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Federal Financial Aid for Higher Education
In this section:
Types of Federal Financial Aid:
Scholarship: | A grant-in-aid to a student as by a college or foundation; "free" money--no payback |
Grant: | To bestow or transfer formally a scholarship to a student; "free" money--no payback |
Federal loan: | Money lent in interest at very low interest rates; repayment is allowed to be put off until you leave college. |
Tax incentive: | A direct reduction of the amount of income tax you may have to pay. |
Grants and Work-Study:
** In order to qualify for a grant, you must fill out a Free Application for Federal Student Aid (FAFSA).
Federal Work-Study: helps to pay for jobs on and off campus as part of need-based financial aid packages. Federal Work-Study aid is available to undergraduate, graduate and professional students.
The Pell Grant Program: targeted toward low-income undergraduate students, most of whom are from families with annual incomes below $20,000. The amount of money available each year varies, depending on the funding allocated to the program in the federal budget.
The Federal Supplemental Educational Opportunity Grant Program (FSEOG): provides additional grant aid to undergraduate students from extremely low-income families.
Loan Programs:
** In order to qualify for a loan, you must fill out a Free Application for Federal Student Aid (FAFSA).
The Perkins Loan Program(formerly the National Defense Loan Program): provides low-interest loans to low-income students.
Stafford Loans: offer subsidized and unsubsidized loans to students from all income levels.
PLUS Loans: provide assistance to parents of students or dependent undergraduate students in an amount up to the cost of college attendance, minus other financial aid.
** Both the Stafford and PLUS loan programs are available through banks (called the Federal Financial Education Loan Program) or directly through the federal government (called the William D. Ford Direct Loan Program).
FFEL Consolidation Loans: designed to help student and parent borrowers simplify loan repayment by allowing the borrower to combine several types of federal student loans with various repayment schedules into one loan. Contact:
Loan Origination Center's Consolidation Department
1-800-557-7392
TTY: 1-800-557-7395
http://loanconsolidation.ed.gov/
Hope Credit: a credit of up to $1,500 for qualified tuition and related expenses paid for each eligible student. This credit must be claimed before the student has completed the first 2 years of postsecondary education.
Who can claim the credit? You can claim the Hope Credit if you pay qualified tuition or related expenses of higher education for an eligible student who is either yourself, your spouse, or a dependent for whom you claim an exemption.
** To claim the Hope Credit, you must fill out Form 8863. You will also need to include Form 1098-T, the Tuition Payments Statement (issued to the student by the eligible educational institution to which you paid tuition or related expenses).
Lifetime Learning Credit: a credit of up to $1,000 for qualified tuition and related expenses paid for all students (per tax return) enrolled in eligible educational institutions.
Who can claim the credit? You can claim the Lifetime Learning Credit if you pay qualified tuition or related expenses of higher education for an eligible student (a student who is enrolled in one or more courses at an eligible education institution) who is either yourself, your spouse, or a dependent for whom you claim an exemption. The credit is also available to working Americans.
** To claim the Lifetime Learning Credit, fill out Form 8863. You will also need to include Form 1098-T, the Tuition Payments Statement (issued to the student by the eligible educational institution to which you paid tuition or related expenses).
Education and Retirement Savings Accounts: allow penalty-free IRA withdrawals for undergraduate and graduate programs and postsecondary vocational programs. In addition, eligible taxpayers can deposit $500 annually into an education IRA which will accumulate earnings tax-free, with no taxes due until withdrawal for approved purposes.
For whom can an education IRA be set up? An child who is under age 18.
Where can an education IRA be established? in the United States at any bank or other IRS-approved entity that offers education IRAs.
Who can contribute to an education IRA? Generally, any individual (including the beneficiary) who modified adjusted gross income for the year is less than $110,000 ($160,000 in the case of a joint return).
Employer Provided Education Assistance: Workers can exclude $5,250 of employer provided education benefits from taxable incomes; eligible taxpayers can deduct up to $2,500 per year of interest paid on education loans and exclude from taxable income loan amounts forgiven for participating in community service jobs; and taxpayers are exempt from taxation on some earnings on prepaid tuition plans.
** For more detailed information, refer to chapter 2 in Publication 15-B, Employer's Tax Guide to Fringe Benefits.
Federal Student Aid Information Center:
To speak with a counselor regarding federal financial student aid, contact the Federal Student Aid Information Center at:
Federal Student Aid Information Center
P.O. Box 84
Washington, DC 20044
1-800-4-FED-AID