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Continue Your Education

Thinking about continuing education can be exciting, but thinking about how you’ll pay for it can be overwhelming. Fortunately, resources such as financial aid and scholarships can help. Consider the following ways to pay for your education.

Direct Subsidized Federal Loan

The government pays interest while you are in school with a direct subsidized federal loan. After you complete your studies, there is a grace period before you have to begin payments. These loans have a fixed interest rate that is usually a lower interest rate than private loans.

Direct Unsubsidized Federal Loan

With a direct unsubsidized federal loan, the government does not pay interest while you are in school. There is a grace period after school as well as a fixed interest rate that is typically lower than private loans.

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Private Loan

A private loan is funded by private lenders and can be either a fixed or variable rate loan. The interest rates tend to be higher than federal loans, and you may have to make monthly payments while still in school.


Scholarship money is generally tax free as long as certain conditions are met. Most importantly, the scholarship must not be compensation for services a student performs (exceptions apply). Also, the money must be used for tuition, fees, books, supplies and equipment required for coursework.

Tax Credits

There are two tax credits for qualified higher education expenses (tuition and certain related expenses). The American Opportunity Tax Credit can be as much as $2,500 per student and is available for any of a student’s first four years of college. The Lifetime Learning Credit is available for each year of post-secondary education, including graduate school and eligible job training. The maximum credit is $2,000 per taxpayer return (not per student). You cannot claim both credits for the same student’s expenses for the year. And the credits are reduced or unavailable if adjusted gross income (AGI) exceeds specified limits.


Family members are sometimes in a good position to help with college costs. For instance, a grandparent can give a grandchild up to $15,000 this year without having to file a federal gift tax return.* Or, tuition payments (any amount) could be made directly to the college with no gift tax consequences.

Retirement Accounts

You can withdraw money from individual retirement accounts (IRAs) to pay for college without having to pay the 10 percent early withdrawal penalty that usually applies before age 59½. However, distributions from traditional IRAs are subject to income tax.

Notices & Disclosures

* Assumes a return is not required for another reason

Article is adapted from content provided by DTS and EverFi.

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