Using bond proceeds for education waives taxes

Can the proceeds be placed against room and board when they are living away from home while attending college, in addition to the tuition? – B.B., via e-mail

Dear B.B.: If the money is spent for educational expenses – and room and board are considered educational expenses – then the tax on those bonds will be waived, assuming you meet the other standards that are in place at the time the bonds are cashed.

Dear Bruce: I have excellent credit. I was surprised to receive a notice a few months ago from a collection agency. It stated that I owe almost $3,600 for a $2,100 school loan. I called and was informed this loan was from February 1994 and that the reason I was not notified sooner was because of an “internal error.” I had consolidated all of my student loans years ago after graduating. This information does not show up on my credit report.

What are my options? Is there a statute of limitations on a school loan? If I have to pay, do I owe all of the extra money for the interest and penalties? I honestly do not believe that I owe this money, as I didn’t take many classes at this university. – M.I., via e-mail

Dear M.I.: You pose an interesting question that has to be divided into a few parts. The first is did you actually owe the $2,100? Your last line is a bit weak when you say you didn’t take many classes. It wouldn’t take many classes to run a bill up to $2,100. As to the $3,600, that I think you could take issue with since they say an internal error prevented them from acknowledging this obligation until now.

You could very easily take the position that you would have paid this amount had it been brought to your attention. Since they neglected to do so, the interest is on them.

Realistically, the $2,100 is your obligation. Whether that can be negotiated at this point is another matter. I don’t believe that under these circumstances they are entitled to the interest and any penalties they’ve assessed.

Dear Bruce: I worked as a bartender through college. I got my degree but found that I could make more money bartending than getting a job in my chosen profession. Since most of my income has been coming “under the table,” my tax return shows very little income.

Now the problem: I would like to buy a house but I cannot prove what I actually make. Therefore no one will loan me the money. Is there anything I can do? – M.S. Exton, Pa.

Dear M.S.: Welcome to the very hard facts of life. By taking a look at either your pay stubs or your income tax, this is how the people who loan you money make sure that you have a way to pay them back. The fact is that no one is going to loan you money until such time that you declare enough income to show that you are a solid citizen.

Dear Bruce: I’m a fairly recent widow at 59. I was not employed during the marriage. I got myself involved on two boards of significant entities and had a ball, but then my beloved died. Last summer, I had a temp job making $8,300. I will continue to seek employment, but here’s the thing: I have no credit card debt and fairly decent assets. My $160,000 home is paid for. I have $100,000 in other real estate and savings, plus $190,000 sitting in cash that I need to invest for income.

I need to get my arms around the safest and most intelligent thing to protect my money and have it grow. Where should I go to accomplish this? – Katie, via e-mail

Dear Katie: This is a common conundrum that we deal with in this column. You are looking for safety and you want growth, and right now those two are very difficult to accomplish. While interest rates are creeping up, bonds are looking good. If you think back a few years, that’s hard to believe.

It would seem to me that you might want to invest in government bonds and at the same time get yourself an education. A bit of risk would be the intelligent thing to undertake, but you don’t do that until you understand the marketplace. That will take a year or so of diligent study, but it is certainly worth the effort. Good luck with your new life.

Bruce Williams is a national radio talk show host and syndicated columnist.