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Only 2.3 percent of folks 35 years and older are enrolled in a college program, with 0.2 percent of college students being 55 years or older. We are seeing fewer and fewer adults attending and graduating from higher education institutions.

Starting or going back to college as an adult is expensive, but the payoff can be greater. Folks with a bachelor’s degree earn a median salary of $36,000 or 84 percent higher than people who have a high school diploma as their highest degree. 

But with inflation on the rise and a pandemic that might’ve affected your debt, you might be wondering how to pay for college as an adult.

Thankfully, there are different ways to pay for college and even certain jobs that offer loan forgiveness. Here are a few ways older students can receive the funds they need to enhance their knowledge.

1. FAFSA

One of the first steps to going into a higher education program is to fill out a Free Application for Federal Student Aid, better known as FAFSA. Folks fill out this government form to find out if they qualify for federal or state financial aid in the form of grants, loans and work-study programs.

2. Grants

After filling out your FAFSA, you will have a better sense of what assistance is available to you via grants. Grants are forms of funds given based on either financial need or merit and do not have to be paid back. These funds are granted to those in certain fields or who have accomplished certain academic achievements.

Types of grants

There are many grants awarded by the state or federal government. Here are a few types of grants that can help adults pay for college.

• Federal Pell Grants: The most common federal grant for undergraduates is the Pell Grant. How much you are awarded depends on your financial status, tuition cost and how many classes you are taking. Part-time students will receive a smaller amount than full-time undergrads.
• Federal Supplemental Educational Opportunity Grant (FSEOG): Scholars who are eligible for Pell Grants also qualify for the FSEOG. Depending on financial need, students could receive $100-$4,000 annually. 
• Teacher Education Assistance for College and Higher Education (TEACH) Grant: Students planning on becoming educators may qualify for the TEACH Grant. Individuals can receive up to $4,000 and will be required to sign a contract stating that they will teach in a high-need, low-income school for a specific period. Priority fields include special education, foreign language and reading.
• State-specific grants: There are certain states that offer different types of grants to students. State-specific grants are great if you are unsure how to pay for college as an adult because certain states offer funds specifically for older students.

3. Scholarships

Scholarships are another form of financial aid that can help you pay for college as an adult. Check out a few different scholarships for adults below.

Scholarships for adults

• College JumpStart Scholarship: This adult learner scholarship can provide $1,000 to someone committed to using their teachings to better their life or that of their family. Students apply to the College JumpStart Scholarship by submitting a 250-word personal statement based on a prompt.
• Return2College Scholarship: If you are a U.S. citizen or legal resident, at least 17 years old and about to begin your higher education, you qualify for the Return2College Scholarship. Fill out an application online and submit an essay on your intended degree—you could win a $1,000 scholarship. 
• Imagine America Scholarship: Adult learners with little or no higher education can apply to the Imagine America Scholarship. Fill out an application online for a chance to be awarded up to $1,000 to better your future. 
• Adult Students in Scholastic Transition Scholarship (ASIST): Executive Women International (EWI) hosts the ASIST scholarship, where adult learners can receive between $2,000 and $10,000. Students can apply through a local EWI program—most schools have their own chapters. 
• Unigo Scholarship: Students of all ages are eligible to apply to the Unigo scholarship program where you can receive $10,000 for furthering your education. You must be a legal resident of the U.S. and planning to attend college to apply. To complete the application process, submit a 250-word response to a required prompt.

The list of scholarships is extensive, which is great for folks looking to further their education. There are plenty of scholarship resources available to find what you’re eligible for.

4. Work-study program

The federal government created the Federal Work-Study Program where students can work part-time jobs to earn money for education fees. Undergraduate and graduate students who demonstrate financial need are eligible for this program.

Good news—full-time and part-time students can participate. This federal program is administered by colleges and universities. Check with your school’s financial aid office to see if your school participates in this program and if you qualify.

The jobs in the work-study program are typically tailored to your specific educational track. Undergraduates can expect to be paid hourly, whereas graduate or professional students might receive a salary or stipend. The amount of hours you can work can’t exceed your specific program.

Here are a few common work-study jobs to check out:

• Teacher’s aid
• Research assistant
• Data clerk
• Tutor

5. Employer programs

If you are unsure how to pay for college as an adult, some companies offer tuition assistance programs. Your current employer could help you cover the cost of classes and supplies. Unfortunately, not every business participates in this program—but a quick chat with your human resources office can provide insight for your continuing education plans.

If your employer offers tuition reimbursement plans, here are a few questions to ask:

6. Tax breaks

Some employer programs come with a tax benefit. The IRS created tax breaks or educational assistance programs to help reduce the weight of tuition, school supplies and required textbooks. You could receive thousands of dollars in financial relief that you do not have to pay taxes on—your employer will not count these funds as part of your wages.

