Steps to Paying For Your Own Education

These are the steps Lisa needs to follow to ensure her she can afford to pay for her own education:

1. Defining the Goal

Lisa wants to continue working while she goes to school part-time. There is an accredited university in her town with a great program she plans to apply to this spring so she can start in the fall. She thinks it will take 3 years to complete the degree and has calculated the costs for the entire program.

2. Finding Resources

Lisa talked to her employer and found out they will give her $5,000 per year to use towards education. During the application process, Lisa also completes a FAFSA form to see if she qualifies for financial aid to help with the cost. Once Lisa starts the program, she can also get a Lifetime Learning Tax Credit when she files her tax return of $2,000 per year.

3. Covering the Gap

Even with all the education benefits, Lisa has lined up, it only covers 50% of her education costs. Lisa’s FAFSA application confirmed she was eligible for a federal unsubsidized student loan. Because this option had a lower interest rate than a private student loan, she decided to use it to cover the remaining education cost.

Resources if You’re Paying For Your Own Education 

Lifetime Learning Tax Credit:

Similar to the American Opportunity Credit (AOC), the lifetime learning credit (LLC) is a tax credit for education. This credit cannot be taken in conjunction with the AOC (it’s either/or), but what usually happens is people will take the AOC credit for 4 years, and then switch to the LLC. There isn’t a limit on how many times you can get an LLC credit. However, the stipulations are similar in that you have to be enrolled in a higher education program and can’t have too high of an income.

Employer Tuition Reimbursement:

Some employers will offer a tuition reimbursement benefit for their employees. Typically, the employee will pay upfront for their courses. Then, after the class is complete, the employer will reimburse them based on their graded performance. Usually, this benefit isn’t unlimited and may have a semester or annual cap on what you can use. Companies are incentives to invest in talent, so offering education assistance can be a win-win. Additionally, up to $5,250 of the reimbursement can be excluded from your taxable income.

College Planning in Summary

College planning affects everyone, regardless of your income, savings, or abilities… and there is no one size fits all solution. Education planning looks different depending on your life stage, goals, and financial situation.

• Starting early produces the best results when it comes to savings.
• Being resourceful produces the best opportunities when it comes to financial aid.
• Being diligent produces the best potential when it comes to achieving your goals.

The key is defining what your goal is and then mapping a path to achieve it.