Other Government Loans For School:
SMART Grants, Perkins Loans,
Tax Breaks & More

Government loan programs that are less-well-known than Pell or Stafford grants include:

The Federal Supplemental Education Opportunity Grant
A need-based award to undergraduate students enrolled in their first bachelor’s degree program. Funds for SEOG’s are relatively limited. While you are required to fill out the FAFSA form for these, the grants, when available, are administered directly through your school’s financial aid office (they’re known as “campus-based” grants).

National SMART Grant
If you’re already getting a Pell Grant, you may qualify for an extra $4,000 per year in aid through this grant, which you will receive only during the third and fourth years of a four year course of undergraduate study, and only if you maintain a grade average over 3.0. To qualify, you must be studying physical or computer science, engineering, math, technology or a major foreign language. Application is through FAFSA.

Federal Perkins Loan
A “needs based” loan program using a mix of government and private funds. You must be in school at least half time. If you are, the government will pay the interest on your loan until you complete school. Application is made through the FAFSA form. Your school will then inform you if you have received a grant.

Federal Plus Loan
Federal Plus Loans are available not to you, but to your parents. They can borrow an amount up to the difference between your total cost of attendance and the amount of financial aid you are receiving from any program. The loans are backed by the government, but administered by private lenders, who offer a very wide variety of repayment options. This type of loan can be found at institutions ranging from your local bank up to Sallie Mae. It takes some research, usually starting online, to start locating potential sources of funding of this type.

Watch Out About Dropping Out
Most of the government (and private) loan programs require you to remain in school on at least a part time basis. If you stop school completely for any reason, you may be required to start paying back both the principal and interest on an accelerated schedule. Again, it’s good to talk about this with your school’s financial aid office before accepting any loan money so you know what you’re getting into. You should also be aware that if you are truly unable to keep up with your loan payments, many states have “advocacy units” that can help you consolidate loans and deal with your lenders.

Don’t Forget About Tax Breaks
Beyond the low-interest federal loans available, there are several tax brakes that are particularly good for adult online students. The “Lifetime Learning Credit” allows you to subtract up to $2,000 per year from the amount of money you claim on your tax return if you are enrolled in an eligible school. You wind up paying tax on a lower income than you would otherwise.

That’s a plus for elearners, most of whom are working and earning money while they study. To get this credit, your school must file a 1098-T statement with the IRS, and you must submit a Form 8863 with your federal tax return. A particular bonus for adults who are gradually working towards a degree online is that there is no limit to how many years you can claim this tax benefit for.

The credit can also be applied to some non-degree courses. Your school’s financial aid office should be able to tell you which courses qualify you for this deduction. Keep in mind, however, that you can’t claim it if you are earning more than $55,000 per year as an individual or $110,000 per year as a couple filing jointly. This is a tax credit you can claim for your own education, unlike most other tax credits that are meant for families paying for a child’s college education.

Next: Private loans for online degrees