A Short Guide to the Different Student Loan Forgiveness Programs

A student loan is an excellent investment for your future, but can also be a considerable burden for the rest of your life if you have not thoroughly thought out your plans. Before you take out a loan or already have one, you should know that a student loan will not be discharged when you file for bankruptcy. It means that you will have to pay off your student loan no matter what. But, the good news is that you can get it discharged if you qualify for student loan forgiveness.

Student loan forgiveness is a program whereby enrolling you can get rid of your entire or part of your student loan. A company like: https://www.loanforgiveness.org/ can guide you through this process. But, in return, you will be expected to enter a particular career or enter into a specific field. Mostly, these are limited to loans approved by the federal government. Such loans can quickly reduce your debt of more than $100,000, but the low number of applications to these programs indicates that most people are unaware of such opportunities.

Student loan forgiveness is one of the best options to reduce their burden of loan debt if –

  • You want to pursue a career in public service and are worried about how you would be able to pay your debt with the low salary that you receive.
  • You already have a student loan and are currently working in a volunteer service job or a public service job.
  • You are working in an occupation that is in shortage in the country and is of national importance.

Requirements for qualifying for Student Loan Forgiveness

  • You should have paid 120 on-time payments towards your loans.
  • The payments must be under a qualifying plan.
  • They should work full-time at a qualifying organization.

Some Student Loan Forgiveness Programs

You can find many loan forgiveness programs made available to the professionals once they complete their studies and enter the workforce. Most of the time, the professional associations already have a list of such programs applying to a specific profession. Some of the places where you should be able to relevant information about such programs are provided below –

  • Teachers – The American Federation of Teachers keep a funding database where you can search for teacher grants, loan forgiveness programs, or classroom donation programs to reduce your debt.
  • Medical and Nursing Professionals – Typically a medical student has about $200,000 in student debt even before they enter the workforce. The Association of Medical Colleges offers many loan forgiveness that can be availed by medical professionals.
  • Legal Professionals – Many Lawyers earn their law degree with a burden of about $150,000. Thus, the American Bar Association provides many different strategies for loan forgiveness at the federal and state level.
  • Public Service or Volunteer Work – The Public Service Loan Forgiveness Program, created by the Congress in the year 2007, is among the best program there is currently for the students.

Before committing to a student loan, ensure that you understand the eligibility criteria along with its benefits. Once you have successfully picked a student loan forgiveness program, make all your payments according to the provided rules.

Real Estate Investments with a Self-Directed IRA Can Pay Off Handsomely

Real estate is a popular investment option for those who have a self-directed IRA as one of their retirement savings tools. In fact, using a self-directed IRA with a custodian such as Quest Trust Company is virtually the only way to use tax-advantaged retirement funds to invest directly in real estate, and to do so in exactly the way you choose.

There are many different ways to invest in real estate with a self-directed IRA, and the most appropriate type of real estate investment for a particular individual is going to depend on their investment goals and their account balance, as well as various other factors. Regardless of the type of real estate investment you choose, here are some ways that choice can pay off handsomely.

Income to Acquire Other Investments. Many real estate investors choose properties that generate a significant level of current income. Single family rental homes, multi-unit apartment buildings and commercial properties are common examples of income-generating real estate investments.

When you invest in income-generating properties within your self-directed IRA, you create a flow of cash that you can use to purchase additional investments within your account. This is significant because you’re limited in how much you can directly contribute to a self-directed IRA ($5,500 for the 2016 tax year, or $6,500 for individuals age 50 or over). Having additional cash flow generated by real estate within your account means that you’ll have a greater number of new investment options to choose from.

Income During Retirement. If you’ve already entered retirement and are now taking distributions from your account, an income-generating real estate investment can provide all or part of the funds for those distributions.

In fact, some investors are able to build the real estate investments within their self-directed IRAs to the extent that they’re able to finance their retirement living expenses solely based on the income they receive from those investments. And such a scenario would allow the account holder to receive that income without having to to sell any of those properties. In fact, those properties may continue to appreciate in value over time, potentially leading to significant long-term capital gains whenever the account holder chooses to sell.

A Retirement Primary Home or Vacation Home. Finally, another way that real estate investing with a self-directed IRA can pay off handsomely is by the account holder investing in property that they will actually use themselves during retirement. This might be single-family home or condominium that they’ll use as their primary residence. Or it could be a property that they’ll use as a vacation home or part-time residence during retirement. It could even be a piece of undeveloped property that the account holder will use to build a home upon.

If you choose to use your self-directed IRA to purchase real estate, it’s important to fully understand the tax-implications of doing so. For example, taking a distribution of the property will trigger a significant tax liability if your account is set up as a traditional self-directed IRA, while no such such liability will accrue if your self-directed IRA is set up as a Roth account.