There are other tax break programs that help you pay for college as an adult. The American Opportunity Tax Credit (AOTC) gives students a $2,500 credit annually. The Lifetime Learning Credit (LLC) might be able to provide you with a $2,000 credit annually. There are also programs for student loan interest deductions to lower your financial responsibilities.

Another tax break includes the 529 plan, which is created by either the state or school you are attending. Students can prepay or create a savings account to pay educational expenses. Once you are enrolled in higher education, you will not be taxed on the money you withdraw.

7. Military benefits

The Post-9/11 GI Bill will pay all tuition and fees for in-state public school for veterans who have served after September 10, 2001, with at least 90 days of service. Veterans can also receive a living stipend to cover any housing fees, and up to $1,000 for books and school supplies.

Keep in mind the actual amount awarded to you will vary based on your total length of service. Students can receive the maximum amount of reimbursement if they have served at least 36 months (or 30 days prior to discharge for a service-related disability). You can receive half of the maximum benefits if you served less than six months but a minimum of 90 days.

Other veteran education benefits include:

• Yellow Ribbon Program: This helps students pay for out-of-state, private or graduate school tuition that isn’t covered by the Post-9/11 GI Bill.
• Edith Nourse Rogers STEM Scholarship: Some eligible veterans can receive funds if they are seeking additional training in the STEM field.
• The Montgomery GI Bill Active Duty (MGIB-AD): If you served a minimum of two years on active duty, you could be eligible for funds to help pay for educational expenses.

8. Prior learning assessments

Adults furthering their education may participate in the Prior Learning Assessment (PLA) program. Since you are older and wiser, you can use your real-life experiences to your benefit. There are certain programs that give folks like you the opportunity to cut down on credits or classes for past experiences under the PLA to save you money overall.

Keep in mind that each school has different rules about what PLA is accepted and how much credit you can receive.

Here are some prior learning assessments that you may qualify for:

Challenge exams

These exams are similar to Advanced Placement (AP) tests, which award students college credit for learning college-level material in high school. Challenge exams are multiple-choice tests for certain subjects and awards college credit. The College-Level Exam Program (CLEP) grants credit for nearly 3,000 colleges and universities.

Academic portfolio

Folks who are well-versed in a subject not covered on challenge exams can create an academic portfolio showcasing their skillset. This body of work can include written reports, articles, certifications, artwork, videos and even business plans.

Not every college will accept an academic portfolio. However, those that do will provide guidelines to help you build yours and receive college credit. Most of these schools charge a review fee, but it will be significantly less than the cost of an academic course.

Workforce training

The skills you learn in the workforce can be applied to higher education programs. You can even receive college credit through the Learning Evaluations program created by the American Council on Education (ACE). This program will test your skills to see if you are versed enough to receive the credit.

Keep in mind that colleges and universities are not required to accept these credits and results will vary. 

Military training

There are certain learning evaluations for military courses offered by the American Council on Education. Faculty members will evaluate military training to determine if you have the knowledge and proper teachings for college credit. You can find your course information on your Joint Services Transcript (JST).

Competency-based education (CBE)

Competency-based education (CBE) is another life experience option to prove proficiency. This form of testing is also known as personalized learning. Students can test out of partial aspects of a course that may cover material they already know. This method helps folks make faster progress toward their degree. There are only a handful of schools that participate in this program, so make sure you check if yours applies.

9. Loans

One of the most common ways adults pay for college is by taking out loans—which are forms of borrowed money that must be repaid with interest. The good news is that there is no age restriction on taking out student loans to cover your higher education fees.

Taking out loans isn’t a bad thing, although when students take out too many loans to pay for a degree that doesn’t have a good return on their investment, they can find it difficult to pay them back. It can be helpful to exhaust all other financial resources to cover as much of your college expenses as possible before resorting to student loans.

Types of student loans

Federal and private loans are the two common types of student loans. Learn more about these financial options below.

• Federal student loans are provided by the government and offer low interest rates with flexible repayment plans. Repayment on federal student loans doesn’t begin until you stop attending school. 
• Private loans are issued by banks, unions and other organizations. The terms and conditions will vary depending on the lender, and these loans are commonly more expensive than federal student loans.

10. Classes for older adults

Are you between the ages of 50 and 65? Good news—you can attend college courses at a reduced rate! Almost every state in the U.S. offers cheaper or even free classes for older adults.

A majority of colleges and universities allow older students to sit in and attend lectures, though they can’t submit any coursework or work toward a degree.

However, there are certain colleges, like the University of Delaware, that allow state residents to be fully fledged students and take free classes as long as they aren’t taking up space from paying scholars.

How to fix your credit score for college

If you are looking for advice around how to pay for college as an adult and fix your credit, look no further!

