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Free Application for Federal Student Aid (FAFSA)

Federal Student Aid, a part of the U.S. Department of Education, is the largest provider of student financial aid in the nation. At the office of Federal Student Aid, our 1,200 employees help make college education possible for every dedicated mind by providing more than $150 billion in federal grants, loans, and work-study funds each year to more than 13 million students paying for college or career school. We are proud to sponsor millions of American minds pursuing their educational dreams.

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Ten Steps to a Strong Scholarship Application

How to simplify applying for scholarships:

Scholarships do not have to be repaid, which makes them an excellent way to pay for college. There are thousands of scholarships available, so, to increase your chances of getting an award, apply for more than one. Begin researching scholarships and requesting applications throughout the spring and summer of your junior year of high school. This will give you time to meet each application deadline. Here are ten suggestions for simplifying and streamlining your scholarship application process.

  1. Get organized. Purchase an expandable file. This will allow you to keep and protect copies of your scholarship applications or printouts of applications that were submitted online.
  2. Have your photo taken. Some applications request a photograph, which should be a simple head shot.
  3. Draft a good resume. Prepare an academic resume that includes all organizations, clubs, volunteer work, and extracurricular activities you have participated in. Include honors and awards you have received from the ninth grade on, both from your school activities as well as from non-school activities.
  4. Request recommendations. Gather at least three recommendations. Ask teachers, counselors, and members of the clergy early. Avoid including recommendations from family members or fellow students.
  5. Obtain your high school transcript. Keep copies of your high school transcript available in case it is requested as part of an application. If a scholarship committee does not specifically ask for an official transcript, include only a photocopy. If the committee requests an official transcript, request one from your school.
  6. Write general essays ahead, then customize. Essays are often one element of a scholarship application. You can draft up something general on your goals, achievements, and financial need. Always be sure that you tailor your response to address the specific topic.
  7. Set up a simple, conventional email address. Make sure you set up and use an email address that represents you well and that doesn’t sound odd or offbeat.
  8. Track due dates. Pay close attention to all due dates and track them on a calendar. Applications will not be considered if they are not received by the due date.
  9. Submit your application exactly as requested. For example, if the scholarship committee asks for the application, transcript, resume and two letters of recommendation, make sure the documents are presented in that order.
  10. Make copies before submitting. If you have a paper application, make a copy for your records before sending. It is recommended that you send an application with delivery confirmation so you have proof that it arrived before the deadline.


What Parents Need to Know About College Planning

1) Begin researching and planning your child’s college budget.

Parents who start the college planning process early have an advantage. They can help their teen begin to gain confidence freshman year, knowing that they have a sound financial plan in place to pay for their education.

In 2011, the average price for tuition, room and board for a college freshman rose to $13,600 at public institutions and to $36,000 at private non-profit universities — an increase of more than a third since last year, according to the National Center for Education Statistics.

“If you do the right research up front, then you are going to pick a school that not only has our child’s best interest at heart, but also has a substantial financial aid package,” said Scott Weingold, a national college financing expert and co-publisher of

Parents and students should work together to identify potential scholarships and monitor deadlines for the awards. The bulk of college scholarships are reserved for high school seniors, however, students can begin earning money sooner.

The Scholastic Art & Writing Awards is among the scholarships that can build a college nest egg for young students. In the past five years, the contest, open to teens in grades 7-12, has contributed more than $25 million in scholarships to winners.

2) Help your student shop around for the right deal.

If your student can’t raise enough money for college through scholarships and family contributions, they may have to consider student loans. Nearly 7 in 10 undergrads have student loans.

Students seeking Stafford Subsidized Loans must meet financial requirements because the loans are based on need. The loans provide up to $3,500 per year to freshman and up to $5,500 per year for seniors. Interest does not accrue on the loan while a student is in school at least half time.

Stafford Unsubsidized Loans have no financial requirements. They accrue interest from the time funds are disbursed to the school. Independent freshman can qualify for up to $6,000 annually through the federal loan.

Knowing that they have to pay the tab for some of their education could help a student narrow down their field of choices to a campus that meets their needs and is affordable.

3) Get them ready to stand on their own.

Planning for college during freshman year also means preparing a student to be more responsible during high school. The college years shouldn’t be a student’s first taste of independence or extended stay from home.

Sign them up for summer programs that allow them to spend weeks away from home enjoying a hobby, studying a subject of interest or volunteering. Some universities offer a summer pre-college experience to give students a chance to learn their surroundings and take college classes.

Such programs teach students valuable lessons about co-existing with a roommate they don’t know. They also learn how to care for their basic needs. The more self-sufficient a rising freshman becomes, the more successful they will be throughout high school and when they attend college.

4) Don’t worry, detachment is part of growing up.

If you have done a great job helping your child mature, don’t be offended if they detach from you a bit now that they are in high school. Let them explore their surroundings without feeling guilty.

“They are testing a sense of independence that they have never experienced before,” explained Catalina Hernandez, a retention coordinator in the Illinois College Advising Corps. “Give them time, they will need you again and they will reach out.”

