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Financial Planning Competency Handbook, 2nd Edition by CFP Board

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CHAPTER 19 Education Financing

Martie Gillen, PhD

University of Florida

Michael Gutter, PhD

University of Florida

CONNECTIONS DIAGRAM

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Financing may be a necessary component of education planning for many families. Financing may come in the form of loans from the federal government, the college, or a non-profit or private organization. Some student loans, such as the subsidized Stafford Loan, are needs-based while other loans are not based on financial need. A financial planner can help clients evaluate the availability of and qualifications for various forms of financing for education funding. Interest paid on student loans, depending on the loan type and other restrictions, may be an adjustment to income for tax purposes. The financial planner must adhere to ethical standards of professional conduct and fiduciary responsibility.

INTRODUCTION

The U.S. Department of Education and many colleges offer low interest rate loans for educational purposes. There are maximum limits on the amount that can be borrowed for a full academic year. Loans differ from grants in that they are not typically based on financial need but are part of the overall financial aid package offered to students. However, the Federal Perkins Loan and subsidized Stafford Loans are based on financial need. The eligibility for such aid would be dependent on the Expected Family Contribution as determined by the ...

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