Paying For School

Financial Planning

Two important things to understand are what is included in the cost of college and that a student's financial aid package may cover only part of those costs.

We strongly recommend that students and their families develop a financial plan to cover any remaining out-of-pocket costs not covered by a student’s financial aid package.

A successful financial plan often combines several options, such as:

A student’s current financial package
Tax benefits for higher education
Aid from other U.S. federal programs
Outside or private scholarships
- Many external (outside) private scholarships are not affiliated with Salem State University. Students should start by checking with their high school. Employers and community organizations also offer scholarships.
An interest-free payment plan, or
A private education loan

Tax Benefits for Higher Education

Tax benefits can help you recoup some of what you spend on tuition or loan interest, or maximize your college savings.

Many families plan to use a savings plan, like a 529 Education Plan, or other tax benefits to assist their students in school. It is important to note that this is not a financial aid award but money paid to the family through the annual tax cycle - not when the bill is due.

For more information, read IRS Publication 970, Tax Benefits for Education, to see which federal income tax benefits may apply, or visit studentaid.gov.

Tax Credits

Two tax credits help offset the costs (tuition, fees, books, supplies, equipment) of college or career school by reducing the amount of your income tax:

The American Opportunity Credit allows you to claim up to $2,500 per student per year for the first four years of school as the student works toward a degree or similar credential. Students must be enrolled at least half-time to be eligible. The credit allows up to $2,500 per year for money paid toward tuition, enrollment fees, course-related books, supplies, and equipment needed for attendance but not paid directly to the college. It does not cover housing and meals.
The Lifetime Learning Credit allows you to claim up to $2,000 per student per year for any college or career school tuition and fees, as well as books, supplies, and equipment required for the course and purchased from the school.

Coverdell Education Savings Account

A Coverdell Education Savings Account allows up to $ 2,000 a year to be set aside for a student's education expenses (elementary, secondary, college, or career school).

IRA Withdrawals for College Costs

You may withdraw from an IRA to pay for higher education for yourself, your spouse, your child, or your grandchild. You will owe federal income tax on the amount withdrawn, but you will not be subject to the early withdrawal penalty.

Qualified Tuition Programs (QTPs, also known as 529 plans)

A QTP/529 plan is established by a state or school so you can either prepay or save up to pay education-related expenses. Once a student is in college, a family can withdraw money from their account to pay for education expenses. The money withdrawn will not be taxed.

To learn more about state 529 plans, please visit collegesavings.org.

Student Loan Interest Deduction

You can take a tax deduction for the interest paid on student loans that you took out for yourself, your spouse, or your dependent. This benefit applies to all loans (not just federal student loans) used to pay for higher education expenses. The maximum deduction is $2,500 a year.

Aid From Other U.S. Federal Programs

The federal government offers several financial aid programs beyond those from the U.S. Department of Education. These programs include:

Education awards for community service with AmeriCorps
Educational and training vouchers for current and former foster care youth and/or
Scholarships and loan repayment programs are available through the Department of Health and Human Services' Indian Health Service, the National Institutes of Health, and the National Health Service Corps.

Budgeting

Budgeting helps students keep their finances under control, identify when they need to adjust their spending, and decide where their money will go instead of wondering where it all went.

Budgeting helps answer these important questions:

Where does all your money go?
Is there a way to spend less?
How do you handle unexpected expenses like replacing a broken cell phone or repairing a car?
How can putting money into savings help with some bigger financial goals?

Creating a budget is straightforward and starts with this simple equation: how much you earn (your income) minus how much you spend (your expenses).

The steps involved in creating a budget include

determining a timeframe and setting goals,
finding a budgeting tool that works for you,
identifying income and expenses,
subtracting expenses from the income to see how much money is left over or if there will be a shortfall, and
making any needed adjustments.

For more information on creating a budget and budget tips, please visit studentaid.gov.