Avoiding the Conflicts of Interest of 401(k)s with a Self-Directed IRA

401(k)s with a Self-Directed IRAIn recent weeks there has been new talk about introducing stronger investor protections and providing increased opportunities within the area of retirement savings. One of the biggest areas of concern has been a new focus on how individual investors fare in their employer-sponsored 401(k) plans.

Surprisingly, under current law there is no legal obligation for a 401(k) plan provider to put the interests of plan participants before their own. This type of duty is known as a “fiduciary” duty, and without this protection retirement savers may be fighting an uphill battle in trying to build their nest eggs.

Perhaps the biggest conflict is the limited choices that you are provided with a 401(k). For example, you might assume that the 401(k) provider selects the available investments based on their quality or suitability for the 401(k) plan participants. But in fact, in most cases, the fund company provides a fee to the 401(k) provider in order to be listed. And in many cases, the fund company can charge additional fees to the plan participants (often in the form of so-called “12b‑1” fees).

These types of fees, which relate to marketing and preferential treatment within the fund, do not benefit the 401(k) plan participants in any way, and essentially represent an extra charge that lowers their overall return. This is permitted under current law because 401(k) plan providers do not owe a legal “fiduciary” duty to the plan participants.

In contrast, a self-directed IRA custodian such as Quest Trust Company cannot market any specific investment funds or opportunities to the account holders. Self-directed IRA account owners make all the investment choices, and have the widest possible range of investment opportunities available to them. Rather than being limited to a handful of mutual fund choices (with the potentially inflated fees we discussed above), a self-directed IRA account holder can choose whatever fund or other investment asset is legally permitted under the IRS regulations.

You’re only given one choice when it comes to 401(k) plans – the one that your employer offers, or none at all.

Within the plan that your employer chooses to provide, you’re likely to note a significant limitation in your investment choices. For example, you may only have a single choice when it comes to a particular type of neutral fund or investment philosophy. And forget about being able to select individual stocks yourself; that won’t be available in an employer-provided 401(k).

A self-directed IRA is better because you have the maximum freedom in choosing where you want your retirement funds to be invested.

Finally, with a 401(k) plan, you are essentially locked into the choices and account custodian that your employer provides. There’s no incentive for your plan provider to offer the best service or even to offer a range of fee options, because they know you can’t take your 401(k) business elsewhere. The plan they provide is your only 401(k) option, and you generally can’t move your funds to a different retirement investment vehicle.

But when you do change jobs, you’ll certainly want to use that as an opportunity to roll any 401(k) account you have into a new self-directed IRA.

General FAQ

 What does Quest Trust Company, Inc. do?

Quest Trust Company, Inc. (www.QuestIRA.com) is a third party administrator of self-directed IRAs in Houston, Austin, and Dallas, Texas, as well as Mason, Michigan. Quest Trust Company, Inc. is the leading provider of self-directed retirement account administration services.  Quest Trust Company has been in business since 2003 with over $600MM in assets under management.  As a neutral party, Quest Trust Company does not offer any investments and therefore has no conflicts of interest with what our clients want to do with their IRAs.  Quest allows you to be in total control of your retirement wealth.

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Who is H. Quincy Long and why do I care?

H. Quincy Long is the President of Quest Trust Company and works in the Houston corporate office.  Quincy has been a licensed Texas attorney since 1991, specializing in real estate, and has been a fee attorney for American Title Company.  In 1990, Quincy received his Doctor of Jurisprudence from the University of Houston, and continued his education, receiving his Masters of Law in 1997.  He has sat on the board of directors of the Realty Investment Club of Houston (RICH), the second largest real estate club in the country, and maintains the title of Certified IRA Services Professional, CISP.  Quincy is also the author of numerous articles on self-directed IRAs and other real estate related topics, many of which can be found on the Quest Trust Company website, and in addition, Dyches Boddiford and George Yeiter, CPA, co-authored with Quincy to write the book “Real Estate Investment Using Self-Directed IRAs and Other Retirement Plans.

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Widely known for his enthusiasm, attention to detail and knowledge of the Self-Directed retirement industry, he is one of the most sought after key note speakers in the nation.  Quincy can often be spotted in his office reading and learning more to prepare for one his many, highly-attended lectures on topics including self-directed retirement plans, real estate, unrelated business income tax, land trusts, mortgage foreclosures, etc.  Quincy enjoys reading, hiking and spending time with family and friends in his free time.

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What is the difference between a “self-directed IRA” and a regular IRA?

