Student Loan Forgiveness is Real!

Student Loan Forgiveness is Real!

General

by | Oct 12, 2018 | General, Teachers, Weekend Pivot Points

It’s been 7+ years in the making…but the day finally came! My wife and I get to say “good riddance” to $5,000 of student loan debt thanks to the Teacher Loan Forgiveness program.

I think most people carrying any amount of student loan debt have at least heard mention of the federal student loan forgiveness programs at this point…and I’d venture to guess that a good chunk of people are even relying on these programs to help provide some relief to the student loan burden.

The Teacher Loan Forgiveness (TLF) program is only one of the several federal student loan forgiveness programs available through the US Dept. of Education. The TLF program requires teachers to be employed in a qualified low-income school for five complete and consecutive years. Once the service requirements are met, teachers can have up to $17,500 (amount depends on the subject area taught) of their Direct or Stafford Loans forgiven.

If you’re doing the math in your head…yes, it took seven years of teaching in qualified schools before my wife’s loans satisfied the five-year requirement. Also, if you thought that last paragraph was clear as mud, know that you are not alone in that thought. The student loan forgiveness programs are notorious for their specific (yet confusing) set of requirements and their adherence to them.

In my wife’s case, a three-month gap between teaching contracts after her first year of teaching reset the TLF Program’s service requirement clock. So, although she has taught 7 years at qualifying schools, the first two years didn’t qualify because they didn’t meet the complete and consecutive requirement…a detail we didn’t know until applying for forgiveness after her fifth year of teaching. It’s these finer details that many people (like us) won’t discover until they apply for forgiveness and receive a rejection letter from the Dept. of Education.

If you’re eligible for Teacher Loan Forgiveness, Public Service Loan Forgiveness, or another federal program, I highly encourage you to take a moment to examine the details and requirements today and avoid any confusion and frustration 5-10 years from now. Not sure where to start? This blog post from the Dept. of Education is a good starting point to learn the basic requirements.

Despite all the requirements and hurdles though, if all the “i’s” are dotted and the “t’s” crossed, the program works and the student loan forgiveness is real. Be cautious, be attentive but be hopeful!

Healthcare HRA vs. FSA vs. HSA

Healthcare HRA vs. FSA vs. HSA

Employee Benefits

by | Sep 28, 2018 | Employee Benefits, Teachers, Weekend Pivot Points

It’s the cross-section of everyone’s favorite topics…healthcare and taxes! Trying to navigate the alphabet soup of employee health benefits can be a migraine-inducing task.

Healthcare insurance and expenses continue to rise. An HRA, FSA, and HSA can be a great way to help offset some of the increases. The aforementioned accounts can help you pay for qualified healthcare expenses, like deductibles, copays, coinsurance, and prescription costs, while saving on taxes at the same time.

Here are some important differences you should consider when determining which account is the best fit for your needs:

Type of Tax-Advantaged AccountHealth Reimbursement Arrangement (HRA)Flexible Spending Account (FSA)Health Savings Account (HSA)
Who funds it?Employer-onlyEmployer or EmployeeEmployer or Employee
Who is eligible to use?Only offered in conjunction with employer-provided health plansOnly offered in conjunction with employer-provided health plansMust have a high deductible health plan (HDHP)
How much can you contribute each year?None; 100% employer-funded$2,650Individual: $3,500, Family: $7,000
How much can be rolled over each year?Allowed at employer’s discretionAllowed at employer’s discretion; $500/year maximumFull rollover allowed
Can it be transferred from one employer to another?Portable at employer’s discretionNoFull portability allowed
How is it taxed?Contributions not included in income; tax-free reimbursements for medical expensesContributions not included in income; tax-free reimbursements for medical expensesContributions not included in income; tax-free reimbursements for medical expenses
What can it be used for?Medical, dental, vision, and prescription expenses.Medical, dental, vision, and prescription expenses.Medical, dental, vision, and prescription expenses. COBRA, retiree medical insurance premiums, long-term care premiums/expenses.

Choosing which account or accounts to contribute to and how much to contribute will vary from person-to-person. A good rule of thumb as you begin thinking about these accounts and how much to contribute is to determine how much would be needed to cover your deductible, expected medication costs, anticipated doctor’s visits, etc.

