supplied at least half of the student's support), he can get a big tax break when he files his taxes next year.

But if Ken can't, then his kids, or his student grandchild, could collect the credit, the IRS says. In fact, even if the students or parents don't spend a penny of their own for tuition or books, they could still collect the tax credit. For example, Uncle Sam could send a $1,000 check to piggyback on Grandpa's check of $2,500. Or Ken's kids or grandkids could reduce their tax bills by $2,500 if Ken contributed $4,000 toward tuition and books. That means the IRS could turn a $2,500 gift into $3,500. Or it could turn a $4,000 gift into $6,500!

"My daughter is a senior. We financed her first two years using the Parent PLUS Loan, and she took a Sallie Mae private loan out for her third year, with us the cosigners. Well, this year, we do not qualify as a cosigner for this loan again. Neither my parents or my wife's, our brothers or sisters qualify as cosigners either because they are retired and living on Social Security, or have job loss problems or large debt. We are searching for some kind of financing that she can qualify for. She is unemployed but is still looking. Do you have any other options, suggestions?"
 —Matt F., "Aging Parent," 8/10/09

Lots of students and parents like Matt are panicking right now because they simply don't have enough money to cover the college bills that are about to come due.

"My 29-year-old son has an associate degree in computer science but wants to go back and get a bachelor's degree in childhood education. He works a full -time job and plans to attend college part time. His income is under $30,000 per year. He's single with no dependents. Are there any grants or loans he might qualify for? Thanks for any advice on this."
—Sharon R.

Millions of unemployed and underemployed adults are thinking about going back to college to improve their job prospects in this rotten economy. One of the many strange secrets of financial aid is that the amount of money available depends on what degree students aim at. For example, government agencies, charities, and universities give very few grants to graduate students hoping for an MBA or other professional degree. They figure these students will earn enough with these degrees to be able to repay big loans.