College Student Tax Benefits

Part of the tuition paid for college may provide a credit on your annual federal tax return. You can only claim one of the credits on your return and the requirements for each vary. However, both have set income guidelines regarding who will qualify for each.

1. Hope Scholarship Credit – This credit can only be claimed for two years for a student enrolled in college on at least a half-time basis. It provides a credit of up to $1,650 to cover the cost of tuition and fees.

2. Lifetime Learning Credit – A maximum of $2,000 (20 percent of tuition and fees) may be claimed for this credit for all family members attending college Tuition and fees can be claimed for any student regardless of the number of hours attending. In addition, students can take this deduction for multiple years.

Graduate Fellowships

A unique way to pay for a college education that is only available to graduate students is a fellowship. The amounts awarded vary based on the type of fellowship and sponsor, but generally these will cover the costs for tuition and fees as well as provide a monthly stipend. Some are multi-year and may also require that the student not be employed while in school so they can concentrate on their studies. If the funds provided are not sufficient to cover all educational expenses, many graduate fellowships do allow you to receive other financial aid as well.

Types Of Federal Financial Aid

Chase Tip: Another form of student financial aid is not in the form of a loan or scholarship. It's called Work Study. Some students may qualify for work study jobs at their college or university. These are part-time positions in the form of student financial aid funded through federal money to assist students with college expenses.

Paying For College With A Credit Card

Chase Tip: In addition, managing credit is a good lesson for any college student. If you choose this option to pay your education expenses, do not charge more than you can afford to pay off. Significant credit card debt or failure to make the monthly minimum payment can create a financial strain that makes it difficult to stay in school or you could end up ruining your credit history.

Graduate Fellowships

Chase Tip: If you don't participate in a graduate fellowship, you can still get advanced degree financing to help pay for school. The process of applying is the same as it would be for an undergraduate loan. If applying for a federal loan, you would fill out the FAFSA form annually. The questions will differ slightly based on the fact that you are seeking advanced degree financing. Typically, people in graduate school are independent and request loans on their own, instead of with their parents.

Scholarships

First time college students don’t always realize that a number of organizations offer scholarships for qualifying students. While many of these awards are need based, others may be available for someone who shows talent in a certain area or has an interest in a specific field of study. A few examples of some of the scholarships include:

1. athletics;

2. academics;

3. science degree seeking; and,

4. nationality.

To find information on scholarships, you can visit the financial aid office at your college or university. In addition, you may find information on various awards by doing a search on the Internet.

Paying For College With A Credit Card

One option to pay for college tuition is to use your credit card. This isn’t a highly recommended option, especially if you don’t plan to pay off the debt quickly. Many credit card companies charge high interest rates and all expect payments to be made on the balance within 30 days. On the other hand, if you pay your credit card balances off quickly, there may be some other advantages you can get from this especially if you have a credit card that provides a cash back bonus, airline miles, or other incentive for you.

Part-Time Employment

Many students want to complete their college education without piling up a mountain of debt. One way to do this is to seek part-time employment to help with the expenses. Depending on the cost of tuition and other educational expenses, a student may need to acquire more than one part-time job and find summer employment as well. Even with employment, it may be possible that additional financial assistance is needed to help with the total educational costs. If this is the case, applying for financial aid may help.

Graduate Assistantship

For graduate students who attend college full-time, a graduate assistantship may help to defray the overall educational costs. Many students find this a good way to complement their college experience because these positions often allow the student to work with their professors doing research, in a teaching role, or other administrative type function. While the benefits offered vary by institution, typically students receive a waiver of some or all of the tuition and a monthly stipend.

Employee Tuition Waivers

Very few people seem to know that employees of colleges and universities often receive partial or full tuition waivers for them and their dependents to attend the college. Some institutions even participate in a network that allows the employee or dependents to attend another college and receive the same tuition benefits. If you are not sure of a way to pay the cost of completing an undergraduate or graduate degree, you may want to consider finding employment in higher education.

Pre-Paying For College

To keep up with the rising cost of a college education, many families are turning to prepaid tuition plans. This allows them to invest money now to cover the future cost of a higher education degree. Essentially, the plan allows a parent to lock in the future cost of the education years before a student is ready to attend. In many cases, state governments may manage these plans directly although many educational institutions may offer a plan directly. You may qualify for a tax benefit for you so check with your accountant regarding rules in your state.

Types Of Federal Financial Aid

College isn’t just for the wealthy or those with a large savings account. There are actually many options available to help you pay for a college education depending on your income and a variety of other factors. The lower your income, the more aid you may qualify to receive. In addition, the type of degree and cost of attendance at your college of choice impact the amount of your federal financial aid award. Some of the aid you may qualify for may not require any repayment. The actually categories of federal financial aid include:

1. Grants – This is essentially free money available to financially needy students. There is no requirement to pay back these funds unless you drop out of school during the term.

2. Student Loans – There are several types of federal student loans. In most cases, all funds must be repaid at some point. The interest rate paid on student loans varies depending on the type awarded.

Your Income And Assets

If you decide to pay for college by relying on financial aid, know the process and requirements to help you qualify. Your financial aid award is determined by reviewing a number of factors including your income and assets. If you are a dependent student, your parent’s income and assets may also be considered. In general, a financially needy student who qualifies for grants and low-interest loans has very little income or assets to report when applying for financial aid. On the other hand, if you or your family is fairly well-off, don’t expect to receive much in the way of federal financial aid. Be honest when reporting your income and assets on the application. Inaccurate information is typically caught during the process and could jeopardize any other financial aid you may qualify to receive.

Your College Savings (Tax Sheltered College Savings Accounts)

All financial analysts pretty much agree that the best way to pay for college expenses is to start saving very early. College is expensive and the cost rises annually. Planning early and saving money in a tax sheltered college savings account can increase the options regarding school choice. Without savings, it may be better to start at a less expensive option like a community college. Also consider what your college savings can buy. If you can’t afford the tuition at an Ivy League school, look into a good state school. Some examples of savings plans that can be used to help pay for a college education include:

1. Section 529 Education Savings Plans – These are available in every state and in most cases qualify you to receive special tax benefits.

2. Coverdell Education Savings Accounts – This account is established in the name of the minor who will use the funds later to pay for college. Contributions may provide tax benefits but can only be added until the child is 18 years old.