Consider using an online calculator to help start the conversation. Also, don’t be afraid to ask your HR representative as you come across questions or work with your financial planner to help determine the best plan of action for you and your family.

Dependent Care FSA’s

Dependent Care FSA’s

Employee Benefits

by | Sep 28, 2018 | Employee Benefits, Teachers, Weekend Pivot Points

Dependent Care Flexible Spending Accounts are one of my favorite, yet lesser-known employee-benefit options. Child/Dependent care is expensive and a DCFSA can help ease some of the stress on the budget. It can be a great tool for young families, like my own, who will have a significant amount of daycare expenses in a given year.

So…what is it, how does it work, and why should you consider it:

What is a Dependent Care FSA?

It’s a voluntary employee benefit option allowed by some (but not all) employers to help you save money on your family’s child care expenses.

How does it work?

By saving from your paycheck into a Dependent Care FSA, you use pre-tax dollars to pay dependent care expenses. This allows you to shelter a portion of your child care expenses from Federal and State income taxation, and, in many cases, Social Security and Medicare taxation also. This helps to reduce your taxable income and, in turn, may reduce the overall amount of taxes you pay.

Benefits of enrolling?

Tax savings is the main reason for using a Dependent Care FSA. As an example, if you contributed the household maximum of $5,000 in a year and fall into the average household tax bracket (22% Federal, 5% State) for most Kentucky families, you might expect to save roughly $1,350 a year in Federal & State taxes alone and up to $1,732 if you include the Social Security and Medicare tax.
Drawbacks of enrolling?

Dependent Care FSA’s are “use-it-or-lose-it” accounts. The money you contribute each year cannot be rolled over into the next year. Families must be careful not to contribute more than they expect to pay in child care expenses for that given year.

Families must also be careful to keep good records/receipts of their child care expenses and also ensure that their child care expenses meet the qualifications for reimbursement (i.e. child care provided by someone outside of your family, etc.).

What you should consider before enrolling?

The first question to ask yourself is “will I be paying child care/dependent care expenses next year?”. If the answer is “yes”, it becomes important to start estimating how much you expect to spend in that year so that you prevent over-contributing to the account.

The final and more difficult question to consider is “will it be more beneficial to save into a Dependent Care FSA or take the Child Care Tax Credit?“. Unfortunately, that answer is beyond the scope of this post. While tax saving is important, it’s also important to consider how this decision fits into your overall financial plan. The decision to enroll or not enroll in a Dependent Care FSA should ultimately be made on an individual basis with the help of your CPA and/or financial planner. At the very least though, it should be part of the conversation.

How much will the Class of 2031 pay for a college education?

How much will the Class of 2031 pay for a college education?

Weekend Pivot Points

by | Aug 17, 2018 | Weekend Pivot Points

It’s “Back To School” season!

My wife is a Kindergarten teacher and I am a numbers/planning geek. It’s inevitable, every year I find myself entertaining my curiosity and projecting future college costs for the incoming kindergarten class (that’s what everyone thinks about in their spare time, right?).

So…what will college cost for the Class of 2031?

To start, the average In-State Tuition & Fees for a Public Four-Year Institution is currently $9,970/year (or $39,880 for four years). If college costs continue to increase at its current average of 5% per year, the total four-year college price tag for the Class of 2031 will eventually double to $81,030 (or $55,676 in today’s dollars).

Either way you look at it, in future dollars or today’s dollars, those are sobering numbers. Will the rate of tuition increase ever slow down? I’m inclined to think it has to at some point, but predicting when is impossible. Will the cost of a college education discourage the pursuit of a college education? Not likely…but it may require better planning and more conversations about matching expected college costs/debt to expected post-graduate income.

With that, here are the stories that caught my eye this week:

MONEY: Some Thoughts on Investing in Real Estate (A Wealth of Common Sense)

Investing in real estate is not for everyone and, as with any investment, it carries risk. It’s important to know what those risks are and if you’re willing to accept those risks. The author poses questions you should ask yourself before attempting to enter the real estate investment world.

