Like free tuition programs, for one.
Brace yourself. The cost of college is expected to double in the next 10 years. Historically, college costs have grown much faster than inflation, increasing around five percent to six percent each year beyond it with no sign of slowing. As a result, paying for college is now a huge source of stress for many American families.
Luckily, there are a few ways the government makes that unsettling sticker price more manageable. After all, a study by the Lumina Foundation found that a college degree increases life expectancy by seven years, makes you almost five times less likely to go to prison, and significantly increases the likelihood of being happy.
Read on for the best ways you can benefit from the government’s help when it comes to paying for college.
Individual Investment Accounts
For most people, tax-advantaged investment accounts should be the main focus. With tax-free growth and tax-free withdrawals for higher education, 529 college savings plans are often the best way to save for college. To calculate how your investments might grow, check out the calculators on CollegeBacker.com.
A Coverdell Education Savings Account shares many of the benefits of a 529 plan — with the important difference that it allows you to pay for K-12 school expenses, too. So, these accounts can be an especially good choice for families who are also planning to send their children to expensive private elementary or secondary schools. However, Coverdell accounts have a contribution limit of $2,000, which can constrain your ability to save aggressively for college.
Free College Programs
Be sure you’re well-versed in the free college programs available. In order to attract and educate the best and brightest our country has to offer, the government has five service academies that provide free tuition, books, board, medical coverage, and dental care: The U.S. Military Academy (West Point, New York), the U.S. Naval Academy (Annapolis, Md.), the U.S. Air Force Academy (Colorado Springs, Colo.), the U.S. Coast Guard Academy (New London, Conn.), and the U.S. Merchant Marine Academy (King’s Point, New York). Of course, it can be difficult to gain admission, and there is a minimum five-year service requirement.
Additionally, many states and cities are now offering tuition-free community college and even four-year universities. For example, the Tennessee Promise Scholarship covers the remaining cost of tuition after other grants and scholarships are applied. Consult your local program for any limitations based on age, income, and academics. Locations currently offering free tuition to their residents include the states of Tennessee, New York, and Oregon, as well as the cities of San Francisco, Los Angeles, and San Jose.
Trim Your Tax Bill
Taking advantage of tuition-related tax credits and deductions can also save you significant amounts of money.
The Tuition and Fees Deduction can lower your taxable income by $4,000, as long as you have qualified tuition expenses and make less than $80,000 and $160,000 for single and married people, respectively.
The American Opportunity Tax Credit can be even better than the tuition deduction because the credit (up to $2,500 annually for each eligible student) directly reduces the taxes you owe instead of your taxable income. Just keep in mind that there are income limits (same as above), a four-year cutoff, and expense qualifications.
Lastly, check out the Lifetime Learning Credit. This $2,000 credit can be applied every year that you are in school, even beyond the traditional four years. It does, however, have lower income limits of $65,000 and $131,000.