What’s New in the World of Higher Education

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Higher college costs
Total average costs for the 2015/2016 school year increased about 3% from the previous year: $24,061 for public colleges (in state), $38,855 for public colleges (out of state), and $47,831 for private colleges. Iowa State University is currently $16,604 for in state and $29,490 for out of state. The University of Iowa is currently $17,832 for in state and $37,618 for out of state.

Total average costs include direct-billed costs for tuition, fees, room, and board; and indirect costs for books, transportation, and personal expenses. Together, these items are officially referred to as the “total cost of attendance.” Note that the cost figure for private college cited by the College Board is an average; many private colleges cost substantially more — over $60,000 per year.

Higher student debt
Seven in 10 college seniors who graduated in 2014 had student loan debt, and the average amount was $28,950 per borrower. It’s likely this amount will be higher for the classes of 2015 and 2016.

Student loan debt is the only type of consumer debt that has grown since the peak of consumer debt in 2008; balances have eclipsed both auto loans and credit cards, making student loan debt the largest category of consumer debt after mortgages. As of September 2015, total outstanding student loan debt was over $1.2 trillion.

Reduced asset protection allowance
Behind the scenes, a stealth change in the federal government’s formula for determining financial aid eligibility has been quietly (and negatively) impacting families everywhere. You may not have heard of the asset protection allowance before. But this figure, which allows parents to shield a certain amount of their nonretirement assets from the federal aid formula, has been steadily declining for years, resulting in higher expected family contributions for families. For the 2012/2013 year, the asset protection allowance for a 47-year-old married parent was $43,400. Today, for the 2016/2017 year, the asset protection allowance is $18,300 — a drop of $25,100. The result is a $1,415 decrease in a student’s aid eligibility ($25,100 x 5.64%, the federal contribution percentage required from parent assets).

New FAFSA timeline
Beginning with the 2017/2018 school year, families will be able to file the government’s financial aid application, the FAFSA, as early as October 1, 2016, rather than having to wait until after January 1, 2017. The intent behind the change is to better align the financial aid and college admission timelines and to provide families with information about aid eligibility earlier in the process.

American Opportunity Tax Credit now permanent
This is a partially refundable tax credit worth up to $2,500 per year for qualified tuition and related expenses paid during your child’s first four years of college.

New REPAYE plan for federal loans
The pool of borrowers eligible for the government’s Pay As You Earn (PAYE) plan for student loans has been expanded. The new plan, called Revised Pay As you Earn (REPAYE), is available to all borrowers with federal Direct Loans, regardless of when the loans were obtained. Under REPAYE, monthly student loan payments are capped at 10% of a borrower’s discretionary income, with any remaining debt forgiven after 20 years of on-time payments for undergraduate loans and 25 years of on-time payments for graduate loans.

“Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.”

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