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Financial Aid 101










During this workshop, we will be discussing financial aid for the years after high school….whether you plan to attend a university or community college, technical or trade school, financial aid is usually available.  Most institutions participate in some of the federal and state aid programs.  The specific college catalog or Web site should have information about the various aid programs in which the school participates. I encourage you to take a look at the financial aid section of the college catalog if you have not already done so.



Unfortunately, the financial aid process is confusing and sometimes intimidating. While I don’t expect you will leave tonight understanding all of it, I do hope you will have a better understanding of the process and what you need to do. During this workshop, we will cover the types of financial aid available; learn about the cost of college, how to apply for aid, and how your eligibility will be determined. We will discuss some specific aid programs, though not in great detail.  There is a lot of printed information available on the individual aid programs, and the Internet is a great resource as well.  We’ll give you some useful Web sites at the end of the presentation.



Financial aid is defined as money in the forms of grants, scholarships, loans and employment to assist in paying the cost of attending a college, university, or vocational/technical school. 



Financial aid can be either merit-based or need-based.  Merit-based aid may be awarded to students with particular skills, talents, or abilities.  It is typically considered gift aid, meaning it does not have to be paid back.  Need-based aid is awarded to students who show financial need to attend a college, university, or vocational/technical school.


This workshop will focus on need-based financial aid.  Information will be provided later             on programs and methods that are alternatives to the major need-based aid programs.


For need-based aid, the family is considered responsible for college costs to the extent that the family is able to pay, not just the extent to which they are willing to pay. Before the government or an institution assists with college expenses, the family is expected to pay whatever it can.


Generally, financial aid is designed to provide students access to, as well as choice among, various types of colleges, universities, and vocational/technical schools. 


You must reapply for financial aid every year…While most families’ circumstances don’t change from year to year, some do. Your financial situation will be evaluated each year; if you become unemployed, or win a lottery, the amount of aid for which you qualify will change.  The most common change in a family’s situation is a change in the number of people in the household or a change in the number in college, both of which will change the amount of aid a student may receive.


The Cost of Attending College


One of the most important principles to remember about the student financial aid business is that your financial need (or eligibility) is determined by subtracting your family contribution from what it costs to attend the school.  Let’s begin by talking about those costs.



Postsecondary education in whatever form is an investment in your future.  As with any investment, there are costs involved.  In postsecondary education, there are both direct and indirect costs.  Direct costs are those that you pay to the institution or perhaps to a representative agency of the institution.  Indirect costs are those that you still have to meet, but you do not necessarily pay to your institution.


It is the institution’s responsibility to establish cost of attendance budgets that are adequate and reasonable.  Generally cost of attendance budgets that are established by the financial aid office are moderate and reasonable estimates of expenses.



Direct costs involve the items that we most commonly think of when we talk about college costs - Tuition, fees, room, board, books, and supplies.  What are these?   Tuition is what buys you a seat in a classroom, a space in your academic program.  This is what you pay for the academic portion of your college education - your classes.  Most schools charge a variety of fees that support activities both inside and outside the classroom.  Examples of fees might include student activity fees (to support cultural programs, student clubs, publications, etc.), computer technology fees (to support computer lab facilities, instruction, etc.), athletic fees, laboratory fees, private music lessons, fees for advanced or remedial classes, etc.  Some fees are charged to all students and some are charged based on your enrollment in a specific academic program or class. 


When we speak of “room charges,” we mean either a fee paid to allow you to live on campus in a residence hall or the rent you pay for an off campus apartment or house.  “Board” means food.  Even if you live at home with your parents, there is a modest allowance in student budgets for the cost of your housing and food.


Books and supplies help you to succeed in your studies.  You may be required to purchase textbooks, workbooks,  notebooks, pencils, pens, high lighters, computers, software, other tools (drafting, for example), paint and paper (art major), etc. 


If you are not required to buy a computer, but you want to buy one, you can ask the financial aid office to include the expenses of a computer in your cost of education. You will probably have to borrow through a student loan program to pay for the computer…it is unlikely that the college will offer you grant funds for a computer that is not required by the institution. Most institutions have plenty of computer labs so students do not have to buy a computer if they are unable to afford one.