It’s important to review your payment history, length of credit history and your total debt balance to begin repairing your credit and credit score. Some private loan companies will require a certain credit score to take out a loan, and if you have a lower credit score it might result in receiving higher interest rates.

Thankfully, resources like CreditRepair.com are here to help you rebuild your credit to grow your skill set at college. Contact our credit repair advisors today to learn more about our programs.

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

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When you’re trying to improve your credit score or establish a credit history, it can be challenging to know what factors are most likely to help. After all, it can take six months of positive financial practices to build a good credit baseline.

While regular monthly bills don’t make up a major portion of your credit score, several types of bills can have positive—or negative—effects. Keep reading to learn which bills can potentially help you build your credit.

What bills count toward your credit?

Keeping up with monthly payments on your credit card, auto loan, student loan, medical bills, rent and monthly utilities could help build your credit.

Credit card payments

Credit cards are one of the most influential monthly bills that contribute to building credit. These accounts are reported to the major credit bureaus—namely, Experian®, Equifax® and TransUnion®—making them notable contributors to your overall credit report.

To leverage credit card usage and build credit, try to pay off all your credit cards in full each month. Making minimum payments can help your credit score as well, but only if your overall credit utilization remains low. 

Also, remember that avoiding credit card usage doesn’t necessarily help your credit. So long as you’re making appropriate payments, utilizing cards frequently can help to build credit through a record of on-time payments.

Auto loan payments

Car loan payments are also reported to credit bureaus, which means it only takes one late or missed payment to see a negative impact on your credit. If you’re going to finance a vehicle, be sure you can comfortably make the monthly payment on time every month. 

Student loan payments

Like credit cards and auto loans, student loans appear on your credit report. If you’re struggling to keep up with payments, that can be a negative factor. 

However, student loans can also be key in helping younger people build a positive credit record. Since the length of credit history factors into credit scores, many borrowers may benefit from a loan account dating back to their early college days—especially if they don’t have a great deal of other credit history to show.

That said, late and missed payments can hurt your credit score, so if you’re having trouble making monthly student loan payments, don’t hesitate to research alternative payment options.

These may include refinancing, deferring loans while still pursuing education, exploring loan forgiveness programs or switching to an income-based repayment schedule, depending on the types of loans you’re holding.

Medical payments

Figuring out where medical bills fit into your credit picture can be complicated. On one hand, medical bills aren’t normally reported to credit bureaus as long as they’re in good standing. So, if you’re making all your medical payments on time, you’re in good shape.

But medical bills tend to come unexpectedly and, if you fall behind on payments, you could be hit with another surprise when an unpaid medical bill in collections appears on your credit report, bringing down your score.

The good news is that, as of July 2022, the top three U.S. credit reporting agencies have made changes to the way medical bills will appear on reports, not including them until a bill has been in collections for a full year and not at all if the outstanding bill is less than $500. If a medical bill in collections does end up on your credit report, keep in mind that it won’t be dropped from your report for seven years unless you pay it off or it was reported in error.

(Sometimes) rent, phone and utility payments

Rent can be another tricky factor in your overall credit picture as landlords generally don’t report payment information unless there’s a problem (i.e., missing or late payments). That said, the three major credit bureaus will all include this data on your report if they see it (note that there are ways to petition landlords to report your on-time, positive payments).

The same largely goes for other monthly bills, such as phone, internet, cable and basic utilities. As long as you’re keeping up with your payments, there’s nothing to worry about, but if you’re focusing on building your credit, it’s essential not to let these bills fall behind and end up in collections.

What bills don’t count toward your credit?

When you’re considering what bills help build credit, keep in mind that some types of bills will never appear on your credit report and therefore have no impact on your score. Specifically, tax liens and civil court liens are no longer reported to credit bureaus, while other fees like library fines and parking tickets are never a credit concern.

Why some bills are counted and others aren’t

As you’ve probably noticed, the factor determining whether a bill counts toward your credit score is whether it’s reported to credit bureaus. Surprisingly, lenders and creditors aren’t legally required to report account and payment information to credit reporting agencies.

Industry standards, however, dictate that certain types of debt—such as mortgages, student loans and credit cards—will be reported as a matter of practice. Providing that information helps these companies make better decisions about how they’ll loan money or extend credit to individuals in the future.

There’s a way to use this system to your advantage while building credit. While many bills may not be reported to credit bureaus when paid on time, those bills may often be paid by credit card, which will be reported. The advantage here is that having regular monthly payments processed through a credit card will help you build a history of credit usage, especially if you’re starting from scratch.

Be aware, however, that if you’re struggling to keep up with bills, paying with a credit card only to fall behind on paying off that credit card balance will have a fast negative effect on your credit score.

Some providers only report late payments and collections

If there’s one thing you can do to make sure your credit continues to improve over time, it’s paying all your bills on time. Many creditors only report to credit bureaus when payments or late or missed or when an account is sent to collections, all of which negatively impact your score—and negative items can remain on your credit report for years, keeping your score down long after you’ve established positive credit habits.

