New tax law may impact teens

Many high schoolers may find themselves impacted greatly by the new tax law recently passed by Congress. Under the Tax Increase Prevention and Reconciliation Act, teenagers could end up paying more tax than they would have in the past.

In the former tax rules, the first $800 of income received in the name of a dependent who was under the age of 14 was tax-free for the child. This included money earned from working, interest from stocks and custodial accounts, and any dividends paid on stock in the child's name. The next $800 of income was taxed at the child's rate, which was about 10-15% on normal income and 5% on interest earned. Any income above $1600 was taxed at the parents' rate, which was about 35%.

Once the child turned 14, what is referred to as "kiddie tax" disappeared. All income was taxed at the child's tax rate, not the parent's.

Under the new tax laws, the lower interest rates only come into effect after the child turns 18. Now, the first $850 will be tax-free, the next $850 will be taxed at the child's rate, and anything over $1700 will be taxed at the parent's rate.

Also, parents who have invested in college saving in an UGMA or UTMA account will no longer get the kiddie tax break. They will owe regular tax rates on all income earned from interest on these types of custodial accounts.

Instead of putting money into UGMA or UTMA accounts, another option might be adding to a student's 529 Plan or opening a Roth IRA in the student's name. By the time the student is able to retire, there would be a nice nest-egg in a Roth IRA.

Whatever you decide to do, we suggest that you not do it alone. There are too many loopholes and mistakes that you could make. It is wise to contact a financial planner or your CAPlus representative, who may be able to recommend a financial planner to you.

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High school sophomores

Students should be thinking about which colleges they might want to visit during the summer. Spring and summer months are great times to visit schools, so you should begin planning these trips now. If your family takes a vacation together in the summer, try to fit a few college visits in while you are at it.

School is over or almost done for most students around the country. Relax and enjoy the summer, but don't forget to schedule in some SAT or ACT study time! Studying at least one hour a week now will help the student get a higher score, which can lead to more financial aid. Colleges often knock down tuition prices by thousands of dollars depending on SAT/ACT scores. The software that College Assistance Plus provides is very helpful in preparing for these tests.

If you are planning college visit trips, you should make informed and educated decisions on which colleges to visit. Avoid visiting schools that you know you cannot afford. Your student may fall in love with an expensive school, and you will find yourself in a difficult position of having to choose between emotion or logic.

Students should take some time during the summer to get involved in community service activities. This can help complement a student's achievements in academics, athletics, arts, or other areas. Not only will this make the student more attractive to the colleges during the admissions process, but it may also make them more qualified to receive scholarships and grants.

Parents and students should continue to save money for the student's college education. If the student has a job lined up for the summer, plan on putting the money into the parents' account(s) rather than in the student's name. This shields the money from the federal formulas that determine how much the family can afford.

Parents should move qualified assets into non-qualified accounts. This strategy is an important key to receiving more financial aid than you may have thought possible. (Qualified assets are assets that qualify for the FAFSA, while non-qualified assets do not.) If your assets are exposed to either the federal or institutional methodology, you can reduce the amount you have to pay by altering the title or moving those assets into non-qualified accounts. Be careful to properly and legally implement these strategies. See your financial advisor or CAPlus representative for more assistance in this process.

High school juniors

School is over or almost done for most students around the country. Relax and enjoy the summer, but we suggest having a summer job or getting involved in community service activities. Having a job can help you earn money and teach you about responsibility, and community service will help you in the college admissions process.

It is a good idea for students to spend at least an hour a week studying for the SAT or ACT exams if you plan to take them again.

If the student is planning on having a job during the summer, the parents should sit down with him or her and go over the importance of having a budget to plan where the money is going. Also, it might be wise to keep the money that the student earns in a parental account instead of an account in the student's name. The federal government expects that the family will use a higher percentage of money in the student's name to pay for college.

If they haven't already, students should check local community colleges to see if there are any summer courses that may be of interest to them. Look for courses in the major you are interested in pursuing; also look for any general courses that may count toward general education credits when you get to college. This can save you from having to pay a higher price for those credits later.