The cost of attendance is different for every school and student.  Depending on your circumstances, you may have additional expenses like childcare or disability expenses.  You may plan on a study-abroad semester that requires additional aid.


Indirect costs are not paid directly to the institution.  They include personal/miscellaneous expenses such as clothing, personal items, laundry, snacks, etc.  Transportation includes the costs of getting to and from your school.  If you commute from your home, you may have these expenses daily.  If you live away from home, you have to consider the expense of getting to school at the beginning of the year and returning home at the end.  You might consider parking stickers, gas, bus, train, or plane fare, insurance, etc.  Also, remember that some indirect costs are things that you might pay for whether or not you attend college.


Adding both the direct and indirect costs together gives you a good idea of what it costs to go to school. 




Applying for Financial Aid


(See Mrs. Huskey in the McNair office to fill out the FAFSA!)


The FAFSA is the required application for all types of Federal aid and most state and institutional financial aid programs.  For 2010-2011 paper FAFSAs will not be available for schools to order via FSAPubs.  Students will be able to obtain a paper FAFSA by calling the Federal Student Aid Information Center (FSAIC) toll-free at 1-800-4-FED-AID (1-800-433-3243).  Students may request up to three copies of the paper application and should receive their FAFSAs in 3 to 7 business days.  Students are encouraged to use the online method for filing the application.  The FOTW Worksheet, the most effective tool students can use to facilitate the online application process, will still be available for bulk order by high schools and financial aid offices.  There is also a PDF version (available for downloading from of the FAFSA that students can complete online and print or download, print and submit for processing.  It will be available by December of a student’s senior year in high school.  Just remember it cannot be filed prior to January 1, preceding the fall semester a student plans to enroll in college.  The FAFSA is year specific and can only be used to apply for aid during the year indicated on the form.  FAFSA on the Phone is available for this year.  It was available for the first time last year.  A student can call the FSAIC to submit his or her FAFSA without the signature and without a waiting period.  The applicant can use his or her PIN to electronically sign on the Web or wait to sign and return the paper SAR. 


If you complete the FAFSA on the Web, you should request a Personal Identification Number.  We’ll discuss how to apply for a PIN on the next slide.


If you complete online, you will see your expected family contribution as soon as you hit the “submit” button.


If you are still in the process of narrowing down your college selection, you may have the results from your FAFSA sent to all the schools you list on the FAFSA (four on paper FAFSA and 10 on FOTW).   If you provide an e-mail address on the FAFSA, a web link to your Student Aid Report results will be sent to you about a week after processing.  If you do not provide an e-mail address, your results will be sent to you about two weeks after filing your FAFSA, sooner if you file electronically.  You should check the information carefully for accuracy.  If you have kept a photocopy of the original FAFSA, this will be an easy process.  If corrections need to be made, carefully follow all instructions for making the corrections.


The FAFSA collects your demographic information.  More importantly, it collects information about your family’s financial situation, which the federal processor uses to determine what your expected family contribution toward your educational costs will be. 



There are a few areas on the form that we will address briefly.  First be sure the student’s social security number reported is accurate.  Determine whose financial information is to be provided on the form.  As most high school students live with and are supported by parents or guardians, we will assume that the parent’s income and asset value as well as the student’s income and assets will be reported.  Follow all instructions carefully regarding family size and number of family members to be enrolled in college during the upcoming academic year.


While actual tax return information is preferable, some families may need to report estimated tax information to meet the early deadlines of some colleges.  Estimate carefully.



If you complete the FAFSA on the Web, you should request a Personal Identification Number (PIN) at at least two weeks prior to filing the FAFSA.  You will be given the option of creating your own PIN or having the site create one for you.  If the site creates one for you, you can choose to have your PIN mailed to you, or you can choose to receive an e-mail that will give you the link to a site where you can access your PIN.  Your PIN will not be sent to you in an e-mail for security reasons.  Instead, a link will be sent where you will be asked for some personal information to identify yourself before you are shown your PIN.  Parents should request a PIN also; a parent’s PIN can be used for multiple application—children or the parent him or herself.  If you choose to display or personalize the PIN or receive the PIN via e-mail, you can use the PIN immediately to sign the application.  However, to ensure you are able to sign electronically, you should apply for the PIN prior to the date you complete the FOTW. 


