What is Financial Aid?
Financial aid is any money used to pay for college, whether it's earned by you, given to you, or you borrow it through a student loan.
We all know the benefits of a college education, but figuring out how to pay for it can be confusing. With the rising cost of education, taking out student loans continues to be the most popular way of paying tuition bills. But what is the best borrowing option for you?
Overview
Popular Borrowing Options:
- The Federal Parent Loan for Undergraduate Students (PLUS) is a loan program for parents of dependent undergraduate students. Parents may borrow every year up to the cost of education minus any financial aid (government grants, college scholarships, etc.). There is no aggregate limit to the amount a parent can borrow, and the loans are based upon a parent's creditworthiness, not financial need.
- Private loans are often used to pay for college and are based on creditworthiness of the student and co-signer (if applicable) as well as other factors such as school eligibility.
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Wondering if a PNC Solution Loan is Right for You?
Overview
What benefits are available? Several tax benefits are available to help families meet the cost of postsecondary education. This is an overview of a few tax benefits. For additional information, including deductions not covered here, please refer to IRS Publication 970* for more details.
Credit or Deduction: There are two types of tax benefits available with respect to higher education costs: credits and deductions.
- A deduction reduces the amount of income on which your tax liability is calculated.
- A credit is a dollar-for-dollar reduction in the tax due, essentially a tax payment from the government.
A nonrefundable credit reduces the amount of tax you pay but is limited to the amount of your tax liability. A refundable credit is unlimited and may be in excess of your tax liability: a payment to you.
The credits relate to payments made in the current year for higher education expenses. If you are currently repaying an existing qualifying student loan, you may be eligible for the student loan interest deduction.
Two tax credits highlighted on this page:
- The American Opportunity Credit
- The Lifetime Learning Credit
Tax benefits are subject to change.
Student Loan Interest Deduction - FAQS
What is the student loan interest deduction?
Who can claim the deduction?
A loan incurred for the sole purpose of paying qualified education expenses for you, your spouse or your dependent. Loans from a relative or a qualified employer plan are not qualified student loans
What are qualified education expenses?
Who is an eligible student?
How much interest can you deduct?
This varies according to your adjusted gross income. Please consult IRS Publication 970 for details on how much interest you can deduct.
What can you deduct as interest?
- Simple interest on a qualified student loan
- Loan origination fees (other than fees for services)
- Capitalized interest
- Interest on revolving lines of credit, such as credit cards, used solely for payment of higher education expenses
- Interest on refinanced student loans are considered to be student loan interest; this includes interest on consolidated or collapsed loans
- Voluntary interest payments made on a qualified student loan during a period when interest payments are not required, such as when the borrower has been granted a deferment
American Opportunity Credit
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Lifetime Learning Credit
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Postsecondary Number of Years
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Four years of postsecondary education
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All years of postsecondary education and courses to acquire or improve job skills |
Type of Degree
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Undergraduate degree at a qualified educational institution or other recognized education credential
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Student does not need to be pursuing a degree or any other recognized education credential |
Courses Eligible
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Student must be enrolled at least half time for at least one academic period during the tax year
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One or more courses |
Felony Drug Conviction
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None on the student‘s record
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Felony drug convictions are permitted |
Qualified Expenses
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Course materials, tuition/fees, books, supplies and equipment which may be purchased from the institution or elsewhere
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Tuition/fees, books, supplies and equipment which must be paid to the institution as a condition of the student‘s enrollment or attendance |
Overview
Adding your name to someone else's debt on a loan is a very serious financial step. Here are some things to consider before you co-sign a loan:
- When you co-sign a loan, you are signing a legal contract. If the borrower does not repay, it can be reported on your credit record.
- If the primary borrower gets behind in payments, the lending institution can hold you and the borrower each equally responsible for repaying the entire debt. If it goes to a collection agency, the agency will try to collect from you.
- Even if the loan is repaid on time each month, another lending institution may consider the amount of debt that you co-signed when determining if you already have too much credit.
Important Legal Disclosures and Information
*Please note that the information contained in this material is from IRS Publication 970. PNC does not provide tax advice and makes no representation or warranty as to the accuracy of the information. Please consult your tax advisor for tax advice on the matters contained here.
You are encouraged to explore all scholarship, grant and federal borrowing options before applying for a private loan. Private loans are subject to credit approval. Certain restrictions and conditions apply.
PNC Solution Loan is a registered mark of The PNC Financial Services Group, Inc.
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