Paying for Your Distance Education

Pursuing a certificate or degree can cost a lot of money, but it is usually money well spent. On average, people with undergraduate and graduate degrees make more money than those who do not have these credentials. Still, the question remains: How are you going to pay for school and support yourself (and perhaps your family) at the same time? Most adult distance learning students pay for their education by working full-time and attending school part-time.

Federal Financial Aid
Most of your financial aid is likely to come from the federal government, which provides need-based aid in the form of grants, work-study programs, and loans. Up-to-date information about federal financial aid programs can be found at the U.S. Department of Education's Web site, http://www.ed.gov/studentaid, or by calling 800-4-FEDAID (toll-free).

Are You Eligible for Federal Financial Aid?
Your financial need is just one criterion used to determine whether or not you are eligible to receive aid from the federal government. In addition, you must

• have a high school diploma or GED or pass a test approved by the Department of Education
• be enrolled in a degree or certificate program
• be enrolled in an eligible institution (see below)
• be a U.S. citizen or eligible noncitizen
• have a Social Security number
• register with the Selective Service if required
• maintain satisfactory academic progress once you are in school

Institutional Eligibility: An Issue Pertinent to Distance Learners
In order to participate in federal financial aid programs, an institution of higher learning must fulfill the criteria established by Congress for the disbursement of Title IV funds, as federal student aid is officially known. There are many complex regulations that establish institutional eligibility. An institution's accreditation status affects its eligibility to participate in federal financial aid programs.

The Distance Education Demonstration Program
The rules governing federal aid were originally promulgated to prevent fraud and to ensure that funds would be provided to students at schools that met certain standards. However, with the growth of distance education, these regulations are increasingly becoming obstacles to provide aid to students at legitimate but innovative institutions. Recognizing this, congress established the Distance Education Demonstration Program under the direction of the Department of Education. Determining the Eligibility Status of an Institution or Program To make sure that the school and program in which you are interested are eligible to participate in federal financial aid programs, call them and ask. However, you can also do some double-checking on your own to confirm what the school tells you. If you plan to enroll in a regionally accredited traditional college or university, you can safely assume that the institution as a whole is eligible to participate in federal aid programs--since distance certificates and degrees are likely to be a very small proportion of its overall offerings. However, because institutions have the discretion to exclude specific programs, check to see if the school disperses federal aid to students enrolled in programs that interest you.

Federal Aid Programs
Once you've established the eligibility of the institution and program in which you are interested, check the federal aid programs in which they participate. Not all schools participate in all the available programs. Below is a summary of the federal aid programs

• Pell Grants, which do not have to be repaid, are awarded to undergraduate students on the basis of need, even if they are enrolled less than half-time.
• Federal Supplemental Educational Opportunity Grants are awards to undergraduates with exceptional financial need, even if they are enrolled less than half-time.
• Federal Work-Study Program provides part-time jobs in public and private nonprofit organizations to both undergraduate and graduate students who demonstrate financial need. The government pays up to 75 percent of your wages, and your employer pays the balance.
• The Federal Family Education Loan (FFEL) Program and the William D. Ford Direct Loan Program, commonly called Stafford Loans, are two loan programs sponsored by the federal government. You are eligible to borrow under these loan programs if you are enrolled at least half-time and have financial need remaining after your Estimated Family Contribution, Pell Grant eligibility, and aid from other sources are subtracted from your annual cost of attendance.
• Perkins Loan Program is available to both undergraduate and graduate students who demonstrate exceptional financial need, whether enrolled full-time or part-time.

State Aid Programs

• Some states offer financial aid to state residents who attend school in-state,
• some offer aid to state residents who attend school in-state or elsewhere, and
• some offer aid to students who attend school in their state regardless of their residency status. Contact your state scholarship office directly to find out what's available and whether you are eligible to apply.

Private Sources of Financial Aid
Colleges and Universities
Second only to the federal government in the amount of financial aid disbursed yearly are colleges and universities. Many of these institutions award both need-based and merit-based aid to deserving students. To find out more about the types of aid that the school you are interested in disburses, contact the financial aid office.

National and Local Organizations
Foundations, nonprofit organizations, churches, service and fraternal organizations, professional associations, corporations, unions, and many other national and local organizations award grants to students of higher education.

Alternative Loan Programs
In addition to the federal loan programs, there are many private alternative loan programs designed to help students. Most private loan programs disburse funds based on your creditworthiness rather than your financial need. Home Equity Loans A home equity loan or line of credit can be an attractive financing alternative to private loan programs. Some of these loans are offered at low rates and allow you to defer payment of the principal for years. Credit Cards Whatever you do, do not use your credit cards to borrow money for school on a long-term basis. The interest rates and finance charges will be high, and the balance will grow astronomically. Credit cards are useful to pay tuition and fees if you (1) can pay the balance in full, (2) expect a student loan to come through shortly, or (3) expect your employer to reimburse your costs. Otherwise, avoid them.

Internships and Cooperative Education Programs Internships with organizations outside the university can provide money as well as practical experience in your field. As an intern, you are usually paid by the outside organization, and you may or may not get credit for the work you do. Employer Reimbursement If you work full-time and attend school part-time, you may be reimbursed for part or all of your tuition by your employer.

Tax Benefits for Students
Whether or not you receive financial aid, there are many recently enacted tax benefits for adults who want to return to school. In effect, these tax cuts make the first two years of college universally available, and they give many more working adults the financial means to go back to school.

The HOPE Scholarship Tax Credit Students whose adjusted gross income falls within certain limits receive a 100 percent tax credit for the first $1,000 of tuition and required fees and a 50 percent credit on the second $1,000. The Lifetime Learning Tax Credit A family may receive a 20 percent tax credit for the first $5,000 of tuition and required fees paid each year through 2002 and for the first $10,000 thereafter.

Individual Retirement Accounts Taxpayers can withdraw funds from an IRA, without penalty for their own higher education expenses or those of their spouse, child, or even grandchild.

State Tuition Plans When a family uses a qualified state-sponsored tuition plan to save for college, no tax is due in connection with the plan until the time of withdrawal.

Tax-Deductible Student Loan Interest The new student loan interest deduction allows students or their families to take a tax deduction for interest paid in the first sixty months of repayment on student loans. Tax-Deductible Employer Reimbursements If you take undergraduate courses and your employer reimburses you for education-related expenses, you may be able to exclude up to $5,250 of employer-provided education benefits from your income. Community Service Loan Forgiveness This provision excludes from your income any student loan amounts forgiven by nonprofit, tax-exempt charitable, or educational institutions for borrowers who take community-service jobs that address unmet community needs.