The major state aid programs use the FAFSA as the application; these include the NC Education Lottery Scholarship, UNC Need Based Scholarship, NC Community College Scholarship, NC Incentive Grant and others.  Eligibility for the State Contractual Scholarship Fund at private institutions is determined by the individual campuses using either the FAFSA or the CSS PROFILE (most institutions use the FAFSA).  Other programs like the NC Legislative Tuition Grant (LTG) have separate forms. Information can be obtained on or by asking the campus aid office.




Be sure to contact colleges to determine if other forms, in addition to the FAFSA, may be required for their aid programs.  Some institutions will require you to complete the College Board’s CSS Financial Aid PROFILE or an institutional financial aid application.  You may also have to complete special forms for some state programs and other scholarship programs.   



If you would like assistance completing your FAFSA online, the North Carolina Association of Student Financial Aid Administrators and College Foundation of North Carolina will be sponsoring FAFSA Day at many sites across the state to help students and families complete the FAFSA.  This year FAFSA Day will be on Saturday, February 13 from 9 until noon at most locations. You should register at or call 866-866-CFNC if you want to attend…registration enables the sites to have enough volunteers to help all those who want assistance, and those who sign-up will receive a list of items to bring and a reminder message a few days before the program. 




Offers for help are everywhere for students and families today.  They may arrive through the mail, over the Internet, through newspapers, magazines or over the phone.  Some of the offers may be legitimate as and FAFSA Day, while others are misleading or scams.

Remember these points in applying for financial aid......

*Meet the earliest deadlines of colleges in which you are interested.


*Complete all questions accurately.  (Call and ask for clarification, if you are unsure                            what a particular question means.)


*Use accurate information....estimate if necessary.


*Don’t wait until you are admitted to file the FAFSA and collect all information from                           the college about their financial aid process.


*Keep a photocopy of all documents -- the FAFSA and any tax forms you use in                                 completing the FAFSA.  You may be asked to provide copies of those documents.



You may be selected for verification by the Federal Government’s processor or by the institution.  Be prepared to submit a variety of additional documentation to the financial aid office.  Be sure to handle all requests for additional information promptly.


Determination of Family’s Ability to Pay College Costs


One of the great mysteries to many families is what actually happens with all the information they provide in completing the FAFSA once it is transmitted (or mailed) to the federal processor.  The information on family size, number in college, income and assets is placed in a formula that has been established by the U. S. Congress.  The answer resulting from this “Federal Methodology” is known as the Expected Family Contribution (EFC).  The EFC is subtracted from the college’s cost of attendance to determine the student’s eligibility for need-based student aid. 


The EFC has two parts: a parents’ contribution and a student’s contribution.  While this workshop will not detail the formula, we would like to provide a brief overview of how the formula works.



First, the parents’ total income, both taxable and non-taxableis determined.  Income is reported from the calendar year preceding the academic year.  Therefore, for the 2010-11 academic year, income reported will be for 2009.  From that income, amounts for certain items over which a family has no discretion are subtracted.  These would include federal and state taxes paid, social security withholding, and allowances for family living expenses.



Assets are used in the formula as these amounts help to provide a clearer picture of the family’s financial strength.  Parents’ net assets (less home equity and retirement accounts) are totaled.  From these assets is subtracted an allowance for retirement and emergencies.  A small percentage of remaining assets will be used in the next step to determine the parents’ portion of the EFC.  (Note: Remember that while the percentage is 12%, the asset protection amount is applied to the reported assets BEFORE the 12% is assessed.  Combined with the next step, for the average family this means that approximately 5-6% of their reportable assets are included in their expected family contribution. )



At this point the information from income and assets are combined and a percentage is applied to this number to determine the Parent Contribution.  If more than one student from the family will attend college during the upcoming academic year, the PC is divided by the number in college.



