Don't go broke returning to college

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Don't go broke returning to college

Going back to school for another degree is a great investment in your future - if you can escape being mired in debt. In a time of belt-tightening, how do you sort out the loans, grants, and tax incentives that could make midcareer schooling affordable?

By Maggie Jackson
Globe Correspondent / September 13, 2009

If you’re working, you may be eligible for tuition reimbursement from your employer. While nearly a quarter of 250 companies surveyed in May by Challenger, Gray & Christmas have cut back on this benefit, many working students are still able to get financial help. Ask the boss.
Ask the financial aid office at your school
If you’re unemployed, don’t give up hope. If you are facing a steep drop in income, ask the financial aid office at your school how to adjust your aid application to reflect your new circumstances. This academic year, the government is asking financial aid officers not to count jobless benefits as income in calculating aid.
At the same time, going back to school shouldn’t cause you to lose your benefits. In fact, you could get an additional 26 weeks of jobless benefits in Massachusetts if you are in certain types of full-time schooling. Contact your school’s financial aid office or your local state-run One-Stop Career Center to get help.

Get a federal grant
Now, where’s the money? The federal government will make $100 billion available this year, through grants or loans, to help families pay for higher education. To get going, be sure to fill out the Free Application for Federal Student Aid, known as FAFSA.
A key form of federal student aid is the undergraduate Pell Grant, which is mostly available to students whose families earn less than $40,000. To help jobless and other struggling students, the government recently provided an additional $17 billion over the next two years to expand the program, boosting the maximum individual grant by more than $600 for this school year to $5,350. Contact your school or a One-Stop Career Center to learn if you are eligible.

Government loans
It’s a good time to take out a federal student loan. Interest rates on the most widely used subsidized Stafford loans hit 5.6 percent in July, and are slated to be cut to 3.4 percent by 2011. One plus: Under the government’s new Income-Based Repayment plan, you’ll typically be expected to pay back only what you are deemed to afford on federal loans. Private loans, which are more expensive, offer no such protections. As well, people who work in public service may be able to cancel remaining federal student loans after 10 years.
Get a bank loan
What about an affordable loan? Don’t be afraid to borrow, so that you can work less and get through school faster, advises Sandy Baum, a senior policy analyst at the nonprofit College Board. Students who work full time are much less likely to graduate. “If you take eight years to get your degree, that’s a longer time that you’re not working with a college degree,’’ says Baum.
Still, borrowing should be done with care. A rough rule of thumb is to borrow no more for your total education than you’ll earn in your first year out of school, says Baum. Usually, students repay loans over 10 years, so there’s wiggle room if you expect your salary to increase quickly.

Don't forget tax credits
Tax credits have been expanded considerably under the government’s stimulus efforts, according to Terry Hartle of the American Council on Education, a trade group for colleges. The new American Opportunity Tax Credit is worth up to $2,500 per student, and available for the next two years to families earning up to $180,000. Lower-income families can get partial refunds. A tip: interest on student loans is deductible from income tax.
Maggie Jackson is the author of “Distracted: The Erosion of Attention and the Coming Dark Age’’ (Prometheus Books, 2008). She can be reached at www.maggie-jackson.com.

© Copyright 2009 Globe Newspaper Company.