College is a rewarding experience which can also cost a lot of cash. Understanding how to make the most value out of your time in school involves understanding the financial aid available, the importance of employment, and the ways to most appropriate regard your taxes.
The value of financial aid: Pell Grants and Stafford Loans
Financial aid is what makes higher education possible for most students. There is a wealth of information and privately funded programs which make tuition far more affordable. The government also helps out in the form of public Pell grants and other sponsored loans.
For those who meet financial necessity, the Pell Grant is a blessing. The highest award is $5,500 annually. The amount a student actually receives varies based on: cost of attendance (COA) for the particular school (COA is calculated using tuition and other living expenses,) expected family contribution (EFC), full or part time enrollment status, and length of program.
Not every student will meet the low-income requirements necessary to qualify for the Pell grant, however loans are a second option, although financial need remains a factor for qualifying for Direct Subsidized Loans, the amount of which is determined by your school. Subsidized loans don’t accrue interest until the student drops below half-time enrollment or after the grace-period following graduation.
The value of employment
A part time job can be crucial for those trying to stay out of debt. Although most part-time employment doesn’t resemble the careers for which you’re in school, there is a wealth of experience to be had in even the most entry-level of positions.
For gaining experience, work-study programs and internships are invaluable. Work-study positions are typically close to campus for the vehicular-challenged. Although internships are famous for being paid positions, some still offer stipend and parlay into more lucrative potential for future employment.
The value of filing taxes
Filing taxes correctly is a skill that should be sharpened while in school. Allocating proper credits and deductions will ensure the largest return possible.
The computer has changed the financial landscape and several tax companies as well as the IRS offer free or inexpensive methods for submitting tax returns online. The copy of your filed return is retained as a .PDF file which makes filling out the FAFSA for the following year easier. However, ensure that the file remains secure, as should all digital archiving of private data, especially those which are related to your finances.
Pen and paper, there is always the old-fashioned way. Pen, paper, and a calculator―a nice date with your receipts and tax codes. The best option for old souls or those careless with sharing information, W-2 and tax returns must be postmarked by the appropriate date.
For the tech-gurus, new options are being developed for filing via your hone. The app store already hosts several apps which feature various levels of filing. Some of the fancier apps can take a captured image of your W-2 and transmit it to the forms online.
Credits and deductions
The main difference between education credits and deductions involves the ways it reduces your tax bill. Credits reduce the amount of taxes owed where deductions reduce the income which is actually reported.
The American Opportunity Tax Credit is a temporary tax credit which runs until 2012. Worth up to $2,500, the income cap is placed at $80,000 for individuals ($160,000 for joint filers) and can be used by parents of dependent children. The amount is based on the first $2,000 and supplemented by 25% of the next $2,000 spent on qualified tuition and related materials.
The Lifetime Learning Credit is for those who gross less than $48,000 annually ($96,000 for joint filers) and can be factored into a return for up to $2,000. The amount is derived from the first $10,000 in qualified expenses.
The Tuition and Fees Deduction can subtract up to $4,000 from taxable income and can be taken in lieu of the education credits listed above. The deduction is applicable for single filers who earn less than $80,000 and married filers who earn less than a combined $160,000. Parents of dependent students who meet the requirements can file.
Author Bio: Katei Cranford is a recent UNCG grad aimed at helping students understand the financial side of college life, from highlighting free tax prep programs to funding parties (and everything in between.)