LIFE: This Is About the Thing You Want to Do Most but Won’t Talk About (NY Times)

You have it. I have it. We all have it, but many of us are afraid to talk about it. Some clients freely talk about it, and yet others (mostly us men) get close to talking about the “thing”, only to retract and revert to the boilerplate goal discussions. Talk about it. Or write about it. Just do something to acknowledge it and give it a chance to grow.

KENTUCKY PENSIONS: 

Kentucky Supreme Court to hear pension reform lawsuit in September (Pensions & Investments)

Kentucky Teachers’ Pension Calculator (Pivot Point Wealth)

The 90%

The 90%

Weekend Pivot Points

by | Aug 3, 2018 | Weekend Pivot Points

Imagine an iceberg. What do you see? A large chunk of white ice floating in the ocean, right?

I was reminded of the Iceberg Analogy this week – we focus on the 10% above water because that’s what we see, but 90% of the iceberg lies below the water keeping it afloat.

Financial planning is more than comparing and picking the “best” investments. While that may be the “exciting” part to focus on – it’s the 10%. In reality, 90% of financial success and building (and sustaining) wealth is behavioral – setting good habits and having the faith, patience, & discipline to stay the course when panic or euphoria arises.

(h/t to Simple Wealth, Inevitable Wealth by Nick Murray).

With that, here are the stories that caught my eye this week:

MONEY: Financial Planning For The Person Who Has Everything (Forbes)
If you woke up tomorrow with no possessions but the clothes on your back AND a bag full of money (equal to your net worth), what would you do? Do you start rebuilding the life you have now by buying the same house and living in the same town? What would you change – where you live, what you do, how much you save, how much stuff you own? Until we truly take the time to explore our response to these questions, the external forces around us will continue to have a strong pull on the direction of our money, our lives, and our dreams.

LIFE: Nudge, not sludge (Science Magazine)
Life is complicated. There are too many choices to be made in the course of a given day. Overwhelmed by the number of choices, sometimes we make the choice to do nothing, instead of choosing. “Nudges” exist to make decision-making less of an overwhelming task and help push us in the right direction to allow us to make better choices. Sludges, however, exist to discourage behavior that is in a person’s best interest, such as the endless amount of steps involved in claiming a rebate. Use the nudges, beware of the sludges.

Where’s the End?

Where’s the End?

Weekend Pivot Points

by | Jul 27, 2018 | Weekend Pivot Points

Be honest. No judgment here. What is the first thing you did when you opened this email? Did you immediately start reading this paragraph…or did you, first, scroll to the end to see how long the email is and, upon realizing that the email wasn’t insanely long, you then began reading?

I am a scroll-to-the-end-first reader. It’s an involuntary reflex for me at this point. I want to know what I’m committing to before I start. If I start after knowing where the end lies, I’m committed to the end, short or long. If I start reading without first seeing the end, I’m likely to bail as soon as my interest starts to fade.

This behavioral tendency applies to savings and investing habits too. There’s a subset of people out there who are inherent savers (I like to call them, “Forrest Gump-ers”) that will save and invest without hesitation or reservation for an undetermined amount of time and with no particular end goal in mind (“They just felt like saving”). Then, there’s the rest of us, the majority. We need help, a push, a nudge to get started and we sure as heck want to know how and when we’ll get a benefit from it (the “Couch to $5k-ers”)…because, with no plan or end goal in mind, we’ll take the path of least resistance, plant ourselves right back on that couch and stop saving when given the chance.

Knowing where you are today + Knowing you where you want to go = Increased likelihood of getting the outcome you desire

Most people have a solid understanding of where they stand today. Fewer have an idea of where they want to go.

Give yourself a nudge. Take a peek at the end and know where you’re going before you start.

With that, here are the stories that caught my eye this week:

MONEY: 10 Money Revelations From Being a Parent (A Wealth of Common Sense)
Being a parent is tough. It’s a fast-paced, on-the-job training in prioritization and a constant battle of trying to find the right balance. The balance between providing support without spoiling; planning for the future but still living in the now; giving an inch without giving a mile. This article is a good reminder for all fellow parents out there that the struggle is real. We’re all trying to find the balance that works for us today, and learning how to adapt when it the balance shifts tomorrow.