Student income and assets are also used in the determination of the EFC. Total student income (both taxable and non-taxable) is determined.   Allowances for federal and state taxes paid and social security withholding are subtracted from the income.  A modest protection amount ($4500) is then subtracted.  NOTE:  This Income Protection Allowance (IPA) is now indexed annually for inflation.  Any remaining amount of income is assessed at 50 percent for the first part of the student contribution of the EFC.  This means that a student can have an income of approximately $4500 without it increasing their Expected Family contribution. If they earn more, their eligibility for aid will likely go down.




The student’s assets are then totaled.  Twenty percent of this amount will become a part of the student’s contribution.



The amount from the income calculation and the asset calculation are added together and become the student’s portion of the EFC.



The parents’ contribution is then added to the student’s contribution to total the EFC.



Remember the EFC is subtracted from the college’s cost of attendance to determine eligibility for need based financial aid.


Colleges and universities will use this method for determining a student’s eligibility for federal funding; however, institutions which provide significant funds from their own sources may modify this determination of need. 



In determining your eligibility for institutionally controlled need-based grants, institutions may choose to require a minimum student contribution regardless of the student’s income.  They may also require parents to report home value and indebtedness as well as other asset information not required by the federal formula.  In addition some colleges will adjust a family contribution by the number in college, if one of the college students is a parent.  Contact the financial aid office of your institutions of choice for more in depth information.




Special Circumstances & Professional Judgment: For some of you, after you fill out your financial aid form, the information that you submitted may have changed. If that is the case, you should notify the financial aid office of those changes. If you suddenly become unemployed, if there is a death in your family, a change in marital status, medical expenses not covered by insurance or student cannot obtain parent information; these are special circumstances that could increase your aid eligibility. It is up to the professional judgment of the financial aid administrator to determine if your special circumstances would cause a change in your eligibility. You should not call your financial aid administrator to compare aid packages from other schools or to attempt to negotiate your aid package. Financial Aid Administrators can only make changes using their professional judgment based upon special circumstances.



Available Financial Aid

Once an institution has received the result of your FAFSA and other documents required, you will be sent information about the financial aid award you are eligible to receive.


Just a reminder ...  In awarding need-based aid, a financial aid office must consider all aid i.e.--merit, athletic, or outside agencies.  If a merit, athletic or outside scholarship meets your financial need, the financial aid office cannot give you need-based funds.



There are four major sources of student aid: Federal government, states, institutions, and various outside agencies, corporations, and foundations.




The two main types of need-based aid are:    Gift aid and Self-help aid.  Gift aid does not have to be earned or repaid.  Grants and scholarships are gift aid.


Self-help aid must be earned or repaid.  Loans must be repaid, but do not have to be repaid until the student leaves school, and they carry lower interest rates than most other loans.  The government pays the interest on need-based loans while the student is enrolled.


Work programs allow students to earn money to pay educational expenses during enrollment in school.  Because students must work for this money, employment through the college is considered a form of self-help aid.


Overhead 37


Federal aid is the largest single source of money for students who can demonstrate that they have financial need.  Eligible institutions can give federal money to students based on rules established by Congress and the US Department of Education.  


Federal Pell Grants are need-based gift aid.  If a student is eligible for a Federal Pell Grant, the amount received depends on expected family contribution and the cost to attend the school of choice.  The proceeds come to the school and the school delivers it to the student.  It will be delivered to the student regardless of how many students at the same school also show need for this type of aid.  For 2010-2011, Year-Round Pell will be available to encourage students to accelerate their education. 


New for 2009-2010 and succeeding award years:  Each student with a Federal Pell Grant-eligible EFC whose parent or guardian was a member of the Armed Forces of the United States and died as a result of performing military service in Iraq or Afghanistan after September 11, 2001, will be determined to have an EFC of zero that will generally apply to all Title IV, HEA programs.  Thus, these students will qualify for the maximum Pell regardless of initial Pell eligibility.


