Filing Taxes as a College Student FAQs

Filing Taxes as a College Student FAQs

Adulting is scary! Suddenly, money is everywhere and confusing. Part of that confusion can definitely stem from filing taxes. Taxes, however, can be tackled, no matter how mysterious. Here are some FAQs about filing taxes as a college student.

***Please note that Let’s Go to College CA can not offer professional tax advice. This post serves as a collection of answers found online. Consult a tax professional for specific questions regarding your unique situation***

Q: Do college students need to file taxes?

A: ANYONE who is single (not legally married) AND earned more than $12,400 in 2020 is required to file taxes. Earned income includes salaries, wages, tips, professional fees, and taxable scholarships and fellowship grants. 

Additionally, you are required to file taxes if your unearned income was more than $1,100. Unearned income includes taxable interest, ordinary dividends, capital gain distributions, unemployment compensation, taxable social security benefits, pensions, annuities, and distributions of unearned income from a trust.   

Source: Internal Revenue Service (IRS) 

Q: Can my parents still claim me as a dependent?

A: Yes! Your parents can claim you as a dependent until you are 24 years old AS LONG AS they provide more than HALF of your living support AND you are a full-time college student. If your parents provide less than half of your support and/or if you are not a full-time student, you should file your taxes independently from them.

Source: Internal Revenue Service (IRS) 

Q: Can I file my own taxes as a dependent?

A: Yes! Even if you are a dependent, you may still file taxes if you had earned income in 2020. If you had a job where you were taxed, you may be entitled to a refund. All you have to do is note in your tax return that you will be claimed as a dependent with your parents. A tax preparer or tax preparing website will assist you with this. 

Source: Internal Revenue Service (IRS) 

Q: What is the American Opportunity Tax Credit?

A: If you/your parents make less than $80,000 a year, you may be entitled up to a $2,500 credit from the government. The credit is meant to help you pay for qualified education expenses. The main factors of eligibility are being enrolled at least half-time during the beginning of 2020, not having finished the first 4-years of higher education, and having no felony or drug conviction.

If the credit brings down the overall tax you owe to zero, you can have 40 percent of any remaining amount of credit (up to $1,000) refunded to you.

Source: Internal Revenue Service (IRS)

Q: What information do I need to file taxes?

A: The main things you will need to file your taxes are your social security number, your mailing address, a W-2 form(s) (provided by your employers), a 1098-T (provided by your school), and a 1098-E (provided by your school loan servicer). 

Source: Internal Revenue Service (IRS) 

Q: Can I file taxes if I am undocumented?

A: Yes! If you are undocumented, you are required to file taxes if you made more than $12,400 in 2020. 

Source: The Balance

Q: What if I don’t have a social security number?

A: If you do not have a social security number, but still are required to file taxes, you can use an Individual Taxpayer Identification Number (ITIN). The ITIN does not allow you to work legally in the U.S., but can be used when reporting taxes. To get an ITIN, you can apply for one through the IRS. 

Source: Internal Revenue Service and The Balance

Q: What if I don’t have a mailing address?

A: You can choose to use a P.O box for tax filing purposes. If you are experiencing homelessness, however, you can ask a shelter or service center if you may use their address on your records and they may allow it.

Source: Get It Back 

Q: Can I claim a device such as a laptop or a tablet as a qualifying educational expense?

A: Yes! If you bought a device in 2020 because it was required for school, then it qualifies as an education expense. However, if you are claiming the Lifetime Learning Credit, you may not deduct equipment purchased from the education institution. 

Source: Turbo Tax

 

All About CA DREAM Loans

All About CA DREAM Loans

Background

The creation of the California Dream Loan was first introduced by then-Senator Lara back in 2014. Then in 2018, Assemblymember Ian Calderon introduced AB1895 and it was signed by the California governor. AB1895 provided repayment programs based on someone’s income for the loan. The latest piece of legislation signed by Governor Newson was SB354 by Senator Maria Elena Durazo which expanded the Dream Loan program to graduate students. 

How to apply and know you if are eligible

Students are eligible if they are enrolled at a CSU or a UC where the loan is currently being provided and they are enrolled as an AB540 student. Students may also be eligible if they file the California act application with the financial aid office and show that they are in financial need. Students need to keep in mind that the loan is provided on a main campus basis so they have to make sure to talk to their campus because it is not administered by anyone else.

Important details about California Dream Loans 

  • The interest rate that you agree upon in your contract can not change, it is a fixed interest rate and the interest rates are the same as federal student loans.
  • Just like federal student loans, you have a six-month grace period before you have to pay it back.
  • There is an income-based payment program that schools have come up with. This is based on what you are making as someone who has entered their career and are you eligible to repay this program.

 To learn more about CA Dream Loans click the video below! 

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Public Service Loan Forgiveness: Snapshot of the Application Process

Public Service Loan Forgiveness: Snapshot of the Application Process

To qualify for Public Service Loan Forgiveness (PSLF), you must make 120 total monthly payments while:

  1. Enrolled in an Income-Driven Repayment Plan 
  2. Have Federal Direct Loans or have consolidated other federal student loans
  3. Working full-time for a government agency or certain types of nonprofit organizations

Before Graduating or Immediately Upon Graduation – check these eligibility requirements first and early on to plan for Public Service Loan Forgiveness:

  1. Check what kind of loan you have by logging in to www.StudentAid.gov.
  2. Confirm that you have a Federal Direct Loan that is not in default. This is the only federal loan that is eligible for PSLF. 
  3. If some of your federal student loans are not Direct Loans (FFEL and Perkins Loan), they need to be consolidated to qualify; this is likely your situation if you borrowed before 2011. Payments on FFEL or Perkins Loans made before you consolidate will not be counted. Depending on your circumstance there may be pros and cons to consolidating in order to apply for PSLF.

