Help me budget for a free education
April 9, 2007 1:13 PM Subscribe
What will my free degree cost me, and how can I make it pay?
What can I expect to pay on my free tuition benefit?
My job pays for me to attend a graduate program one class at a time. I've been told to expect to pay taxes on this benefit because it counts as income. I take 12 credits/year at $400/credit, plus about $60 in annual fees. ($4860/annum)
What expenses can I write off while I'm in school? I know I can defer my undergraduate loans because I'm enrolled half-time. Can I write off books and transportation (I'm not living on campus)?
Fianlly, can I apply for federal or state loans for my education, even though it's being covered by my employer? For instance, can I take out a lower-interest Stafford loan and pay off my high-interest credit card?
Thanks in advance!
What can I expect to pay on my free tuition benefit?
My job pays for me to attend a graduate program one class at a time. I've been told to expect to pay taxes on this benefit because it counts as income. I take 12 credits/year at $400/credit, plus about $60 in annual fees. ($4860/annum)
What expenses can I write off while I'm in school? I know I can defer my undergraduate loans because I'm enrolled half-time. Can I write off books and transportation (I'm not living on campus)?
Fianlly, can I apply for federal or state loans for my education, even though it's being covered by my employer? For instance, can I take out a lower-interest Stafford loan and pay off my high-interest credit card?
Thanks in advance!
I have a similar benefit through my employer that I'm taking advantage of, so my experience may be helpful....
First off, you may not be required to pay taxes on the benefit if its only $4860/yr. The IRS will let you exclude up to $5250 of an employer-provided educational benefit (see IRS Pub 970). That benefit will typically let you cover tutition, fees and books.
As for other expenses, IANA tax lawyer or accountant, but its my understanding that you don't get to deduct things like transportation... although books may be something different if your employer doesn't cover them. You may not be able to deduct them outright, but maybe use them with one of the educational credits available (hope, lifetime learning).
Lastly, you CAN take out student loans to finance your education. I purposely did that because my workplace benefit offers reimbursement, and I didn't want to have to float $1000s of dollars for tuition before I got paid back. You'll need to fill out the FAFSA, but most people would at least qualify for a Stafford loan of some kind.
That said, you're not supposed to use those funds for anything other than educational/living expenses during your time in school... if they would actually catch you paying off a credit card is another matter.
posted by dicaxpuella at 1:43 PM on April 9, 2007
First off, you may not be required to pay taxes on the benefit if its only $4860/yr. The IRS will let you exclude up to $5250 of an employer-provided educational benefit (see IRS Pub 970). That benefit will typically let you cover tutition, fees and books.
As for other expenses, IANA tax lawyer or accountant, but its my understanding that you don't get to deduct things like transportation... although books may be something different if your employer doesn't cover them. You may not be able to deduct them outright, but maybe use them with one of the educational credits available (hope, lifetime learning).
Lastly, you CAN take out student loans to finance your education. I purposely did that because my workplace benefit offers reimbursement, and I didn't want to have to float $1000s of dollars for tuition before I got paid back. You'll need to fill out the FAFSA, but most people would at least qualify for a Stafford loan of some kind.
That said, you're not supposed to use those funds for anything other than educational/living expenses during your time in school... if they would actually catch you paying off a credit card is another matter.
posted by dicaxpuella at 1:43 PM on April 9, 2007
I had the same benefit from my employer and thirding everything above me - you will probably be fine. At my school, credits were nearly $1000 each so after that initial $5250 ran out (um, spring semester each year), I found myself losing about $900/month in taxes and had to take out loans just to pay my rent, fun times.
Anyway, as I understand it, depending on which tax "thing" you take (that's the technical term for however you choose to classify it, Lifetime learning credit, etc) you could write off books, transportation, and/or meals eaten at/because of school (i.e. I had classes that ran until after 8 and often had to just buy food at school and apparently that counted).
I ended up applying for loans to cover the tax bite from the tuition benefit. IIRC, the government and your school figure out how much you will actually need, so you can at least try, the worst thing that will happen is you don't get any loans. Even if you don't get the federal subsidized ones, you probably won't have a problem getting something from a private lender through your financial aid office. Every year, somehow the FA office my school knew *exactly* how much in federal subsidized loans I'd need to make up the difference between my normal check and my check with the tuition taxes and that figure was my student loan package. They offered other unsubsidized loans as well (we're talking like an extra $14K per year above and beyond my normal loan package) that I never took but could if I wanted to. Personally, I wouldn't use the student loan program as a lower-interest credit card loan, but if you used it to pay your rent and other expenses, while any other income paid off your credit card, perhaps that is acceptable (even though to me it sounds the same, but IANAA).