Students should go online to the websites of the colleges that they are most interested in attending. Collect information about college application procedures, entrance requirements, tuition and other fees, room and board costs, student activities, course offerings, and financial aid. Begin comparing schools by factors that you find most important.

Students should continue to refine their lists of potential colleges. Contact the admissions and financial aid offices at any colleges in which you are interested so that you can get information now on admission, scholarships, and financial aid. Talk with your parents about the colleges in which you are interested; parents often have wise insights and suggestions.

Summer months are often great times to visit colleges, so you might want to plan any summer visit trips now. Parents should make informed, educated decisions on which colleges to visit; don't visit colleges that you know you are unable to afford. This may save you from emotional attachment from a college that is too expensive. You don't want to waste your time and gas money visiting colleges that you are unable to afford, and your son or daughter may just end up falling in love with a college that is way out of your price range.

When the student has figured out the things he or she would like in a college, give the information to your College Assistance Plus representative if you have not yet done so. We will then give you a detailed comparative list of colleges that meet your search criteria and their up-to-date financial information. We will be available to sit down with you and discuss the list and where your student may fit the best.

Parents should also move qualified assets into non-qualified accounts. This strategy is an important key to receiving more financial aid than you may have thought possible. (Qualified assets are assets that qualify for the FAFSA, while non-qualified assets do not.) If your assets are exposed to either the federal or institutional methodology, you can reduce the amount you have to pay by altering the title or moving those assets into non-qualified accounts. Be careful to properly and legally implement these strategies. See your financial advisor or College Assistance Plus representative for any assistance in this process.

High school seniors

If you filed your FAFSA, you should have received your SAR (Student Aid Report) by now. If you have not received it, call 1-800-4-FED-AID or visit www.fafsa.ed.gov, because it is essential that you have this information. This report summarizes your financial aid eligibility, so make sure you read it carefully. If there are any inconsistencies or errors, make the changes necessary and either send the packet back or update the information online. If you have questions, feel free to contact your CAPlus representative for help.

Many colleges' application deadlines have passed by now, although there are also many that are on a rolling admission schedule (meaning that you can apply at any time). If you have missed deadlines, look for colleges with later deadlines to which you can apply. We suggest applying to six or more schools. Once you have applied, follow up with the admissions office to make sure that they have received all of the necessary information from you and your high school.

You should have received financial package letters from all the schools that you were accepted to. Compare the offers to determine the best choice for you. Contact your CAPlus representative for help with making your final choice. If you haven't made your choice yet, don't worry. You have plenty of time.

Don't make rash decisions. Remember that many students transfer after their first year, and the average student changes his or her major at least 3 times in the course of their undergraduate education. The average cost of changing a major is about $8000, which adds up, especially if the student is in school for the average 5 years. Take your time and choose a school that you really would want to be at. Also, don't choose a school because of a boyfriend or girlfriend. Often relationships don't last throughout college, and one or the other of you may decide to transfer for academic or financial reasons.

If the student is planning on having a job during the summer, the parents should sit down with him or her and go over the importance of having a budget to plan where the money is going. Also, it might be wise to keep the money that the student earns in a parental account instead of an account in the student's name. The federal government expects that the family will use a higher percentage of money in the student's name to pay for college.

Don't focus on a technical school unless you are certain that you will not be changing majors. Students who are planning on going to college for pre-med, for example, should keep in mind that 80% of pre-med students drop out of that program and change to another major in their first year of college. Liberal arts schools or community colleges are often good choices because they have a variety of programs that students can switch to if they find they do not like their original major. Talk to your College Assistance Plus representative to determine what exactly you are looking for, and they will help you find colleges that will meet your needs.

Students should also beware of ending up at a school that is too selective for them. Applying to and choosing to attend a very selective school can often hurt more than it can help; if you are only considered average at that school, they will not want you as much as they would want someone who would be above their average. Schools offer better financial rewards to students that will help their institution appear better.

