FPQP Education Planning 2

Question 1

When calculating Expected Family Contribution (EFC) under the federal methodology, which of the following is treated most favorably (lowest impact on aid eligibility)?

Accepted Answer

Assets in a 529 plan owned by the parent

Answer

529 plans owned by parents are assessed at a maximum rate of 5.64% of assets, while student assets are assessed at 20%, making parent-owned 529s more favorable for aid purposes.

Question 2

The Section 529 plan contribution limit is based on:

Accepted Answer

Individual state limits, often based on projected education costs

Answer

529 plan aggregate contribution limits are set by individual states and are based on the projected cost of education, typically ranging from $235,000 to over $500,000.

Question 3

A student loan interest deduction allows taxpayers to deduct up to how much in qualified student loan interest per year?

Accepted Answer

$2,500

Answer

Taxpayers may deduct up to $2,500 in student loan interest per year, subject to income phase-out limits.

Question 4

Which of the following best describes a Uniform Transfers to Minors Act (UTMA) account used for education funding?

Accepted Answer

The minor gains full control of assets at the age of majority

Answer

UTMA accounts are irrevocable gifts; the minor gains full legal control over the assets at the age of majority (18 or 21 depending on the state).

Question 5

Which of the following is an advantage of a prepaid tuition plan over a standard 529 savings plan?

Accepted Answer

Protection against tuition inflation at participating schools

Answer

Prepaid tuition plans lock in today's tuition rates at participating institutions, providing a hedge against future tuition inflation.

FPQP - Financial Paraplanner Qualified Professional Practice Test

FPQP - Financial Paraplanner Qualified Professional Practice Test

FPQP Education Planning 2