New for 2010-2011:  Another program similar to one above is IASG (the Iraq and Afghanistan Service Grants) Program.  This is a non-need-based program available to a student whose parent or guardian died as a result of military service in Iraq or Afghanistan after September 11, 2001.  At the time of the parent or guardian’s death, the student must have been less 24 years of age or enrolled at an institution of higher education.  This grant will be the same amount as a maximum Pell Grant.  The Grant may not exceed the student’s cost of attendance and payments are adjusted like Pell Grants if the student is enrolled less than full-time.  Unlike Pell Grants, IASG Program grants are not considered to be estimated financial assistance.  The student’s EFC will not be changed as a result of a parent or guardian’s service.


(Funding may not be available after 2010-11) Academic Competitiveness Grants are need-based gift aid awarded to students who have completed a rigorous program of study in high school.  These are awarded to Pell Grant recipients who:

·   Are US citizens or eligible non-citizens

·   Enroll at least half-time in undergraduate program at degree-granting college/university (includes certificate programs of at least one-year in length)

·   Completed rigorous program of study after 1/1/2006

o   NC College/University Preparation Course of Study is one of our options (See Handout for other options)

·   Receive $750 as first-year student

·   Second year students must have completed rigorous secondary school program of study after 1/1/2005

o   Minimum 3.0 cumulative GPA

o   Receive $1,300 as second-year student (sophomore standing)  


Federal TEACH Grant, Teacher Education Assistance for College and Higher Education Grants, is a new federal program that provides up to $4,000 a year to students who sign an agreement to serve as full-time teachers for at least four years within eight years of completing their course of study and teach math, science, a foreign language, bilingual education, special education, or a subject designated as “high need” by the federal or state government, or local education agency and approved by the Department, or serve as a reading specialist.  Also, recipients must comply with the requirements for being “highly qualified teachers”.   Failure to fulfill the service requirement will cause the TEACH Grant to be permanently converted to an unsubsidized Direct Loan.  Recipients must be citizens or eligible non-citizens.  The award is prorated for less than full-time enrollment. 


Federal Perkins Loans, Federal Work-Study, and Federal Supplemental Educational Opportunity Grants are campus-based programs.  The federal government gives each participating school a certain amount of money for each of these programs.  The school then decides which of its needy students will receive the money and how much they will receive, within the limits set by the federal government.  The awards can vary from school to school.


Federal Family Education Loan Program is regulated by the federal government and includes the Federal Stafford Loans and the Federal PLUS Loans.  The money the student borrows comes from private lenders, but the loans are guaranteed by the federal government through a state agency.  Federal Stafford Loans are made directly to students.   Eligibility for subsidized loans is based on demonstrated need and both principal and interest payment becomes the student's responsibility six months after leaving school only. 


Like the FFEL Program, the Ford Federal Direct Loan Program is a name used to refer collectively to several different programs.  There are the Direct Subsidized Loans, the Direct Unsubsidized Loans, and the Direct PLUS Loan Programs.  The primary difference between the Federal Direct and FFEL programs is the source of the funds.  Under the Direct Loan Programs, the lender is the federal government.


Institutions generally participate in either the FFEL Programs OR the Direct Loan Programs; however, they can participate in both.  We will discuss the unsubsidized loans and the PLUS Loan later in this presentation.



North Carolina has both gift aid and self-help aid available to in-state students.  Some examples are listed here.  Some state scholarships are based solely on merit; others are designed to support students interested in certain professions to help fill a shortage within the state; and still others are based only on demonstrated need.


The North Carolina Student Incentive Grant (NCSIG) combines federal and state funds and is based only on need.  Completion of the FAFSA is the only required application.  For the 2009-10 academic year, awards are $700.  Students who receive NCSIG funds have SIGNIFICANT need---their Expected parent contribution is 0.


The North Carolina Legislative Tuition Grant (NCLTG) may be awarded to full-time NC residents attending one of North Carolina's private institutions and part-time students enrolled three-quarter time.   The award for 2009-10 is $1,850 per academic year; the amount for 2010-11 has not been established.  Need is not a factor.