There is no legal distinction between a “self-directed IRA” and any other IRA.  The difference is simply this:  Quest lets you take control of your retirement by letting you invest your IRA in what you know best.  There are 2 different sets of rules that govern what you can do with your IRA.  First, there is the Internal Revenue Code, which has surprisingly few restrictions.  Second, there is your account agreement with the custodian.  With most custodians you are restricted in the type of investments you can buy in your IRA.  Quest allows you the maximum amount of control and flexibility.  Almost anything that can be documented can be held in your Quest self-directed IRA.

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Which types of IRAs does Quest Trust Company offer?

Quest offers almost all types of retirement plans, including:

    • Traditional IRAs
    • Roth IRAs
    • SEP IRAs
    • SIMPLE IRAs
    • Individual 401(k)s, including the NEW Roth 401(k)
    • Coverdell Education Savings Accounts (formerly Education IRAs)
  • Health Savings Accounts (HSAs)

All of our plans are self-directed, and all of them can hold the same type of non-traditional assets, such as real estate.

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How much can I contribute to my IRA?

  • Roth and Traditional IRAs –   $5,500 for 2013 (kept the same for 2014) plus $1,000 catch-up if you are age 50 or over by the end of the year.
  • SEP IRAs – 25% of your wages (or up to 20% of your net earnings from self-employment) up to a maximum of $51,000 for 2013 and $52,000 for 2014.  Contributions can be made up to the employer’s tax filing deadline, including extensions (if you are self-employed, you are the employer).
  • SIMPLE IRAs – $12,000 salary deferral plus $2,500 catch-up if you are 50 or over for 2013 and 2014 plus up to 3% of your salary matched by your employer.
  • Profit Sharing/401(k)s – $17,500 in salary deferral for 2013 and 2014, plus catch-up deferral of $5,500 if you are age 50 or older by the end of the year plus 25% of your wages (or 20% of your net earnings from self-employment) up to a maximum of 51,000 ($56,500 including catch-up contributions) for 2013 ($52,000, or $57,500 including catch-up contributions for 2014).
  • Coverdell ESAs (formerly Education IRAs) – $2,000 per year until the child is age 18.
  • Health Savings Accounts (HSAs) – $3,250 for individual coverage in 2013 ($3,300 for 2014) and $6,450 for family coverage in 2013 ($6,550 for 2014) plus $1000 catch-up for 2013 and 2014 if you are over age 55.

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What kinds of investments can be made in an Quest Trust Company self-directed IRA?

You have the broadest possible choice of investments, including:

    • Real Estate, including debt-financed and foreign real estate
    • Deeds of Trust
    • Real Estate Options
    • Lease Options
    • Unsecured Notes
    • Oil and Gas Interests
    • Small, non-publicly traded corporate stock
    • Limited Liability Companies
    • Limited Partnerships
    • Factored Invoices
    • Discounted Commissions
    • Security Agreements and Notes
    • Tax Lien Certificates
    • Foreclosure Property
    • Joint Ventures
    • Race Horses
    • Publicly traded stocks and mutual funds
  • and a whole lot more…

It should be made clear that you are not taking a distribution to purchase these assets.  All assets are purchased within the IRA, and all profits stay in the IRA!

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As a real estate professional, how can knowledge about self-directed IRAs put money in my pocket now?

For those of you who are investors, you can make other people aware that they actually have more money to invest in real estate than they thought since they can use their IRAs to buy real estate.  In other words, your knowledge of self-directed IRAs can increase your pool of eligible buyers for your properties.  Also, you can help others transfer their retirement funds into a self-directed IRA, then you can borrow those funds to make your own investments – in other words, you can create your own private bank!  Finally, you can make your own retirement wealth grow with your knowledge and experience in real estate by buying and selling through your own self-directed IRA.

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Is it really legal to buy real estate in your IRA?

Yes, absolutely!  The Internal Revenue Code does not tell you what you can do with your IRA, only what you cannot do.  Besides restrictions on purchasing life insurance and most collectibles in your IRA, nearly everything else is fair game.  Unless your IRA is self-directed, however, your custodian may not allow investments in real estate.

Investor Awareness: Private Placements

A private placement is the sale of securities to a limited number of qualified private investors. While an IPO is the initial sale of shares to the general public, a typical private placement is offered only to institutional investors and accredited individuals and entities that meet certain eligibility requirements.

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For companies, private placements can provide an infusion of cash more quickly and less expensively than a public offering. Private placements are also generally not subject to public disclosure obligations. They typically allow companies to have a great deal of control over the process – the company can decide how much to sell, at what price, and to whom. However, those decisions do require a tremendous amount of due diligence and careful deliberation.