5) Encourage involvement in activities that interest your child.

The more activities a child is encouraged to participate in, the more he or she will discover new interests and hobbies that could help shape education and career goals. Extracurricular activities also enhance resumes and make a student’s application more appealing to colleges.

Ultimately, parents need to hit the ground running during their child’s freshmen year of high school. They should promote independence and involvement in new activities, but let their child know that college is imminent if they want it by being open about the costs and ways your family is going to pay for college.


Tax Benefits

Overview of Education Tax Benefits

Students and their families can get money for college by filing their federal income tax returns. These education tax benefits include tax deductions and tax credits for college savings, tuition and fees, scholarships, employer tuition assistance and student loan interest. Tax deductions reduce the amount of income that is taxed, while tax credits directly reduce the amount of taxes paid.

Most of the tax deductions are above-the-line exclusions from income, which reduce the taxpayer’s adjusted gross income (AGI). Taxpayers can claim these deductions even if they don’t itemize. The reduction in AGI may help them qualify for other tax benefits and for more need-based financial aid. Thus an exclusion from income may provide both direct and indirect financial benefits. Other tax deductions are below-the-line or itemized deductions that reduce the amount of taxable income.

Some of the tax credits are refundable and some are not. When a tax credit is not refundable, the tax credit is capped at the taxpayer’s tax liability.

Most of the education tax benefits are restricted to taxpayers who file federal income tax returns as single or as married filing jointly. Married taxpayers who file separate federal income tax returns are not eligible.

Picking the best mix of education tax benefits can be complicated, in part because of Internal Revenue Service (IRS) rules that prevent double dipping. Taxpayers can’t use the same educational expenses to justify more than one education tax benefit.

Summary of Education Tax Benefits

A summary of the various education tax benefits appears in the following tables.

American Opportunity Tax Credit$2,500 tax credit per student
100% of first $2,000
25% of second $2,000
Limit: First 4 years of postsecondary education
Must be degree-seeking, enrolled >= half-time
40% refundable ($1,000), not subject to AMT
Reverts to Hope Scholarship after end of 2017
Tuition, fees and course materials (such as textbooks, supplies and equipment)2014 Tax Year
$80,000 to $90,000 (single)
$160,000 to $180,000 (joint)2015 Tax Year
Lifetime Lerning Tax Credita$2,000 tax credit per tax return
20% of first $10,000
Unlimited number of years
Does not need to be degree-seeking
Tuition and fees2014 Tax Year
$54,000 to $64,000 (single)
$108,000 to $128,000 (joint)2015 Tax Year
$55,000 to $65,000 (single)
$110,000 to $130,000 (joint)
Tuition and Fees Deduction$4,000 exclusion from income
Reduced to $2,000 in income phaseout band
Unlimited number of years
Expires after the end of 2014
Tuition, fees and, if required by and paid to the school, textbooks, supplies and equipment.2014 Tax Year
$65,000 to $80,000 (single)
$130,000 to $160,000 (joint)2015 Tax Year
Employer Tuition Assistance$5,250 exclusion from income per employee
Unlimited number of years
Does not need to be degree-seeking
Tuition, fees, books, supplies, equipmentNone
Business Deduction for Work-Related EducationExclusion from income for qualifying work-related education expenses greater than $5,250 if the expenses are a working condition fringe benefit. The education must be required by the employer or law to keep present job, salary and/or status, but cannot be necessary to meet minimum educational requirements of present trade or business or to qualify employee for a new trade or business. Unlimited number of years.Tuition, fees, books, supplies, equipment, transportation, travelNone
Tuition Gift Tax ExclusionTuition paid directly to a college or university is not subject to gift taxes. May be treated as untaxed income to the student on the FAFSA, affecting eligibility for need-based financial aid.
Unlimited number of years
Tuition onlyNone
Student Loan Interest
$2,500 exclusion from income for interest on federal and private student loans
Unlimited number of years
Student loan interest2014 Tax Year
$65,000 to $80,000 (single)
$130,000 to $160,000 (joint)2015 Tax Year
Student Loan Forgiveness, Cancellation and Repayment AssistanceExcluded from income if forgiveness is conditioned upon working for a period of time in a particular profession for any of a broad class of employersAmounts of cancelled or forgiven student loan debt for student loans made by government agencies or educational institutionsNone
Scholarships, Fellowships and GrantsExclusion from income of amounts spent on qualified expenses if the student is a degree candidate and the scholarship is not payment for services. The full amount is exempt from FICA whether or not the student is a degree candidate.
Unlimited number of years
Tuition, fees, required course-related materials (books, supplies, equipment)None
529 College Savings PlansEarnings are tax-deferred. Qualified distributions are excluded from income. The earnings portion of a non-qualified distribution is taxed at the beneficiary’s rate and subjected to a 10% tax penalty.
Unlimited number of years
Tuition, fees, books, supplies and equipment, expenses for special needs services. Room and board if enrolled at least half-time.None
Prepaid Tuition PlansEarnings are tax-deferred. Qualified distributions are excluded from income. The earnings portion of a non-qualified distribution is taxed at the beneficiary’s rate and subjected to a 10% tax penalty.
Unlimited number of years
Tuition, fees, books, supplies and equipment, expenses for special needs services. Room and board if enrolled at least half-time.None
Coverdell Education Savings AccountsEarnings are tax-deferred. Qualified distributions are excluded from income. The earnings portion of a non-qualified distribution is taxed at the beneficiary’s rate and subjected to a 10% tax penalty.
$2,000 annual contribution limit from all sources through age 18
Must be used by age 30 unless special needs
College tuition, fees, books, supplies and equipment. Room and board if enrolled at least half-time. Elementary and secondary school expenses (tutoring, room and board, uniforms, transportation).2014 Tax Year
Phaseout on contributions:
$95,000 to $110,000 (single)
$190,000 to $220,000 (joint)2015 Tax Year
Education Savings Bond ProgramExclusion from income of interest on Series EE bonds issued on or after January 1, 1990 and all Series I bonds.
Unlimited number of years
Tuition and fees, or rollover into a 529 plan, prepaid tuition plan or Coverdell ESA2014 Tax Year
$76,000 to $91,000 (single)
$113,950 to $143,950 (joint)2015 Tax Year
$77,200 to $92,200 (single)
$115,750 to $145,750 (joint)
Kiddie TaxUnearned income between one and two times the standard deduction for a dependent may be taxed at the child’s rate, depending on the age of the child.All expenses allowed.None
Early IRA Distributions for Higher EducationNo 10% additional tax penalty on early distributions from an IRA for qualified education expenses, but earnings are otherwise still taxable as ordinary income.
Unlimited number of years
Tuition, fees, books, supplies, equipment and expenses for special needs services. Room and board if enrolled at least half-time.None
Roth IRAA return of contributions from a Roth IRA is excluded from income, but may nevertheless affect eligibility for need-based financial aid.All higher education expenses2014 Tax Year
Phaseout on contributions: $114,000 to $129,000 (single), $181,000 to $191,000 (married filing jointly) and $0 to $10,000 (married filing separately)2015 Tax Year
Phaseout on contributions: $116,000 to $131,000 (single), $183,000 to $193,000 (married filing jointly) and $0 to $10,000 (married filing separately)
Loans from Retirement PlansQualified retirement plan participants may borrow up to half of the vested account balance with a 5 year repayment term. This includes 401(k), 403(b) and government retirement plans, but not IRAs.All expenses allowed.None
Hardship Distributions from 401(k) and 403(b) Retirement PlansPlan participants may take a hardship distribution from a 401(k) or 403(b) retirement plan to pay for college tuition, fees, room and board. Distributions are limited to elective contributions. Hardship distributions may be subject to the 10% early distribution tax penalty.Tuition, fees, room and board.None

