What Is A Student Loan
A student loan is money borrowed from the government or a private lender in order to pay for college. The loan has to be paid back later, along with interest that builds up over time. The money can usually be used for tuition, room and board, books, or other fees. But some students use their loan money for other stufflike trips to Jamaica for spring break.
Lets be clear: Student loans are different from scholarships and grants. Loans always have to be paid back . Scholarships and grants, on the other hand, dont need to be paid back . Student loans are also different from work-study programs, where students get paid to work on campus.
Speak With The Financial Aid Office About Your Options
Each individual college has its own policy for tuition payment plans. If youre interested, ask your schools financial aid office about your options.
As you research and apply to schools, make sure to consider the cost of tuition. By understanding the costs and how to cover them, you can make the best choice for your educational future.
Maya Dollarhide contributed to this report.
The Tuition And Fees Deduction
The deduction for tuition and fees expired on December 31, 2020. However, taxpayers who paid qualified tuition and fees in 2018, 2019 and 2020 could claim a maximum deduction of $4,000. The loss of this deduction highlights how useful a 529 college savings plan can be for saving money on college expenses.
You could get this tax break if you covered the cost of those qualified education expenses for a college student such as yourself, one of your dependents or your spouse. Qualified education expenses include tuition and other fees that students are obligated to pay in order to attend a particular institution. But you cant deduct expenses that you paid for with a scholarship or another tax-free award.
Youre ineligible for the tuition and fees deduction if you and your spouse are filing separate tax returns or you were a nonresident alien for part of the tax year. You cant claim the tax break if your income is higher than a certain threshold either. If your modified adjusted gross income is above $80,000 , you cant qualify for the deduction. Note also that this is an above-the-line deduction. That means you dont have to itemize deductions in order to take advantage of it.
Don’t Miss: Grammarly Free Trial For Students
Risks Of Paying For College With A Credit Card
Using credit cards to pay your tuition is not without risks:
- Fees may exceed any rewards you earn. Fees are common when paying tuition with a credit card. It’s rare to find a card rewards rate of more than 2%-but you are likely to pay at least this much to charge your tuition expenses to a card.
- You are likely to pay more in interest than you would with a student loan. In 2019, credit card interest rates average about 17%. The rates for federal student loans for the 2019-20 school year, meanwhile, range from 4.5% to 7%.
- You lose out on some features unique to student loans. There are multiple options available for repaying federal student loans such as repayment plans linked to your income, interest-only repayment or deferment. These options disappear when you charge tuition to a credit card.
- You could put your credit at risk. Paying tuition with a credit card raises your credit utilization, which could lower your credit score immediately. And if you fail to pay your credit card debt, your score is certain to drop even further.
What Is A College Tuition Payment Plan
Instead of paying for college tuition at the beginning of each year, semester, or quarter, college tuition payment plans also known as tuition installment plans or deferred payment plans allow students and their families to spread out the cost of tuition over a period of time.
Depending on the school, the plan may allow payments to be made over the course of the semester or over the full year.
While youll generally have to start making payments right away, programs frequently offer the option to spread payments into monthly installments. Some schools also offer programs that break the payment into a few equal payments throughout the semester.
Read Also: Is Grammarly Cheating
Sidney Wang’s Love Of Jewelry Led To An Online Etsy Shop That’s Booked $35488 So Far This Year
Sidney Wang was making minimum wage at a milk-tea company in August 2020 when she decided to open her own jewelry business. That same month, she opened an online Etsy shop called GemsbySidney.
Business started booming in January 2022, when one of her TikTok videos promoting the Etsy shop went viral and accumulated almost 600,000 views. Before that, the shop’s success primarily came from word of mouth Wang’s family and friends told other people about her shop. She also posted consistently on and TikTok, but said that her accounts gained many more followers after her video went viral.
From January to June of this year, she booked $35,488 in sales, Insider verified with documentation. By the end of 2022, she expects to earn $47,000 $14,000 more than last year.
“I didn’t think my business was going to blow up the way it did,” she said.
Wang said a lot of the money she makes from her Etsy shop goes towards paying her current college expenses: Her tuition is usually $3,900 a semester and rent is $550 a month. She also recently bought a car with her earnings.
“It’s all 100% from my business,” she said.
How Do Payment Plans Work
Some colleges run their own tuition payment plans. Others use an outside service to administer the plan.
Typically these payment plans only cover the direct costs charged by and paid to the college, such as tuition and fees. Sometimes the cost of housing and meal plans will also be included under a tuition fee payment plan. The cost of things like textbooks and school supplies are not usually included in these payment plans.
Many tuition payment plans require an enrollment fee, which may fall around $50 or $100, although it may be lower. These plans dont usually charge interest, which can potentially make them less expensive than taking out a student loan, as long as you are able to make the monthly payments.