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Private placements are exempt from the registration requirements of the federal Securities Act of 1933 and public disclosure requirements as long as certain requirements are met. The sale of securities through private placements cannot involve any public offering, public solicitation, or advertising. In addition, private placements must comply with state laws and anti-fraud provisions of securities laws. Companies must disclose to potential investors all of the pertinent information needed to make a fully informed decision.

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Securities sold through private placement securities can take different forms. Typically, they involve the sale of either debt or equity.

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Investments in private placements carry a high degree of risk for various reasons. Securities sold through private placements are not publicly traded and, therefore, are less liquid. Additionally, investors may receive restricted stock that may be subject to holding period requirements. Companies seeking private placement investments tend to be in earlier stages of development and have not yet been fully tested in the public marketplace.

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Investing in private placements requires high risk tolerance, low liquidity concerns, and long-term commitments. Investors must be able to afford to lose their entire investment.

A company seeking a private placement issues a Private Placement Memorandum or PPM. The PPM details the company’s financial situation and business plan, as well as any other pertinent information about the company and the offering. Once investors decide to invest, they complete a subscription agreement.

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Due diligence begins with a background inquiry on the company and its management and an analysis of all the information presented by the company and its offer. The principal thrust of due diligence focuses on compensation, self-dealing, background of insiders, litigation history or potential, risks and accurate discussion of the nature of the business. An internet search can provide essential information. Do not depend on the accuracy of information supplied by the company or its agent, but engage in an independent investigation that is customized for each offering. Most offerings may have certain unique features that require additional due diligence. Ask for clarification on any information provided that you do not understand and request back up documents to support their claims. Remember that Ponzi schemes pay until they can’t so follow the money and make sure the income is income.

Why to Consider an End-of-the-Year Portfolio Review

You probably have a list of financial tasks that you’re looking to complete by the end of the year. Getting ready to file your taxes is likely the first thing on the list, followed by making the maximum contributions to your self-directed IRA, and perhaps rolling over your existing IRA with a traditional custodian to a self-directed IRA managed by a custodian such as Quest Trust Company.

Another task that should be part of your end of the year checklist is to conduct a portfolio review. Here are some reasons why a portfolio review can be so valuable.

Evaluate Your Past Investment Decisions

It’s important that you periodically evaluate the past investment decisions you make. Did your investment selection methodology from the past year yield the results you were anticipating? Were your investment decisions more volatile than you believed they’d be? Did your investments generate the level of income you hoped for? Unless you determine whether your prior decisions were good ones, it’s difficult to know whether you should continue on the same path or change course.

To Help With Your Planning for the Coming Year

Depending on your answers to the above questions, you may decide to make minor changes to your investment portfolio, or perhaps make some significant changes if they’re necessary. Or you might decide not to make any changes whatsoever. But it’s difficult to make a reasoned decision for any investment choices unless you first evaluate how your current portfolio is performing. By the same token, if there have been significant changes in your life (such as the birth of a child or getting married), then you may want to change your investment focus to reflect those changes.

Getting an Expert Opinion

When you an annual portfolio review, you can bring in outside assistance to help you evaluate your investment performance and chart a proper path forward. Sometimes getting an expert opinion, even if it’s just once per year, can prove extremely valuable.

Another Step Closer to Retirement

As you get older, your investment needs change. There are different approaches to retirement investment planning, but nearly everyone would agree that the investment needs of a 25 year old investor are going to be different from those of a 65 year old. If you don’t conduct an annual portfolio review it can be difficult to know whether your portfolio composition is appropriate for your age.

Review Retirement and Non-Retirement Accounts

Your end of the year portfolio review should include all of your retirement accounts (i.e., your IRAs and 401(k)s), as well as your taxable investment accounts. You may also wish to include holdings such as your savings accounts, checking accounts and any bank CDs, to make sure that your analysis incorporates an accurate picture of your cash holdings. When you evaluate your overall portfolio across all of your accounts you’ll be in a better position to make investment choices that can help you meet your goals.

Remember that reviewing your portfolio each year doesn’t necessarily mean that you have to select an entirely new set of investments. But conducting that review will help you decide on what changes you might want to make for the next year, or confirm that it’s best to stick with your current investments.

The Millionaire Mindset Class with DMI

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FAQs About Self-Directed IRAs

If you’re not entirely familiar with the concept of a “self-directed” IRA, then you might be unclear on what exactly that type of individual retirement account is, and the ways it can be a strong foundation of your retirement savings plan. Here are some of the most commonly asked questions (and answers) about self-directed IRAs.

Just What is a Self-Directed IRA?