As You Start Working in Public Service – Document Your Employment Using the PSLF Application Form:

  1. Submit a PSLF application form every year or when you change employers. You’ll want to have documented every qualified employer where you worked while you made a payment towards PSLF. Especially if you have multiple public service employers.
  2. Make sure that your PSLF application form has all required fields completed. Incomplete forms or inconsistencies may affect your eligibility. If you do not meet a PSLF qualification, the response letter to your application will provide more information.
  3. Make sure you have all the information required: employer’s address, Employer Identification Number (EIN) which can be found on your Wage and Tax Statement (W-2), and consistent info with your previous application.

As You’re Working in Public Service – Submitting your forms using the PSLF Help Tool:

  1. Log in with your FSA ID. The tool will import your loan info automatically.
  2. The Tool will ask a series of questions to confirm you’re on the right track to loan forgiveness and that your employer qualifies for PSLF.
  3. Find out if your loans qualify and options available to you if they don’t.
  4. Get a signature from an “authorized official” at your employer, typically someone in your human resources office.
  5. Print and mail your completed form. Save and archive your documentation (PSLF application, response letters from FedLoan Servicing, and employment documents) in case there are any discrepancies.

After Working at Least 10 Years in Public Service – Applying for PSLF and Getting Your Loan Forgiven:

  1. Upon making your 120th payment you’re ready to apply for PSLF. You must still be working for a qualified employer when you submit your application.
  2. Gather your current employer information and any documentation used to prove previous employers qualified while you made payments towards PSLF.
  3. Complete and submit the PSLF application by using the PSLF Help Tool (see above), by mail, or fax. 
  4. If your PSLF application is approved, then all remaining balance including interest and outstanding principal will be forgiven. Any payments made after the required 120 will be refunded as well.

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Federal Loans vs. Private Loans

Federal Loans vs. Private Loans

What are the Differences Between Federal & Private Student Loans?

Federal student loans are provided by the government after a student or their family fills out a FAFSA. The conditions are mandated by law and include specific protections (such as fixed interest rates and income-driven repayment plans) not usually associated with private loans. Unlike federal loans, private loans are provided by private companies like banks or credit unions. Private loans have terms and conditions that are set by the lender. Private student loans are generally more expensive and offer fewer benefits and protections than federal student loans.

How Do I Know If I Have a Private or Federal Loan?

Federal student loan information can be found by going to www.StudentAid.gov. If you do not know the name of your lender or servicer, and you cannot find your loan information at StudentAid.gov, you most likely have a private loan. You can find information about your private loan by checking your credit report.

Any student loan information that shows up on your www.StudentAid.gov account are federal loans. It is common that borrowers have both Federal and private loans. If you have a loan that doesn’t show up on your www.StudentAid.gov account, it is important to check your credit report to find out who your private loan company is.

Are There Different Interest Rates With Federal and Private Loans?

Federal loans have fixed interest rates that are usually lower than private loans. Private student loans can have variable or fixed interest rates. The interest rate on private student loans can be higher or lower than the interest rate on federal loans.

Do Private Student Loans Have Repayment Plans?

Only federal student loans have mandated repayment plans by the government. If you have a private student loan, and are struggling to make your monthly payment, you should contact your loan servicer to inquire about any repayment plans they offer. 

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What You Need to Know About Income Driven Repayment (IDR) Plans

What You Need to Know About Income Driven Repayment (IDR) Plans

What Are Income-Driven Repayment Plans?

Income-Driven Repayment (IDR) can make monthly payments more affordable for borrowers with lower income. In an IDR Plan monthly payments are calculated as a percentage of ‘discretionary income’ based on income and family size. If your income increases while on an IDR plan, your payments can increase. Conversely, if you lose income perhaps due to losing your job, your monthly payment can be reduced to $0.00. After completion of an IDR Plan, any remaining debt may be forgiven. Below is a chart with how different IDR Plans monthly payments are calculated and an estimated timeline for the plan.

Different IDR Plans How is my monthly payment calculated?

*percentage of “discretionary” income*

How many years can I stay in the plan for?

*any remaining debt is forgiven after completing these timeframes*

Revised Pay as You Earn (REPAYE) 10% 20-25 years
Pay as You Earn (PAYE) 10% 20 years
“New” Income-Based Repayment (IBR) 10% 20 years
Income Based Repayment (IBR) 15% 25 years
Income Contingent Repayment (ICR) 20% 25 years

When Do I Sign Up For an Income-Driven Repayment (IDR) Plan?

After your 6-month grace period ends (when you leave your higher education program or graduate) you will automatically enter the 10-year Standard Repayment Plan. You can enroll in an IDR Plan at any time when you are paying off your student loans.

To remain in an IDR plan, you must recertify your income and family size with your servicer annually. If you don’t recertify by your specific deadline, your monthly payment will increase to the amount you would pay under the 10 year Standard Repayment Plan.

If you don’t recertify your income by the annual deadline any unpaid interest will be capitalized (added to the principal balance of your loans). This will increase the total cost of your loans over time because you will then pay interest on the increased loan principal balance.

Borrowers who fail to recertify can still reenter an IDR plan at any time. And, borrowers can recertify their income at any time if they need to adjust their payments due to loss of income or job.

What Happens If My Income Increases Under the Income-Driven Repayment (IDR) Plan?

If your income ever increases to the point that your calculated monthly payment amount would be more than the 10-year Standard Repayment Plan, you’ll remain on the IDR plan, but your payment will no longer be based on your income.

Instead, your required monthly payment will be the amount you would pay under the 10-year Standard Repayment Plan, based on the loan amount you owed when you first began repayment. Again IDR Plans are especially beneficial to borrowers who are lower-income or may have become unemployed. 

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