This is some good stuff. I just saw a classified ad that read:
"The Federal Government is sending out checks for $10,000 to any American that desires to increase their earnings potential, improve their quality of life, benefit their community, set an example for their children, and generally get ahead in life. To qualify, you can't be rich and you can't be lazy."
Alright, it wasn't a classified ad, I made it up...sort of. While my ad is seemingly ridiculous, it's a pretty good translation of one of the provisions in the recently enacted American Recovery and Reinvestment Act that President Obama signed into law on February 14th. In essence, the Act provides a $2,500 tax credit for up to four years of post-secondary education--a.k.a. college.
In order to claim your tax credit, you must be enrolled in college, earn less than $80,000 if you're single or married filing separately or $160,000 if you're married filing jointly, and your education must cost at least $4,000 annually. The way the credit is worded is that $2,000 is a 1 for 1 offset against the costs of your education. The next $500 in credit is on a 1 for 4 offset on the next $2,000 of costs. In other words, spend $4,000 and you get $2,500 back through the tax credit. This is a very, very good thing.
If you're not sure how to take advantage or what all the right steps are to go back to school, don't fret, just keep reading.
Step 1: Select and Enroll in a Program
In selecting a program, pick one that meets at least these three criteria: (1) something related to what you want to do, (2) something that you have the skills to complete, and (3) attend a properly accredited institution. If you follow at least these three guidelines, your educational experience will give you enjoyment, confidence, and respect.
If you're not sure what you want to do, don't worry. Most people don't figure this out until very late in their careers, if at all. Even if you aren't completely sure, try to find something that you could see yourself doing day in and day out for the next decade or more.
As for your current skills, think about what you are good at. Some are great communicators and will do well in sales. Some are very good with their hands and might make good mechanics. Still others are great at organization and would be very good administrators. Something that you should note is that whether you are in sales, auto repair, or administration, there are jobs for those with low skills that pay $25,000 annually and there are also those in each of these fields making six figures. The difference in pay is related to education being translated into job performance.
After you've selected a program, go ahead and complete an enrollment application. This is usually a simple form and most colleges will require a small fee to accompany the application. For adult learners, exams such as the SAT or ACT are often not required so you need not fear such things. If you are going back for an advanced degree, the LSAT, GMAT, or GRE may be required, but you should consult with your selected school's office of admissions.
Step 2: File Your Tax Returns
Murphy's Law--one of them anyway--says before you can do something, you have to do something else first. In this case, before you can submit your Free Application for Federal Student Aid (FAFSA), you should first file your tax returns. To do this, I recommend FreeTaxUSA.com whose banner is below.


Step 3: Submit FAFSA and Financial Aid Paperwork
The FAFSA is actually a pretty simple form to complete if you have all of the documents you need. These documents include the following:
- Social security number
- Driver's license or state issued ID
- Your 2008 federal tax return
- Your parents' 2008 federal tax return, if you are still a dependent
- Current bank and investment statements
- Alien registration or permanent resident card, if not a U.S. citizen
Having these documents available will help you finish the application quickly and relatively painlessly. When you're ready to begin, click here to reach FAFSA's website. Please note that there are important deadlines for federal and state financial aid so be sure to know when the FAFSA is due.
In addition to the FAFSA, you should also complete any financial aid paperwork required by the financial aid office at your school of choice. By completing the FAFSA and your school's financial aid application, you can be sure that federal and state aid will be credited to you properly.
Step 4: Finance the Gap
Even if you qualify for federal or state grants, there will still be a significant gap that will need to be paid somehow or another. This gap can be filled in many ways depending on your situation. In order of best to worst, here is a list of how to finance your education:
- Federal and state grants - if you qualify, you will be notified through the financial aid process at your school. There are a wide range of grants available, but most are reserved for low income households and the disadvantaged.
- Tuition reimbursement - if you're fortunate enough to work for an employer that will pay for your education, take advantage of it. Employers offer these benefits because studies have shown that employees typically stay longer and are more productive if tuition benefits are paid. One caveat: most require a minimum tenure after completing your courses so be sure that you'll want to stick around for that length of time.
- Scholarships - there are billions of dollars in scholarships and anyone that is willing to put in the time can be confident that some money will flow in. One of the amazing things about scholarships is that they are available to a wide range of individuals and some are as simple as having the right last name. To complete a search, use FastWeb or ScholarshipExperts. Both services make finding scholarships easy.


- Cash - the next best source of funding is cash out of your own pocket. While it will certainly put a cramp in the budget, it beats paying interest. Use it if you have it.
- Federal student loans - there are two kinds of federal student loans bearing the Stafford name. Subsidized means that interest will be suspended during while you are enrolled in school while unsubsidized means that interest will accrue from the time the loan is disbursed. Start with SimpleTuition.com.

- Private student loans - if you are attending a pricey institution (I would question whether this is a good idea or not), you may need to obtain a private student loan to fill the gap. These loans are typically at higher rates and have less favorable terms than Stafford loans. However, if it is necessary, then a private student loan through a big name bank can take care of the difference.
Step 5: Translate Your Education
The English word education has its roots in the Latin word educo which means to foster or draw out. The single most critical factor in increasing your earnings as a result of education is how well you translate your education into useful, on the job skills. This factor is why traditional college graduates enter the workforce in their early twenties and have a difficult transition. It is also why I typically suggest traditional graduates go back to school later to earn a Master's degree.
If you are able to take what you learn in school and apply those learnings properly to your career, you will increase your earnings as a result. While the academic world can sometimes seem like a parallel universe to the real world, the lessons that are taught are valuable if, and only if, they can be translated to the job. To put it another way, if you're going there to get good grades, but can't translate it into the real world, don't bother going--or become a professor.
Summing Up
Education is one of the core tools that helps people increase their earnings. Formal education through colleges and universities serves the purpose of teaching valuable lessons that can be applied to your career and those that understand this and take advantage of it will have a far easier path to financial security than those that do not.
If you know you should go back to school, but don't do it under these tax incentives, you're crazy. Think about it. When was the last time the federal government told you, "We have a check for $10,000 with your name on it." The answer: NEVER!