From a legal point of view, a self-directed IRA is the same tax-advantaged retirement savings vehicle as the IRAs you likely see advertised by discount brokers and your local banks. The legal structures of standard and self-directed IRAs, as well as the tax and retirement implications, are identical.

How is a Self-Directed IRA Different from a Standard IRA?

What makes a self-directed IRA unique is the custodian that safeguards your account. The most widely used custodians for standard IRAs are discount brokerages and banks, but these custodians only allow you to invest in a subset of the permissible investment types that are actually authorized by law. In contrast, self-directed IRA custodians like Quest Trust Company allow individual investors to invest their account funds in every permissible investment class. For example, by law, individuals can use their IRAs to invest in alternative investments such as real estate, private equity and private debt instruments, foreign currencies and precious metals.

So Why Doesn’t My Discount Broker Let Me Use My IRA to Make “Alternative” Investments?

Quite simply, the answer is probably that they don’t want to have to charge you for the additional services that come along with those types of investments. Make no mistake about it, buying an investment property is a significantly more complicated process than buying a stocks or bonds. And continuing to maintain and manage that process is even more involved. All of these services require the time and efforts of qualified professionals. In order to maintain their market position as “low cost” service providers, traditional custodians simply don’t offer custodial services relating to these types of investments.

Can I Use My Self-Directed IRA to Buy Myself a Vacation Home?

The short answer is yes, but not without some significant legal restrictions that come along with ownership. This is because there are broad prohibitions on what is known as “self-dealing” within an IRA. Your self-directed IRA therefore cannot make any investment or conduct any business that provides you or your family with any current benefits. So while you can use your self-directed IRA to purchase real estate, you can’t use that real estate yourself, even if you’re willing to pay rent back into the IRA.

Note that if you’re interested in a vacation or other property that you can eventually use once you reach retirement age, you can buy the property now with your retirement account and simply rented out to third parties in order to generate income for the self-directed IRA. Once you reach retirement age you can simply take a distribution of that rental property and use it however you see fit.

If you have further questions about the self-directed IRA structure, feel free to contact Quest Trust Company.

Quest Trust Company helps change people’s lives and financial future through self-directed IRA investment education. Quest Trust Company helps people invest in what they know best and build their financial future on their own terms.

“Savers Credit” basics for contributions to a self-directed IRA

In addition to all the other benefits of a self-directed IRA, did you know that you may also be eligible to receive a further tax benefit for contributions to that you make to your account? The Retirement Savings Contribution Credit (sometimes also known as the “Savers Credit”) can reduce an individual’s tax bill by up to $1,000 if their income is below certain thresholds (or up to $2,000 for taxpayers filing joint tax returns). The Savers Credit was created as a way to provide a direct financial incentive for lower income workers to save for retirement.

Below is the key information that you’ll need to be able to determine whether or not you’re eligible to apply the Savers Credit to your tax return for contributions you make to your self-directed IRA.

Income Threshold. In order to be eligible to claim any portion of the Savers Credit, a single person must have an adjusted gross income of less than $28,750 for 2012. An individual filing as a head of household must have an adjusted gross income of less than $43,125. Finally, a person with a tax filing status of married filing jointly must have an adjusted gross income of less than $57,500.

For the 2013 tax year, these amounts will rise to $29,500 for those with a single filer tax status, $44,250 for a head of household, and $59,000 for those with a tax filing status of married filing jointly.

Amount of Credit. For those who are eligible, the amount of the Savers Credit will be 10%, 20% or 50% of the amount of the contribution that an eligible makes to their self-directed IRA (or to any eligible employer-sponsored retirement plan). The exact amount of the credit will depend on the tax filer’s adjusted gross income. IRS Form 8880 contains a chart to help you make the calculation.

Personal Status. Furthermore, in order to claim the Savers Credit, an individual must be at least age 18, not a student on a full-time basis, and not be claimed as a dependent on any other person’s tax return.

Nature of the Credit. The Savers Credit will lower an individual’s overall tax bill on a dollar for dollar basis, but any unused portions of the Saver’s Credit will not increase an individual’s refund.

Contributions Net of Distributions. When you evaluate how much your eligible retirement contributions were for the year, you must first subtract whatever distributions you received from your account within the two-year period before the year that you’re claiming the credit and including the filing year. There are certain types of distributions that are exempted from this general rule.

Setting up and making regular contributions to a self-directed IRA can be a great way to build wealth for your retirement years. Depending on your income you may be able to save yourself even more money by claiming the Savers Credit on your tax return.

Quest Trust Company helps change people’s lives and financial future through self-directed IRA investment education. Quest Trust Company helps people invest in what they know best and build their financial future on their own terms.