Investing
Zoe Team
4 min read
Assess total education costs versus available personal funds and potential loan needs.
Prioritize federal student aid applications before considering private loan alternatives.
Create a realistic budget that accounts for tuition, living expenses, and projected future income.
Federal loans are generally the best starting point due to standard terms; private loans may offer lower rates for strong credit but often lack the same protections.
Focus on applying for grants and scholarships first, work part-time if feasible, and borrow only what is absolutely necessary for essential education costs.
Federal loans usually do not require a credit check, but private lenders will require a solid credit history and proof of income for favorable rates.
PAYING FOR COLLEGE BLOG SERIES
You’re a recent college graduate and want to financially plan for a second degree with as many financial resources as possible.
Meet Lisa
Lisa graduated from college 4 years ago and has been working as a business analyst. After multiple conversations with her mentors, she has decided to pursue a Masters in Business Administration (MBA), and now she’s trying to figure out the best way to make that dream a reality. She plans on paying for her own education, but wants as much financial support as she can get, in order to avoid getting into unnecessarily high debt.
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.
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.
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.
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.
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 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.
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