The North Carolina State Contractual Scholarship Fund may be awarded to NC residents who demonstrate need and who are attending one of the state’s 36 private institutions.  The institutions receive funds based on the number of NC residents attending the institution and they are responsible for determining which NC residents qualify for these funds.


The North Carolina Education Lottery Scholarship was created by the 2005 General Assembly to provide financial assistance to needy NC students.  It is available for students in UNC campuses, Community College Campuses, and non-profit College Campuses where students currently receive state aid.  Eligible students must be NC residents enrolled at least half-time, undergraduates, meet all Pell Grant eligibility rules (except EFC), and have EFC less than or equal $5,000.  It can be received for a maximum of eight semesters or the equivalent.


ELS designed to ensure needy students receive a set minimum amount of grant aid (in combination with the Pell Grant).


An example considering the floor amount is $3,400:

      Pell = $1,900 and ELS = $1,500

      Pell = $800 and ELS = $2,600

If EFC > Pell eligibility and < 5001, then no Pell and ELS is $3,400


Result:  every eligible student whose family can afford to pay$5,000 or less (calculated using FAFSA) will receive at least $3,400 from Pell and/or Lottery Scholarship.


The Nurse Scholars Program is a merit-based scholarship/loan for state nursing students. The Nurse Education Scholarship/Loan Program (NESLP) is designed to help needy nursing students.


The Teaching Fellows and Prospective Teacher Scholarship/Loan programs are merit-based for students who want to become teachers. The nursing and teacher programs require students to perform service in their chosen fields in return for the funds…in other words, these programs are loans, which are repaid by service. If the recipients do not repay in service to the state, the loans must be repaid in cash with interest.  For details on these and other aid programs in North Carolina, visit


North Carolina recently initiated the NC Reach Scholarship Program to assist young people who were adopted from foster care after age 12 and those who aged out of foster care at age 18 to obtain a postsecondary education from North Carolina public community colleges, colleges or universities. 


NC Reach is designed to help recipients attend and graduate without incurring debt.  Students receive a grant to assist them with tuition and school related expenses, as well as comprehensive support services to help them succeed academically.



Student eligibility:

  • Adopted from foster care after age 12 or aged out of NC foster care at age 18 (must have been in NC DSS care on 18th birthday)
  • Eligible until 26th birthday
  • Must be enrolled in one of the 74 North Carolina public colleges, community colleges, or universities.


Program Description:  Grants offered for up to 4 years, including fall, spring, and summer terms. Funds up to the school’s full cost of attendance after other public funds and scholarships have been applied.


Applications and additional information are available at



Many schools provide need-based and non need-based aid to their students.  This type of aid is usually referred to as "institutional aid" and varies by school.  The best source of information about this type of aid is the school's financial aid office.


Outside assistance or private aid comes from community groups and agencies.  Local organizations, churches, civic groups, and parent's employers are often sources of support.  Students with military backgrounds often are eligible for veteran's benefits to assist with education.


Students with special needs or disabilities can seek assistance from Vocational Rehabilitation.


Alternatives:  Is that all there is?

Many of you will not qualify for as much need-based aid as you had anticipated; some of you may not have any eligibility at all. But do not get discouraged, there are numerous options available to families in addition to the need-based aid programs.


Federal Unsubsidized Loan Program: Every student is eligible for a loan. If it has been determined that you are not eligible for the subsidized Stafford or Direct loan, then you are eligible for the unsubsidized loan. (By the way, this is why the companies will guarantee they will find you money for college!) You can borrow the same amount with the same repayment options; the only difference is that you must be responsible for the interest while you are in school (subsidized interest rate for 2010-11 is 4.5% and unsubsidized interest rate is 6.8%).  If you have qualified for less than the maximum loan limit in subsidized Stafford or Direct loan, you may receive the remainder of your eligibility in an unsubsidized loan.