Additional Information

IRS Publication 970, Tax Benefits for Education (PDF), provides additional detail on the various education tax benefits.

The IRS also publishes a special information center on Tax Benefits for Education and interactive tax assistants for evaluating eligibility for the education tax credits/deductions and student loan interest deduction. See also IRS Tax Tip 2010-30. Questions about education tax benefits are among the most frequently asked questions received by the IRS.

Many students file federal income tax returns for the first time when enrolled in college. IRS Publication 17, Your Income Tax, provides a good introduction, covering such topics as filing status, personal exemptions, withholding, estimated tax, standard deductions, itemized deductions, income tax and tax credits.

Income phaseouts are updated annually by the IRS. The 2013 income phaseouts were published in Revenue Procedure 2012-41 and Revenue Procedure 2013-15. The 2014 income phaseouts were published in Revenue Procedure 2013-35 on November 18, 2013. The 2015 income phaseouts were published in Revenue Procedure 2014-61 on October 30, 2014.

The US Government Accountability Office (GAO) published a report, Multiple Higher Education Tax Incentives  Create Opportunities for Taxpayers to Make Costly Mistakes  (GAO-08-717T, May 1, 2008), which finds that the complexity of the many education tax benefits leads to suboptimal behavior by taxpayers. Some eligible taxpayers do not claim the education tax benefits. Others could have obtained a greater reduction in their tax liability by claiming a different mix of tax credits and deductions.

DISCLAIMER: The information contained on this web site is provided for general informational and educational purposes and is not, nor intended to be, legal, financial or tax advice. The publisher is not authorized to practice in front of the IRS and is not subject to IRS Circular 230. This information is general in nature and may not apply to the specific circumstances of individual readers. No claims are made about the accuracy, timeliness or usefulness of the content contained on this web site or any site linked to this site. Users of this site should seek specific guidance directly from a qualified legal, financial or tax professional. Nothing contained on or provided through this site is intended to be or is to be used as a substitute for professional advice.


Parents, Click Here for Information on Educational Tax Benefits