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For aspiring teacher, college is pay-as-you-go

Mary Beth Henry hated school.

So when the West Columbia apartment manager and part-time real estate agent started night school for a new career, she made an odd choice for a major - teaching.

"I figured maybe I can be a better teacher and help kids like it better," said Henry, who wants a classroom of second-graders.

But she needs to get to the schoolhouse without going to the poorhouse.

The single mother of two needs to cover the $5,500 per semester tuition at Columbia College while having little savings.

She got a recent reminder of her tenuous finances. A $3,000 commission she received for a home sale last month was meant to start an emergency saving fund. Instead, it went to repair a leaking roof.

"At least it was there to use," said West Columbia financial planner Neil Brown, who is working with Henry to end her cycle of living paycheck to paycheck.

Henry heads into her second semester at Columbia College with about half her tuition covered by a grant.

The other half is paid by a student loan, which is interest free while she is enrolled in school. Henry will pay about 6 percent interest on the loan after she graduates, which is scheduled for May 2011.

When she leaves school, she will have about $14,000 in loans.

Henry hopes to have part of her loan paid back for agreeing to work in a school district where the state has trouble recruiting teachers.

Brown said for Henry's circumstances that the "pay-as-you-go" system works. That way she can build the equity in her home and try to work on that emergency savings fund.

Brown can take advantage of a federal tax credit up to $2,500 a year for tuition payments. The credit had been capped at $1,800 until this year.

But for those with a little cash, he also suggested putting money into the South Carolina 529 college savings plan.

The money can be taken out anytime (even within days of opening an account) to earn a 7 percent state income tax deduction.

And the money doesn't just have to go to tuition. Money from a 529 can be used for computers, text books, and room and board.

"All you need to do is some coordinating," Brown said. "People are surprised at all the ways you can get money for education."

Relief on student loans

Completing the FAFSA helps determine whether a student is eligible for aid from the school as well as federal and state governments in the form of grants and low-interest loans. The FAFSA can be found online at www.fafsa.ed.gov.

The FAFSA, which has to be refiled for each school year, can be submitted as late as the end of the academic year for which you're looking for aid - but it's best to fill the form out early each calendar year.

Filing in January or February means there's more money to go around, but aid is still available for students who start school this fall and haven't submitted the FAFSA - if they file as soon as possible, said Richard Bellows, director of financial aid at Butler University.- MarketWatch

Students burdened by school loans should find relief in a new income-based repayment option.

Under the new Income-Based Repayment program, federal loan payments are based upon monthly income and family size.

Most borrowers who sign up for the plan will pay less than 10 percent of their income toward student loans, according to www.ibrinfo.org, a Web site run by the Project on Student Debt.

The program went into effect July 1. It is designed to allow graduates saddled with more debt than they can comfortably pay off in 10 years to stretch out their payments. After 25 years, what's due on the loan, including interest, is forgiven.

Graduates with public service jobs in sectors such as education and health care could see their loans forgiven after a decade.

Neither program includes private loans, which students and their families are relying on more as college costs increase and the economy remains weak.

Other changes that took effect July 1: Rates on Stafford loans originated before July 1, 2006, reset to 2.48 percent from 4.21 percent. (Recent graduates who consolidate during their six-month grace period pay 1.88 percent.) Also, origination fees for Stafford loans will drop; and the maximum Pell Grant amount for low-income students rose to $5,350.

- Star Tribune (Minneapolis)

Find a fit

It's beneficial for students to use other areas in which they excel - whether their abilities are in cooking or mechanical engineering - as a means for obtaining scholarships, said Mark Kantrowitz, publisher of college financial-information Web sites FinAid.com and FastWeb.com.

Students looking for niche scholarships should create an "accomplishments resume," where they list hobbies and areas in which they excel, he said.

"There are essay competitions, artistic competitions, competitions for every hobby under the sun," Kantrowitz said. "If you want to attract schools' attention or scholarship sponsors' attention, pick your favorite hobby and try to go all the way in that hobby."

Once students have outlined a clear picture of what they're good at, it's time to do the homework. For instance, FinAid.com provides a list of scholarships for average students as well as scholarships for volunteering and community service.

- MarketWatch

How to pay for college

Highlights of some college-related federal and state credits, deductions and savings plans from Neil Brown, a certified financial planner from Burkett Financial Services in West Columbia. For more complete details, including restrictions, and more options

FEDERAL

Hope Credit - With the passage of 2009 tax law, the Hope Credit was renamed the American Opportunity credit and allows for a larger credit of $2,500 of qualified education expenses for each student's first four years versus only the first two years.

Education IRA (Coverdell Account) - Individuals can contribute up to $2,000 annually per child up to age 18. The amount can be transferred to another child. Earnings and withdrawals are tax-free if used to pay for qualified educational expenses.

Roth IRA - Principal amounts can be withdrawn tax and penalty free. Withdrawal of earnings for educational expenses is always penalty free, otherwise the earnings on the funds are subject to tax if withdrawn prior to age 59 1/2.

Uniform Gift to Minor Account/Custodial Accounts -Contributions to the plan may be made by anyone. No family income restrictions are imposed but gifts larger than $13,000 per year may be subject to gift tax.

Student Loan Interest Expense Deduction - Individuals can claim a deduction for interest expense paid on qualified education loans after graduation. The maximum deduction for 2009 is $2,500.

SOUTH CAROLINA

Tuition Tax Credit - Refundable credit for tuition paid to colleges and universities. The credit is equal to 25 percent of tuition paid, not to exceed $850 for each student attending a four-year institution or $350 for each student attending a two-year institution.

S.C. 529 Investment Program - Federal and state taxes are not assessed on withdrawals. Students are not required to attend S.C. schools. Contributions are South Carolina tax deductible. If an account is closed or not used for education purposes, the earnings on the principal portion of the proceeds would become taxable, plus a 10 percent penalty.

Life Scholarship - This scholarship helps cover the cost of in-state tuition at S.C. public colleges and universities for S.C. residents.

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