Federal PLUS Program: PLUS is an acronym that stands for Parent Loan for Undergraduate Students. As parents, you are currently able to borrow up to the cost of education, less any financial assistance your student is receiving. This is a loan that you need to apply for each year and currently has a fixed interest rate of 8.5% for FFEL and 7.9% for DL.  As the program currently operates, you do not have to complete the FAFSA, if all you want is a PLUS loan. 


The Federal PLUS Loan program was expanded by HERA to include graduate and professional students.


Private Alternative Loans for students:. Some families have turned to private loan sources to supplement the federal loan programs.  If you need to borrow more money than is available through the federal education loan programs, consult with your financial aid office for the loan program information. They will offer information on programs they have found beneficial to their students.  As you choose a lender, pay particular attention to fees charged as well as the interest rate.


Payment Plans: If you are already planning to pay for college out of your monthly budget, check with the institutions you are considering for a monthly payment plan. Some institutions will have an outside organization handle their payment plan, while other institutions may offer their own payment plan.  This is an increasingly popular way of spreading the cost over the period of the academic year, instead of making large payments at the beginning of a semester.


Outside Scholarships: You should apply for scholarships from other sources, but there is a correct and incorrect way of doing so. The incorrect way to search for scholarships is to pay a fee for an organization or individual to locate scholarships for you. In almost every case, the information you are paying for is already free and readily available. The correct way is to locate this information without paying a fee. You will find information about scholarships from your high school guidance office, institutions you are applying to, and most importantly, from the Internet.


Tax Credits and Deductions


In 1997 and again in 2001, the Congress enacted legislation that provides tax relief to college students and their parents.  Some of the benefits are restricted by income; others are designed to help any family.  We don’t have time tonight to cover all of them in depth; if you use a tax preparer, ask him or her about the benefits. Or, access the CFNC Web site and click on paying for college and then tax savings to see details about who qualifies for the benefits. 



      American Opportunity Tax Credit (formerly Hope Tax Credit)

The American Opportunity Tax Credit is not really a scholarship…it is a credit parents can claim on their tax return for the tax year in which the expense was incurred…. For example, if you pay tuition for your freshman in the fall of 2009, when you file your 2009 return in early 2010, you may be able to claim a credit for some of those expenses.   The credit can be used to pay for tuition, fees and course materials (books, supplies and equipment needed for a course of study) for the first four years of college.


The credit is limited to a total of $2,500 and is calculated by allowing 100% of the first $2000 you pay and 25% of the next $2000 you pay, which is $500, for a total of $2500. If you pay less than $4000, you will not be able to claim the full $2500 credit.  Married couples filing jointly who have modified adjusted gross income of up to $160,000 ($80,000 for single parents) can claim the full credit for 2009.  Above that income level, the credit gradually phases out, with those earning up to $180,000 ($90,000 for singles) eligible to claim a partial credit.


A family that does not earn enough to pay income taxes will get up to $1,000 back – 40% refundable credit.




      Lifetime Learning

The Lifetime Learning tax credit can be used for undergraduate and graduate coursework as well as professional development courses that parents might take to enhance job skills.  There is no limit on the number of years this credit can be claimed.


For 2009, parents can claim up to 20% of their expenses (tuition, fees, and books) up to a maximum of $2000. 


The Lifetime Learning Tax Credit is restricted to families with incomes below $116,000 for joint filers and $58,000 for single filers.  Those with incomes between $96,000 and $116,000 ($48,000-58,000 for single filers) are subject to a reduced eligibility. 




      Tax deduction for higher education can reduce amount of income subject to tax by up to $4,000.  Qualified expenses must be for tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room and board.


Deduction is taken as an adjustment to income on Form 1040 or 1040A.


Taxpayers with qualifying incomes ($160,000 and lower for joint filers and $80,000 and lower for single filers) may deduct up to $4,000 in 2009 for qualified tuition and related expenses.


Cannot claim this deduction if filing status is married filing separately or if another person can claim an exemption for student as a dependent on his or her tax return.


Eligible student is a student who is enrolled in one or more courses at an eligible educational institution.


To continue your investigation of student financial aid, you may wish to read additional publications or surf the web.  


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