Tax Attic

Jerry Coon
Jerry Coon

Contrary to Governor Snyder’s seemingly best efforts, the cost of college tuition continues to sky rocket. The ways to finance that cost are familiar to all of us, i.e. scholarships, grants, and loans. In my book, scholarships and grants that aren’t required to be paid back are the very best method of paying for college. Of course, those scholarships and grants are highly competitive. Billions of dollars of public and private academic scholarships are awarded annually in the United States. Most colleges/universities/technical schools have scholarships ready to be awarded to a multitude of in-coming students with many of those scholarships being used to entice out-standing students to attend a school. The scholarships are awarded based on academic and other accomplishments as identified by the group awarding the scholarship. The competition can be intense. Each one of those scholarships, whether it is for $1,000, $10,000, or a full ride, for one year or all four years receives multiple qualified applicants with a panel of judges picking the successful applicant. Those scholarships allow untold numbers of students to be able to attend the college of their choice.

The federal government has its’ own grant program. It is called the Pell Grant program with over 32 billion dollars of grants awarded yearly. That figure is subject to Congressional funding but it’s quite safe to say that Congress could give away as much money through Pell Grants as they wish to give away. Pell Grants are based on financial need eligibility with the maximum grant being $5,550 for the 2012-2013 school year. Each recipient must be able to demonstrate a financial need. Just as with the private scholarships, the Pell Grant program allows a large number of students to be able to attend the college of their choice. Academic accomplishment, however, does not factor into the equation. The hopeful recipient must file a FAFSA (Free Application for Federal Student Aid) that calculates the EFC (Expected Family Contribution) of the student and his/her family. The FAFSA can be filed as early as January 1 and can be filed as late as June 30. However, a few states, Illinois, Kentucky, North Carolina, South Carolina, Tennessee, and Vermont, administer funds on a first-come, first-served basis so, in those states, it definitely would pay to file the FAFSA as soon as practically possible. “Practically possible” is a moving target in today’s tax environment. W-2s are required to be made available by the end of January. Interest and dividend statements are usually sent out to taxpayers by the end of January. However, taxpayers who have a brokerage account with an Ameriprise, Edward D. Jones, Merrill Lynch, or Fifth Third Financial, etc., may not receive those brokerage statements until late February; well into March; or even early April. Unfortunately, the brokerage houses do have a history of sending out revised statements. It’s not uncommon to receive a revised statement a few weeks after having received the original statement. This year, the Internal Revenue Service did allow brokerage houses an extension of time in an attempt to make sure they were correct the first time. It does appear to have worked. We did see fewer corrected brokerage statements this year. However, getting them out later did cause some FAFSAs to be filed a little later than wanted. Fortunately, Michigan is not one of the states that divvies out money totally on a first-come, first-served basis. Also, if a taxpayer owns a business, quite often those tax forms are not filed until well into the tax season. Bottom line: file the FAFSA as soon as all of the information is available. It is possible to file a preliminary FAFSA based on projections and finalize it when the final information is available.

The EFC or Expected Family Contribution is the term the federal government has coined that puts a dollar amount to how much a family is expected to contribute to a student’s annual college cost. EFC combines the variables of parent’s income and assets, student’s income and assets, total number in the family, number in the family attending college, the age of the oldest parent, and the cost of the college the student is going to attend. If the EFC is under $23,000, the student should qualify for the maximum award of $5,550. As the EFC increases, the Pell Grant will decrease until it disappears totally. At the other end of the scale, loans can be procured relatively easily. They do have to be paid back, though, and the interest that is charged can be high. Thanks to our national Congress that sets the rates, the rates on many loans are in the 5-6% rate. In today’s low interest rate environment, that might actually be categorized as obscene. Next week I will discuss the various loans, commonly called Stafford loans; their availability; and the applicable interest rates. This week, though, remember that the Start of Summer Celebration, as sponsored by the Rockford Chamber of Commerce, in conjunction with the City of Rockford and the various businesses of the Rockford area, begins this Thursday, the 13th. For 42 years, this annual event has served to kick off the summer season in Rockford. I would encourage you to visit downtown during the Celebration; enjoy the fireworks Saturday night at dusk; and remember the parade is Saturday morning at 11am. This Jerry Coon signing off.


Jerry Coon is an Enrolled Agent and

a Registered Tax Return Preparer.

He owns Action Tax Service on

Northland Dr. in Rockford.

Contact Jerry through his website:

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