Making the decision to go back to school as an adult is a difficult one. Whether you are pursuing graduate studies or getting an undergraduate degree later in life, school can help you get a better job with a higher salary. However, getting the degree involves a significant amount of both money and time. Luckily, you have several options when it comes to financing your education, from grants and loans to scholarships. Below are some helpful guidelines about getting the best financial aid possible if you choose to go back to school.
Investigate employer reimbursement policies.
You should always check with your current employer about your options for tuition reimbursement. Some companies will pay part, if not all, of your tuition depending on the course of study you’ve chosen. Before accepting this assistance, however, you should read the fine print about whether participation in the program requires your working a set number of years for the company after graduation, and whether there are stipulations on courses of study. The other drawback of this approach is that you’ll have to continue working, so only part-time study is feasible. However, if the company offers enough assistance, this deal could be worth the commitment.
Employer reimbursement programs also have tax benefits. The first $5,250 of employer educational assistance is not taxed. You will have to pay taxes on any costs beyond that amount.
Review your personal assets.
While no one wants to spend all of their savings on education, assets can help cover some costs to reduce overall debt. In general, you should avoid tapping into retirement funds because of the tax implications and the blow to your future nest egg. However, selling some stocks or other assets can yield some quick cash for covering at least part of the expenses involved.
Learn about the applicable tax deductions and credits.
The federal government understands that going back to school as an adult is difficult and tries to ease the process with a number of different tax breaks. The American Opportunity credit, for example, offers $2,500 to people in their first four years of undergraduate education who are enrolled half time or more and who have a modified adjusted gross income below $80,000. Partial credits are available for people who make more.
Another important tax break is the Lifetime Learning credit, which is worth up to $2,000 for covering any higher education courses. People can claim this credit if their modified adjusted gross income is $55,000 or lower. Unfortunately, the IRS allows people to claim only this credit or the American Opportunity credit in a single year.
The other tax implication to understand is the ability to write off student loan interest. Each year, you can deduct up to $2,500 of the interest you pay on student loans, provided that your modified adjusted gross income is below $65,000. Partial deductions are available for people who earn more money than that.
Get familiar with federal aid options.
The federal government also helps students in ways beyond tax credits and deductions. The path to federal student aid starts with the Free Application for Federal Student Aid (FAFSA), which calculates your expected family contribution. This number represents how much money a student is realistically expected to contribute toward their education. The gap between that and the price of attendance may be partially or wholly met with one or more types of federal aid.
The main types of federal aid come in the form of Stafford, Perkins, and PLUS Loans. For undergraduates, Stafford Loans may or may not be subsidized, meaning that the government pays any interest that accrues while you’re in school and during grace periods. Subsidies are based on need. All Perkins Loans are subsidized.
Graduate students can receive unsubsidized loans. Stafford and Perkins Loans have limits, but Grad PLUS Loans allow for borrowing up to the full cost of attendance.
Undergraduate students with exceptional financial need may receive Pell Grants or the Supplemental Educational Opportunity Grant. Other forms of aid include the federal work-study program, which provides subsidies for jobs for graduate and undergraduate students; and military aid for veterans and their family members.
Talk to financial aid officers.
Beyond federal student aid, institutions tend to offer their own need-based and merit-based aid. Talking to a financial aid officer can help you get a handle on what kind of financial aid you can expect from a school. When dealing with financial aid, it’s important to meet all deadlines, since funds are often distributed on a first-come, first-served based. In addition, meeting with a financial aid officer can give you an opportunity to explain any extenuating circumstances. For example, the FAFSA is based on your prior-year earnings, but this will not accurately reflect your current income if you are quitting your job to return to school.
Financial aid officers can also offer great advice about looking for outside scholarships. These individuals know where to look and potentially know of some institution-specific scholarships. In addition, officers can provide advice about meeting the remaining gap between the aid you’ve received and the full cost of attendance, such as opportunities for private loans. Because private loans have higher rates and less favorable repayment terms than federal loans, they should be a last resort.