College financing options for adults going back to school
As the job market evolves, companies are increasingly looking for employees with advanced or specialized degrees. According to the U.S. Census Bureau, workers with advanced degrees聽聽over their working lives than those with just a bachelor鈥檚, on average.
The prospect of expanded career prospects has many adults looking to return to school. But the聽聽can prove prohibitive even to those with steady employment. Adult learners should familiarize themselves with options that can make education more affordable.
Employer reimbursement
Before applying for聽, first find out whether your employer offers tuition reimbursement. Forward-thinking companies understand that an investment in a promising employee is an investment in their own future. The federal tax code allows employers to provide an employee up to $5,250 in tax-free educational assistance each year.
Educational assistance can typically be rescinded if you are unable to maintain a certain level of achievement 鈥� a minimum grade point average, for example 鈥� or if you leave the company. To verify that the aid is being used for its intended purpose, your employer may ask you to present receipts for education-related expenses.
529 plans
These are tax-advantaged investment plans that help individuals and families save for college expenses. Unlike traditional savings accounts,聽聽can keep pace with inflation because the contributions are typically invested in mutual funds and have age-based asset allocation options, in which the investments become more conservative as the expected date of enrollment approaches.
One of the most compelling features of 529 plans is that contributions grow tax-deferred. Qualified distributions for the beneficiary鈥檚 college tuition, fees, room and board are exempt from federal taxes. Most states offer tax deductions or tax credits, too.
The plans are flexible; it鈥檚 perfectly admissible to change beneficiaries or roll the funds over into a separate 529 account. If you have plans to return to college in the next 10 years, start saving for this upcoming expense聽sooner than later.
Tax credits
Education tax credits aren鈥檛 just for kids! Tax credits directly reduce the amount of an income tax obligation. For example, if you聽owed $5,000 in federal income taxes and received a $1,000 tax credit, you would only owe $4,000. That makes credits more powerful than tax deductions, which only reduce the amount of your income subject to tax. If you got a $1,000 deduction, you鈥檇 save at most a few hundred dollars.
The Lifetime Learning Tax Credit provides a federal tax credit of up to $2,000 per taxpayer for expenses associated with postsecondary education. The amount of the credit is equal to 20% of the first $10,000 of qualified tuition and related expenses that you incur in a given year.
Discuss all of these opportunities with a licensed tax professional. Funds can also be withdrawn penalty-free from a聽, provided the money is used for educational purposes.
The state of your personal finances shouldn鈥檛 deter you from advancing your education. Understanding the options available is the first step toward realizing your educational 鈥� and career 鈥� goals.
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