You May Like: How Much Are College Classes
Employer Payment Or Reimbursement
Some employers will pay for expenses related to your education or reimburse you. Also, some universities have programs in which they provide discounts to students from specific organizations, like the Learning Partnership program here at Columbia Southern University.
Each employer has their own guidelines, so make sure you understand the requirements to avoid losing benefits or having to pay funds back to your employer.
Whats An Installment Plan
An installment plan isnt a brand-new concept. You may have used an installment plan to pay back a loan. It simply means you pay for an item in fixed amounts at specified intervals you make small payments over time.
An installment plan for college can have several different names:
- Monthly payment plan
Don’t Miss: Uei College Pharmacy Technician
How Do Tuition Installment Plans Work
Tuition installment plans are designed to help you manage college expenses without breaking the bank.
Instead of paying your students college bill for a semester or quarter all at once, you pay in monthly installments. In many cases, the first payment is larger than the ensuing payments.
Your bill must be paid in its entirety by the end of that academic period.
Most plans do not charge interest if you pay by check or direct deposit.
Why You Shouldn’t Pay For College On A Credit Card
There is one main reason why you shouldn’t use a credit card to pay for tuition the fees.
The math says it all: If your college or university charges a convenience fee of 2.5% for credit card payments, every $10,000 you pay in tuition will come with an additional $250 in fees. Even if you are using a no annual fee credit card, the additional costs that come with charging a tuition payment can add up quickly to outweigh any cash back or rewards you may be redeeming.
Also Check: What Shots Do I Need For College
The Only Time Using A Credit Card To Pay For Tuition Makes Sense
The key determining factor when deciding whether to use a credit card to pay for tuition is if the benefits outweigh the cost.
“Bonus reward points, introductory interest-free repayment periods and cash back can tip the scales in favor of using a credit card if the balance is repaid before standard rates and fees are added,” McClary says.
The U.S. Bank Visa® Platinum Card is one of the best low interest cards with its 0% introductory APR for the first 20 billing cycles on new purchases . This is one of the longest interest-free periods for both balance transfers and purchases. Balances must be transferred within 60 days from account opening.
If you were to use a card like this one, you would have 18 months to pay off your tuition payment but it is essential that youpay off the full balance before the 0% introductory period ends. If you fail to pay off your balance, or if unexpected life events arise that make it impossible, you will be charged with a high APR and end up having to pay more than you needed to in the first place.
Transferring The Tuition Amount
If there is any amount left over after your child has claimed the tuition amount, they have two choices: transfer it or carry it forward. This comes up a lot since students dont typically earn a lot of income while going to college or university.
Your child can transfer up to $5,000 of the tax credit, less the amount used to reduce tax owing. So if they reduced their tax owing by $1,000, the most that can be transferred is $4,000. The tuition amount can be transferred to their parent, grandparent or spouse/common-law partner.
You May Like: Testing Out Of College Classes
Can You Pay For College With A Credit Card
Depending on what your college or university bursar’s office allows, you may be able to pay your tuition with a credit card.
While you can get enhanced flexibility and may even earn rewards points by paying tuition with credit, you will likely have to pay fees and could end up spending much more on interest. Most financial experts would advise you that paying your tuition with credit cards should only be used a last resort as you work to negotiate payments directly with your college or university.
Pay The Monthly Installments
After getting signed up, all your student will need to do is make sure that the monthly payments are sent on time. If they use direct debit, all that theyll usually need to do is ensure that they have enough in their bank account to cover the payment. If they are using an alternative approach like paying by check theyll need to send out the payment to ensure it arrives at the right place by the due date.
Its important to note that the monthly installment is the minimum amount your student needs to pay by the due date. Usually, paying extra is allowed, and it could be a wise move for students that have the ability to tackle the balance early. Then, once the balance is paid off, they can use the money they would use for the monthly payment and set it aside for the next quarter or semester, allowing them to functionally get ahead.
If your student is trying to figure out how to pay for college tuition and other educational expenses, scholarships can make it easier. If you and your student want to learn more about how scholarships can help them graduate debt-free and how to find amazing scholarship opportunities, sign up for our free college scholarship webinar! Take a trip over to to reserve your spot today.
Don’t Miss: Are Summer Classes Easier
Is Tuition Per Year Or Per Semester
Different schools have different rules for when college tuition is due, but youll usually need to pay before the start of each semester or at the beginning of each trimester or semester.
For example, at some colleges, tuition for the fall semester might be due in August, while others might require payment for the fall semester to be paid later.
The bursars office at your college should provide you with information on exactly when payment is due. Schools may also charge late registration fees or impose other late charges if you fail to make tuition payments by the deadline set by the school.
Most schools do not require you to pay tuition for the entire year up front. However, if you receive financial aid, the grant or loan you receive typically covers a full academic year. According to the Department of Education, when you receive a grant or loan for the full academic year, your school typically pays out your money once per term, or twice per academic year.
