College Planning Experts

“HOW THE STIMULUS ACT AFFECTS YOUR COLLEGE SAVINGS”

By Joe Hurley, founder, Savingforcollege.com

The $787 billion American Recovery and Reinvestment Act of 2009, signed by President Obama, could have an impact on how you build and spend your 529 college savings account. One change made by the Act: The list of eligible 529 expenses is expanded to include purchases of computer technology and equipment, along with Internet access for students and their families.

However, this expansion applies only to the years 2009 and 2010; starting again in 2011, computers etc. do not qualify unless required by the educational institution as a condition of enrollment or attendance.

For students attending post-secondary school in 2009 and 2010, the Hope Scholarship credit is beefed up under the Act. The new temporary version, called the American Opportunity Tax Credit, is available to more families than was the old Hope credit. It can be used for the third and fourth years of college in addition to the first two years; course materials are included as an eligible expense; and the credit phases out at a higher range ($160-180,000 for joint filers and $80-90,000 for all others). Futhermore, the maximum annual credit amount increases from $1,800 in 2008 to $2,500 for this year and next (100% of the first $2,000 of eligible expenses plus 25% of the next $2,000 of eligible expenses); it can be applied against the alternative minimum tax; and it is up to 40% refundable for students not subject to the kiddie tax.

Families with a choice between the American Opportunity/Hope credit, the Lifetime Learning credit, and the above-the-line tuition deduction will almost always opt for the American Opportunity/Hope credit.

Under the anti-double-dipping rules, families will have less opportunity to take tax-free withdrawals from their 529 plans as compared with the old Hope credit because the new credit will consume more of their qualified expenses ($4,000 versus $2,000). However, they will have greater opportunity to take tax-free withdrawals from their 529 plans as compared with the Lifetime Learning credit, which uses up $10,000 in tuition costs to generate a maximum $2,000 credit.

Finally, the Act provides an incentive for your college freshman to move off campus and purchase a home by November 30, 2009. First-time homebuyers receive a 10% tax credit on the purchase price of the home, up to a maximum $8,000 credit. The tax credit must be repaid if the buyer moves away in less than three years, so beware if your child later wants to transfer schools. Housing costs qualify for tax-free 529 treatment, although the student must be enrolled at least half-time, and the eligible amount for an off- campus student is capped each year to the amount reported by the school in its "cost of attendance" summary.

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UC Campuses Want the Truth

UC wants the truth on student applications

The university uses random checks to make sure that grades, honors and extracurricular activities are properly reported.

Reporting from Concord — The gray-and-green warehouse in suburban Concord seems an unlikely headquarters for a statewide detective operation, and the fact checkers at work there insist they are not mercilessly probing the lives of California's teenagers.

Still, there is an element of hard-boiled sleuthing in the University of California's unusual attempt to ensure that its 98,000 freshman applicants tell the truth about themselves and their extracurricular activities. The stakes are high; UC enrollments may be canceled if students are found to be evasive or lying.

Each year, a small number of UC applicants — fewer than 1% — are caught fibbing about such claims as performing a lead role in a school play, volunteering as a tutor for poor children or starring on the soccer field.

But UC officials say there is a broader purpose beyond the relatively few "gotchas": to scare everyone else straight.

"We take the admissions process very seriously and we want to uphold the integrity of the whole process," explained Han Mi Yoon-Wu, a coordinator in UC's central admissions operations.

In an era when tough competition for college entrance may lead some insecure or conniving applicants to hype, or invent, parts of their records, experts say many colleges and universities do some informal checking on students' extracurricular claims, especially if something seems fishy. But the UC effort appears to be the only formal, systematic program in the nation, they say.

For many years, UC has checked the final high school grade transcript of each admitted student in the summer before enrollment. Failing grades in the last semester of high school can get a student's admission revoked, as can lies about self-reported grades in previous terms.

Beginning in 2001, however, UC expanded its consideration of applicants' personal accomplishments, alongside their grades and test scores, and soon stepped further into its truth squad effort. Broadening the area for investigation to students' extracurricular activities, it commissioned the Educational Testing Service to cull a small but statistically significant random sample of applications each January and February, before entrance decisions are made.

