Going Back to School? Nine ways to afford it
You’re never too old to go back to school. But college and university can be expensive, and finding the money to pay for tuition, books and fees – maybe even food and shelter, too – can test your resolve.
Dr. Alan Webb is a Chartered Accountant and Associate Professor at the University of Waterloo’s School of Accounting and Finance. “For mature students especially, money for education can sometimes be found in places they may not be aware of,” he says.
So, if you’re serious about finally getting that degree, here are some of Dr. Webb’s tips for finding funds in some often-overlooked places.
1. Check out Registered Education Savings Plans – If you established one of these for a child, both the contributions and associated earnings can be returned to you (the sponsor) if they’re not used. The contributions themselves are tax-free to the person who made them. And, if structured properly, the taxes on the earnings can be reduced too, especially if your income has dropped, as it might if you go back to school yourself. A Chartered Accountant can help you set this up properly to maximize tax savings.
2. Be a lifelong learner – If you have RRSP funds, the government has a plan for your continuing education or that of your spouse or partner. In broad terms, the Lifelong Learning Plan allows withdrawals to be made from RRSPs. Only full-time students or those with certain disabilities are eligible. Generally, the amounts must be repaid over a 10-year period and repayments must be complete before the end of the year in which the planholder reaches age 71. For detailed information, visit the Canada Revenue Agency website at www.cra-arc.gc.ca.
3. Claim the Education Tax Credit, tuition and text book amounts – In addition to a credit for tuition payments, the Education Tax Credit allows full-time, post-secondary students to claim $400 federally and $490 from Ontario taxes for each month in school in 2011. Part-time students can claim $120 and $147 monthly, respectively. Then there’s the federal text book credit, which entitles full-time students to $65 for each month in school. Part-time learners can claim $20 each month.
You must have reported some income and paid taxes to claim these credits, and your school must provide you with either an official tax receipt or a completed form T2202A. For federal purposes, a maximum of $5,000 in unused tuition, education or text-book credits can also be transferred to a spouse or a parent. Or, save it to claim another time. The Canada Revenue Agency tracks any outstanding credits, and may even claim them for you in future years.
4. Get a student loan – Usually, interest on money borrowed under the Canada Student Loans Act,the Canada Student Financial Assistance Act or similar provincial or territorial government laws doesn’t begin to accrue as long as you are in school. When you start to repay the amounts, the interest can usually be deducted on your tax return, but only by students themselves – even if relatives actually make the payments. Unused claim amounts can often be carried forward to any of the next five years.
5. Get other kinds of loans – If you’ve been working long enough to accumulate assets, you may have other options. A line of credit secured against your home, for instance, can be a source of low-interest funds with easy repayment terms.
6. Consider a co-op program – Dr. Webb says systems like that at the University of Waterloo, which allows students to work for a semester during the year, can help provide funds for school as well as practical work experience.
7. Apply for a scholarship – If you’re eligible for the Education Tax Credit, the full amount of scholarships, fellowships or bursaries that you receive with respect to enrolment in a scholastic program are usually tax-free.
8. Talk to your boss – Many companies will contribute to employees’ advanced education, especially if it will enhance their capabilities and value to the organization. This may or may not be a taxable benefit, however, depending on the nature of the program. A leave of absence, part-time work or flexible hours could be invaluable for maintaining consistency, seniority or even pensions. It may also provide enough earnings to ease some of the strain on your lifestyle as you study.
9. Save, save, save – No government plan or tax incentive can compensate for a prudent savings plan and the miracle of compound interest. Start young, be diligent, and get time working for you to help you pay for your education at any age.
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Have you gone back to school? How did you finance your studies? Share your tips in the Comments section below.
