Paying for College: Where to Get Money for Your Education

Paying For College: Where to Get Money for Your Education

August 13, 2012
Originally published on USAA.com

With high tuition and the tough job market, you may wonder if getting a college degree is still worth the cost. It is, according to recent research.

A U.S. Census Bureau study released in September 2011 shows your education level affects your paycheck: If you work full time and year-round, a bachelor's degree can help you earn between $681,000 and $1.2 million more than a high school diploma.
To help find the cash to pay for an education in today's economy, here are five methods and their pros and cons.

1. Find Free Money
Whether you're on your own or living under your parents' roof, you could benefit from financial aid.
To start the process, fill out and submit the Free Application for Federal Student Aid. Colleges and universities use the FAFSA as the basis for awarding federal student aid. Some also use it to determine your nonfederal aid, which can include state-level grants and scholarships.
In addition to academic-related awards, look for scholarship offerings from associations, colleges, religious organizations and foundations that target your demographic or affiliations. Check out Fastweb to see what's available.

PROS

  • You get a portion of your college costs paid for.
  • You can add any scholarship recognition to your resume.

CONS

  • The FAFSA paperwork can seem daunting.
  • Finding and applying for grants can be tricky.

2. Look for Loans
Although starting your career with student debt isn't ideal, student loans may need to be part of your college financing plan. One of your best loan deals is a federal Direct Loan, which can either be subsidized or unsubsidized, depending on your financial need. With a subsidized loan, the government pays the interest while you're in college.
If you don't qualify based on your financial need or a federal loan isn't enough to cover the tab, you may consider private loans to fill the gaps. Generally, private lenders offer student loans at higher rates.
PROS

  • You can deduct up to $2,500 in student loan interest. The IRS Publication 970 offers details on these tax benefits for education.
  • A variety of private student loans are available through various lenders.

CONS

  • You begin your career with debt, since you have to pay back most loans, usually with interest.
  • Graduate and professional students will pay more for federal loans starting July 1, 2012. Currently, the government pays interest on the loans for graduate and professional students up to $23,000 per year while they are in school.

Confused about Financial Aid?  A New Tool Explains The Costs of College

3. Serve Your Country
Military service can make your education goals a reality. The Armed Forces tuition assistance program offers military members up to $4,500 annually for tuition and fees.
Another military option is the Post-9/11 GI Bill .  Depending on length of service, the bill pays 40% to 100% of tuition and fees at an in-state public college or university, or up to $17,500 at a private or foreign school. The Montgomery GI Bill requires service members to enroll in the program and pay $100 per month for a year ($1,200) in order to receive a monthly education benefit.
You can prepare for military service and pay for college at the same time through ROTC programs. Some college students get their entire tuition tab picked up through ROTC and have an opportunity to serve in the Army, Navy, Air Force or Marine Corps after they graduate.
PROS

  • With the tuition assistance program, most of your tuition and fees are covered.
  • In certain situations, the new GI Bill allows transfer of benefits to spouses and children.
  • GI Bill benefits are tax-free.

CONS

  • Your studies may be interrupted by required military relocations or deployments, if you choose the Tuition Assistance Program.
  • The Post 9/11 Bill requires specific length of service to qualify for transferability of benefits to a spouse or child.
  • Tuition benefits can expire.

4. Get Help at Work
If you're employed, look into whether your company offers a tuition-assistance program.  Some companies require that your coursework relate to your job.
PROS

  • A degree paid for, all or in part, by your employer.
  • The possibility of a boost in pay with your new credentials.

CONS

  • Some companies require a minimum grade-point average and won't pay education costs upfront. If you're laid off, you may end up paying some of the tab.
  • Some employers require you to remain on staff for a certain period of time after you finish your schooling.

5. Turn to Family and Friends
Are you comfortable asking for help with tuition or accepting monetary help from generous family members or friends? Make sure any benefactors know about qualified transfers which allow individuals to pay an unlimited amount of tuition directly to a qualified institution of higher learning on your behalf without being subject to the gift tax. 
PROS

  • Knowing someone is in your corner can help motivate you.
  • Your college costs are reduced and your benefactor may see tax benefits.

CONS

  • Sometimes such gifts can come with strings attached.
  • It can be hard to know whether you can depend on regular tuition payments from this source.


Paying for College (College Board)
Student Guide to Financial Aid
Planning for College Doesn’t Have to be a Pain in the FAFSA
Free Application for Federal Student Aid
Post-9/11 GI Bill and Other Programs

 

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