Those selected are asked for proof of just one verifiable contention, chosen on a rotating basis from among eight categories of information on the application. It could be a claim that the student was a football quarterback, worked 15 hours a week at McDonald's or volunteered often for a food bank.

Clippings from a school newspaper, a copy of a theater program, pay stubs or letters from a coach or counselor quickly resolve nearly all cases. Sometimes, anxious applicants send in performance videos, artwork, poetry or a sports plaque to bolster their cases.

Of the 1,000 or so applicants checked this way annually in recent years, no more than 10 or 15 send in insufficient evidence or, after several volleys of mail, e-mail and phone calls, stop responding or don't take advantage of the appeals process. And of those, only a couple each year are believed to be telling outright lies, said Mary Jacobson, a program administrator at the testing service's Concord office.

UC and testing service officials agreed to allow a Times reporter a rare visit to the facility, which is set among strip malls and new housing developments in this East Bay suburb, and to review some cases, with the proviso that applicants' names and schools not be disclosed. They would not allow photos to be taken. Yet any hope of finding an FBI-like atmosphere was quickly dashed; the office resembled a low-key accounting firm during tax season.

A soft-spoken woman, a mother who remembers what it's like for a child to apply to college, Jacobson says she and her staff of three verifiers do not consider themselves grand inquisitors. Real detectives "start with the premise that there was a crime," she said. "Our assumption is that it was the opposite, that [applicants] will be able to verify what we ask them to verify. And our experience is overwhelmingly that they are able to." She pointed to file boxes containing voluminous correspondence from applicants.

Jacobson said most applicants are truthful but some may exaggerate things because "they're kids." She advised students "to be thorough and honest and put your best foot forward." After all, she said, "it's just not a happy thing if you have to cancel their university applications."

For example, a student last year was asked to prove that she was a volunteer coach for a soccer team of younger girls. She responded that she could not find the soccer officials who could confirm the claim. So UC officials wrote again, suggesting that a letter from a team member's parent would do, as would some printed material from the league. After no further response, the application was canceled and the student was never heard from again.

In another recent case, a student was asked to verify her claim of a lead role in a school play. She wrote back that the drama teacher had retired and wasn't reachable and that she didn't have a copy of the playbill. UC gave her a second chance, as its rules allow, asking her to prove another item on her application, this one about volunteer work at an elementary school. What about a letter from a teacher there, the investigator suggested? The young woman did not respond and her application was discarded.

This year, an applicant sent in a video of a dance performance to verify her arts activities, but Educational Testing Service staff could not tell whether she was among the dancers and are awaiting a confirmation letter, preferably on school letterhead.

Other cases had happy endings. A young man verified that he was a cashier on an Army base by sending in a pay stub. Another proved that he took a French immersion class in Toulouse with a letter from an instructor, written in French and translated by a friend of Jacobson. And several UC letters to one student were returned unopened to Concord before a high school counselor told researchers that his family was temporarily homeless and vouched for his accomplishments.

In the program's first few years, many students ignored the letters, but the response rate has improved, Yoon-Wu said. "At first, students didn't know they had to take this seriously, but word has gotten out that UC does and you will be canceled if you don't respond," she said. She pointed out that the final section of the UC application reminds students that they face such consequences if any information is found "to be incomplete or inaccurate."

UC's truth-in-application program and the informal efforts at other schools have been set up in response to concerns that a small share of high school seniors may agonize so much about their chances of getting into college that they do something foolish, said David Hawkins, public policy and research director at the National Assn. for College Admission Counseling in Arlington, Va.

The pressure that students face to show outstanding achievement has "led colleges to recalibrate their radar" looking for fraud, Hawkins said. Some schools also have begun to watch for Internet plagiarism in applicants' essays, he said.

High school counselors say they urge students to tell the truth for its own sake and because applications and financial aid forms may, in effect, be audited.

Still, they say the popularity of online applications makes it hard for them to catch the few students who fib.

"Kids being kids, I'm sure that some kids will try to pad things," said Judy Campbell, a college counselor at Hollywood High School.

And the temptation to exaggerate extracurricular and job responsibilities may be especially strong for students who can't brag about academic triumphs, she added.

"If their grades are not so hot," Campbell said, "they may say, 'I was so busy doing all the other stuff and that's why my grades suffered.' "