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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
**