As long as you are registered for six credits you are eligible to take out Stafford loans. Double-check this, I believe it is six credits for that particular semester that you are accepting financial aid. I think you don't count as "half-time" according to the government unless it's six credits or more a semester. But again, double-check that since I could be wrong.
posted by ml98tu at 11:39 AM on April 10, 2007
Anyway, as I understand it, depending on which tax "thing" you take (that's the technical term for however you choose to classify it, Lifetime learning credit, etc) you could write off books, transportation, and/or meals eaten at/because of school (i.e. I had classes that ran until after 8 and often had to just buy food at school and apparently that counted).
I ended up applying for loans to cover the tax bite from the tuition benefit. IIRC, the government and your school figure out how much you will actually need, so you can at least try, the worst thing that will happen is you don't get any loans. Even if you don't get the federal subsidized ones, you probably won't have a problem getting something from a private lender through your financial aid office. Every year, somehow the FA office my school knew *exactly* how much in federal subsidized loans I'd need to make up the difference between my normal check and my check with the tuition taxes and that figure was my student loan package. They offered other unsubsidized loans as well (we're talking like an extra $14K per year above and beyond my normal loan package) that I never took but could if I wanted to. Personally, I wouldn't use the student loan program as a lower-interest credit card loan, but if you used it to pay your rent and other expenses, while any other income paid off your credit card, perhaps that is acceptable (even though to me it sounds the same, but IANAA).
As long as you are registered for six credits you are eligible to take out Stafford loans. Double-check this, I believe it is six credits for that particular semester that you are accepting financial aid. I think you don't count as "half-time" according to the government unless it's six credits or more a semester. But again, double-check that since I could be wrong.
posted by ml98tu at 11:39 AM on April 10, 2007
Oh, and some "help me budget for my free education" advice. I also did the working full time while going to school thing and keep in mind this is my own experience, but I've seen it others:
- You'll end up paying more for food, either because you're buying it before/during/after class or you don't have enough time to make normal inexpensive meals during the other meals of the week.
- You'll pay more for convenience, I often found myself buying toiletries at CVS instead of Target because CVS was around the corner and I could go during lunch. All the stuff you'd normally be all, "I'm not paying an extra $2 (or whatever) for that!" You end up paying the $2 just to do it and be done. Another example is that instead of driving out to return something, you might just not bother, since it takes time and energy to return stuff and you never got around to it because of finals and now the 30 day limit has passed and you're out $20.
- You'll probably pay more when you go out and you might buy more things for yourself because you'll be sort of stressed and not really thinking and say, "I NEED/DESERVE that." I have a lot of crap that was accumulated that way (some crap that never got returned too :)).
If you already have credit card debt, I would advise getting a budget program (I swear by You Need a Budget) to help you keep everything in check. It's not scary and helps you think twice before buying or spending because you are so busy.
posted by ml98tu at 12:16 PM on April 10, 2007
- You'll end up paying more for food, either because you're buying it before/during/after class or you don't have enough time to make normal inexpensive meals during the other meals of the week.
- You'll pay more for convenience, I often found myself buying toiletries at CVS instead of Target because CVS was around the corner and I could go during lunch. All the stuff you'd normally be all, "I'm not paying an extra $2 (or whatever) for that!" You end up paying the $2 just to do it and be done. Another example is that instead of driving out to return something, you might just not bother, since it takes time and energy to return stuff and you never got around to it because of finals and now the 30 day limit has passed and you're out $20.
- You'll probably pay more when you go out and you might buy more things for yourself because you'll be sort of stressed and not really thinking and say, "I NEED/DESERVE that." I have a lot of crap that was accumulated that way (some crap that never got returned too :)).
If you already have credit card debt, I would advise getting a budget program (I swear by You Need a Budget) to help you keep everything in check. It's not scary and helps you think twice before buying or spending because you are so busy.
posted by ml98tu at 12:16 PM on April 10, 2007
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And I would ask about writing off books and whatnot. I am pretty sure you can - I had my taxes done by an accountant this year and he told me I was eligible for the Lifetime Learning credit (I think) since I did spend some of my own money on tuition and books and other incidentals.
As long as you are registered for six credits you are eligible to take out Stafford loans.
posted by sutel at 1:34 PM on April 9, 2007