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Step 3

Step 3: Planning to Meet College Costs and
Alternatives for Financing

There are many ways to prepare to finance a college education, but not all ways are appropriate for all individuals or families. The key is finding the strategies that are appropriate for you. Identifying those options will be a function of many factors, including your family's resources and how soon you plan to attend college.

If you plan to enroll in college in the next 12 months and you think you will need assistance to cover educational costs, then make sure that you apply for financial aid. Complete the FAFSA and any additional required forms as early as you can in order to receive the maximum amount of aid you are eligible for (see Applying for Financial Aid) and make sure you apply for scholarships. In addition, you should know about Working While in College, Cooperative Education and Reentry Student Credits, and Tax Credits.

If you won't be entering college for at least a year, then you have some planning options to take advantage of that a student entering school immediately doesn't have. In addition to becoming familiar with the options listed above, you might want to familiarize yourself with ScholarShare and Other Savings Programs, Military and Other Service Opportunities, and Finishing College Sooner - Advanced Placement Examinations sections below.

Golden State ScholarShare and Other Savings Programs
Golden State ScholarShare is an innovative tax-deferred education savings plan sponsored by the State of California. Under the program, parents or other individuals make contributions into the ScholarShare Trust for a designated beneficiary's future college expenses. Funds invested in ScholarShare are after-tax dollars, but interest accrues on a tax-deferred basis. When ScholarShare proceeds are withdrawn to pay college expenses, earnings on the principal are taxable by the state and the federal governments at the student's rate rather than the parents'. For more information, contact the ScholarShare program at 1-877-SAV4EDU or at www.scholarshare.com.

In addition to using the ScholarShare program, families may take advantage of many other more traditional savings programs. For example, families can save using an Education IRA or U.S. Savings Bonds.

The Military and Other Service Opportunities
Educational benefits and scholarships are available to those who serve in the U.S. armed forces. In some programs, enlistees receive an education first, and serve an equivalent amount of military time after graduation. Other programs allow you to accumulate money for an education while completing an initial enlistment period. Some scholarships pay full tuition and all instructional fees, and may include a living allowance. Loan repayment is also available to army service personnel. For more information, contact your local armed forces recruiting office.

Community service jobs through AmeriCorps provide earnings and educational awards of up to $4,725. For more information visit the organization's website at www.americorps.org or call (916) 323-7646.

Working While in College
It may not be possible to earn all your own college costs, but part-time and summer work can help reduce the amount you'll need to borrow. School employment offices can help you find a job on or off campus. Also, check with the local office of the California Employment Development Department for job listings.

On some campuses, work-study or student assistant programs help students find career-related jobs.

Finishing College Sooner - Advanced Placement Examinations
High school students can take the College Board's Advanced Placement examinations and receive college credit for honors courses or independent study in foreign languages, English, history, science, mathematics, music, and art. Advanced college placement avoids repeating work and could save the cost of up to one year of study. See your high school counselor for details.

Cooperative Education and Reentry Student Credits
Cooperative Education
Cooperative Education allows you to alternate work and school. You may take time off from school to work in career-related jobs off campus, receive academic credit for that work experience, and return to school in good standing. Often you can earn enough money to pay for the next year, while gaining valuable work experience.

Cooperative education programs are available at public and independent schools and colleges. For more information, write to:

Reentry Student Credits
Reentry students might find that a school will give academic credit for job, volunteer, or travel experiences. The College Board's College-Level Examination Program (CLEP) is a nationwide program of testing for college credit. Exams are based on undergraduate courses in a variety of subjects. CLEP enables you to demonstrate knowledge gained outside formal educational settings and assists colleges in recognizing and rewarding that knowledge. For more information, write to:

Tax Credits
The two federal education tax credits, the Hope Scholarship tax credit and the Lifetime Learning tax credit, are available to taxpayers for tuition and required fees paid less grants, scholarships, and other tax-free educational assistance. Eligibility for both is phased out for joint filers who have between $80,000 and $100,000 in adjusted gross income, and for single filers who have between $40,000 and $50,000 in adjusted gross income. Families will be able to claim the Lifetime Learning tax credit for some members of their family and the Hope Scholarship tax credit for others who qualify.

Hope Scholarship Tax Credit
The Hope Scholarship tax credit was designed to make the first two years of college or vocational school universally available. Students or their parents (depending on who is the taxpayer) may receive a 100-percent tax credit for the first $1,000 of tuition and required fees paid and a 50-percent credit on the second $1,000. The credit can be claimed for a maximum of two tax years for students who are enrolled in any portion of their first two years of college or vocational school and on at least a half-time basis in a degree or certificate program.

Lifetime Learning Tax Credit
The Lifetime Learning tax credit is targeted at adults reentering college, changing careers, or taking courses to upgrade their job skills. It also is available to juniors, seniors, and graduate-level students or other students ineligible for Hope credits. A family may receive a 20-percent tax credit for the first $5,000 of tuition and required fees paid each year through 2002, and for the first $10,000 thereafter. The maximum credit is determined on a per-taxpayer (filer) basis, regardless of the number of postsecondary students in the family.

Scholarships
Scholarships typically result in a direct reduction in the contribution that students and their families must make to cover educational costs. This means that students who earn scholarships typically find that they have to work fewer hours or borrow less money in order to cover college expenses.

More about Scholarships

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