If it is too hard for you to pay your entire tuition when the semester first starts, you can discuss with your school how college payment plans work so you can find out if choosing a payment plan would make attending school more affordable.
What Are The Drawbacks Of Using A Tuition Payment Plan
While tuition payment plans for college can be a great deal, there are drawbacks. Usually, the biggest one is that the full semester or quarters balance has to be paid in full by the end of the term. Students cant defer until they graduate, something that they have the ability to do with most student loans.
Since students cant defer, they will commonly need a source of income while they are attending classes. Many students find that having to work and study is challenging, and it may not be ideal for students who want to take larger course loads.
Next, while the setup fees are modest, they are an added expense. There can be other fees, too. For example, the college may charge extra to take payments by credit card, or there may be a late fee for a payment after the due date.
Finally, unlike student loan interest, any fees a student pays while using a tuition payment plan arent tax-deductible. In most cases, this is a small drawback, but it is one, nonetheless.
Also Check: Mount Union College
Advantages Of Tuition Installment Plans
Tuition installment plans are a good alternative to long-term student loan debt.
- Tuition installment plans are less expensive than student loans. They have a modest up-front enrollment fee of approximately $100-$150 and do not charge interest.
- Installments are typically spread over the period of a year or slightly less.
- Tuition installment plans offer convenient automatic withdrawal from the payers bank account or credit card.
- Tuition installment plans generally do not require a credit check.
Ali Dieguez Combined Her Passions For Fitness And Thrifting Into A Resale Business That Booked $13740 In Sales Last Year
Ali Dieguez always enjoyed thrift shopping while she was in college: On her way home from the gym, she’d stop by the thrift store next door to find pre-owned brand-name athletic wear. When she’d find a few pairs of Lululemon leggings that weren’t her size, she’d post them on Poshmark, a resale platform.
But it wasn’t until she returned from her semester abroad that she realized resale could provide viable income and flexibility around her busy schedule. She started selling activewear on Poshmark in January 2020.
Months later, demand for casual clothes picked up during the pandemic. “The one thing that people were trying to do was work out in quarantine,” she said.
As governments lifted restrictions, Dieguez broadened her inventory to other clothing like dresses and denim. She also lists items on other resale platforms such as eBay, Mercari, Depop, and Curtsy to tap the wide scope of customers.
In 2021, Dieguez made $13,740 in sales on Poshmark, which Insider verified with documentation. The 23-year-old put $3,668 of her earnings toward her tuition at San Diego State University last year.
To manage both school and her business, Dieguez meticulously scheduled her classes, gym time, homework, Muay Thai training, and resale work. Typically, she woke up at 5 a.m. and went to bed around 7 p.m. “I was kind of boring,” she said. “I had the same schedule basically every day, but it worked.”
Read Also: Universities That Accept Low Gpa For Masters
Carrying Forward The Tuition Amount
Alternatively, your child could carry forward the leftover amount to claim in future years. This is also done by completing Schedule 11 or selecting Tuition Fees Carryforward in the Student section of TurboTax. Theyll more than likely be able to use the tax credit once they start working full-time and earning more money. They have to claim the carry forward amount in the first year that they have to pay income tax and CRA will apply this amount automatically when needed.
Disadvantages Of Tuition Installment Plans
There are a few disadvantages to tuition installment plans.
- Service fees for tuition installment plans can add as much as three percent to your bill.
- Some colleges charge an additional fee if you pay by credit card or pay late. To determine your colleges policy, check with its bursars office.
- The fees for a tuition installment plan are not eligible for the student loan interest deduction.
You May Like: Do Credits Expire
Companies That Offer Tuition Reimbursement
Even though reimbursement conditions might differ from one employer to the next, its still good to be aware which companies offer this benefit when youre on the job hunt.
Here are a few of the companies that offer tuition reimbursement:
- Target up to $5,250 for an MBA degree
- UPS up to $25,000 in tuition assistance
- Home Depot up to $5,000 annually for tuition assistance
- Starbucks full tuition covered for a bachelors degree through Arizona State Universitys online program
- Chipotle up to $5,520 in tuition reimbursement
- Wells Fargo up to $5,000 in tuition expenses annually
- Amazon up to 95% of tuition fees for in-demand degrees
- AT& T up to $25,000 in tuition reimbursement after one year with the company
- Verizon up to $8,000 annually in tuition assistance
- Intel 100% reimbursement for courses taken through Intel University
- Proctor & Gamble up to $40,000 tuition reimbursement for pre-approved courses
- Deloitte full reimbursement on graduate studies after two years with the company
- FedEx up to $5,000 annually in tuition assistance
- McDonalds up to $3,000 annually in tuition assistance
This list isnt exhaustive and is subject to change, so its best to check with an HR manager to see what the current offer is for tuition reimbursement.