If the student is finding that he or she is not receiving good financial packages from the colleges to which he/she has applied, consider applying to some additional schools. Many schools have rolling application deadlines and will let you apply up until the beginning of school in the fall.

You may want to look into any summer classes offered by community colleges in your area. You may be able to get some of your general education classes out of the way at a lower cost than you would pay at a public or private institution.

If you have made your college choice, congratulations! It's a tough decision to make. Don't forget to send in your tuition deposit, and please notify your CAPlus representative so we can update our records.

College freshmen, sophomores, and juniors

Statistics say that 30% of students transfer after the first or second year of college, so higher grades will give you the ability to obtain a great deal at the college the student is transferring to. If you are transferring, make sure you have talked to an academic advisor at your new school to ensure that you are not behind as far as credits go.

It is a good idea for parents to sit down with their students and outline a budget for the summer and the upcoming school year. Students need to be prudent about spending money instead of using loan money for pizza and CDs. They may not realize it now, but they will be paying for that pizza for the next 30 years...with interest!

If you are planning to work this summer, focus on finding a job that will enhance your resume. Service jobs are plentiful, but you should look for one in your field of study! Not only will this give you experience, but it will also help you determine if you really do want to be in this field. If you have not yet found a job in your field, double your efforts and network, network, network! Talk to anyone and everyone you meet about what you want to do with your life and what kind of job you are looking for. Chances are that someone knows someone else who may have a job opening for you.

Parents should make it a point to caution their students about getting credit cards. We cannot stress enough the importance of controlling credit card use! Any late payment can be used as an excuse by the credit card company to increase the card's interest rate. Grace periods are also shrinking; whereas they used to be 30 days long, many credit card companies are decreasing these periods to 20 days, and some have no grace period at all. Be sure that both you and the student know the card's policies before signing up. Even inactivity on a credit card can result in high bank fees!

College seniors

If you have graduated, congratulations! College is a long journey, but you're moving on to the next part of your life. If you still have a few classes (or an extra year) to go, keep pushing to keep your grades up until you graduate.

If you aren't sure what you want to do (or can do) with your degree, feel free to contact your College Assistance Plus representative. We want to see you succeed, and we know a lot about careers and what you may be able to get into with your degree. We are here to help you!

Continue looking for jobs and internships, and talk to friends and family for ideas or contacts. Network like crazy and stay focused. Parents usually have many friends and contacts that may be helpful. Try to talk with anyone who might be able to help so that you have as many people as possible looking for opportunities for you. Remember that most jobs aren't posted on web sites or in the newspaper.

Don't worry too much if a month or two goes by and you haven't found the right job yet. Keep talking to people and interviewing; don't sit around the house and wait for people to call you. Also remember that your first job will probably not be your dream job. Because you are young and probably inexperienced, you may have to accept a job that is not quite what you had envisioned. This is not the case for all recent grads, however.

Strategic Suggestions

It is extremely important for high school students, especially juniors and sophomores, to spend time studying for the SAT and ACT tests. Unless you got a nearly perfect score, retake the tests! The highest combination of scores is kept, so there is no way for you to hurt yourself by taking the tests again. Some schools automatically reduce the costs of tuition by 50% or more if the student's SAT score is 1100 (by the old standard) or above! There are also many scholarships that students can qualify for based only on their SAT/ACT scores. It is good for students to study during the summer to keep their minds sharp and active.

High school students should also take the summer to do volunteer and community service, and to seek a job in a field they might be interested in pursuing. Try to find a job that is more relevant to your career than flipping burgers at a local fast food joint. When you understand the job market and what you will be getting yourself into, it will be easier to choose a major in a field that you will stick with.

If there has been some circumstance in your family that has suddenly created financial hardship, write a letter to the college's Financial Aid Director explaining the situation. Make sure that he or she understands that you are not looking for loans but gifts/grants/hardship dollars directly from the college or university. If you call or email your CAPlus representative, he or she will assist you in drafting this letter.