Other simple ways to build credit

While you’re working hard to pay bills on time, there are some other steps you can take to begin building or improving your credit. 

• Maximize your length of credit history by leaving older accounts open, and avoid opening new ones more than necessary. Applying for new credit can also result in credit inquiries that may weigh against your score. 
• Instead of opening a new credit card, ask for a credit limit increase. This will allow you to maximize credit utilization on a single, older account rather than regularly hitting your max across multiple younger accounts.
• Set up automatic bill pay. If forgetting to pay bills on time is causing your accounts to fall into poor standing, setting up automatic payments can make sure those bills are taken care of each month.
• If you already have outstanding late bills, get caught up as soon as possible. If you make a payment before the account is sent to collections, you may still avoid having it show up on your credit report at all.
• Check your credit reports and dispute any errors. According to the Consumer Financial Protection Bureau, you should check your credit reports at least annually and make sure there are no errors that might stop you from getting a loan or credit. Make use of free credit report providers and write to credit reporting agencies to dispute any errors you encounter so they may be removed.

If you’ve taken all these steps and you’re still not happy with your credit standing, or if you’re simply having trouble understanding all that goes into your overall credit picture, a CreditRepair.com can help you get back on track and build the credit you desire for a more secure future.

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

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Buying a home is exciting, but it can also be scary or even a little intimidating. Although Experian® reports the average credit score in the United States is 714, the reality is a large percentage of Americans have credit scores that fall below that number, making it difficult for them to qualify for conventional home loans. Luckily, other options are available for individuals with bad credit who want to achieve the American dream of homeownership. 

An FHA loan is a popular financing option for first-time buyers, buyers who may not have a large down payment and buyers with less-than-perfect credit. Getting approved for an FHA loan with bad credit may be more realistic than you might think. 

What is an FHA loan?

An FHA loan is a mortgage loan insured by the Federal Housing Administration. They typically have fewer restrictions than conventional loans, making it easier for borrowers with low credit scores to get approved. 

FHA mortgage insurance protects lenders against losses, so they can afford to offer home loans to borrowers with lower credit scores and individuals with small down payments.

Can I get an FHA loan with bad credit?

If you have bad credit, you may think homeownership is out of the question, but that may not be the case. Over the years, the Federal Housing Administration has loosened the guidelines of its loan program to allow more borrowers to meet the requirements necessary to qualify for a home loan. Even those who’ve experienced bankruptcy or foreclosure may qualify for an FHA loan. 

A conventional home loan typically requires a credit score of 620 or higher for approval. So many borrowers with bad credit are drawn to FHA loans because the approval rating is higher for those with lower credit scores. There are no guarantees, but FHA loans can make the dream of homeownership a reality for those with bad credit.

What are the benefits of an FHA loan?

FHA loans allow borrowers to pay smaller down payments, allowing them to reserve funds for other expenses related to homeownership. 

Other benefits of FHA loans include:

• Flexible co-signer rules
• Easier qualification requirements
• Option to finance some closing costs
• Higher debt-to-income ratio (DTI)
• Looser rules on gift funds (i.e., who can give you money for a down payment)
• More affordable interest rates

While these loans are very popular, they aren’t for everybody, says Justin Pritchard of The Balance. He cites not being ready to take on a mortgage, paying mortgage insurance and higher up-front costs as a few drawbacks of using an FHA loan. 

Requirements for an FHA loan with bad credit

Generally speaking, bad credit is a score of anything less than 500, but that answer varies depending on the lender. Many lenders won’t extend loans to borrowers with scores lower than 500. Even with a score of 500, the loan approval may come with additional requirements. 

Down payment requirements

How much of a down payment you’ll need to purchase a home with an FHA loan depends on your credit score. Borrowers with a FICO® score of at least 580 may qualify for a 3.5 percent down payment. Borrowers with a FICO score between 500 and 579 will be required to provide a down payment of 10 percent. 

Additional requirements

Borrowers will also need proof of income and steady employment. 

How to apply for an FHA loan with bad credit

If you want to pursue an FHA loan, you should first find an FHA-approved lender. Most banks and mortgage companies offer FHA loans. If you don’t already have a lending institution in mind, you can do some online research to find some FHA-approved lenders. 

After you select the lender you want to use, you’ll submit a loan application. You can apply online, over the phone or in person with a loan officer. Whichever way you choose, there are some things you’ll want to have handy to make the process smoother. 

Here are just a few important pieces of information you’ll need: 

• Complete names of borrowers plus any co-borrowers
• Current address
• Social Security number
• Employer information along with salary information (complete with pay stubs)
• Credit report with information on all open loans and real estate
• Tax returns (for at least two years)
• Bank account statements
• Other information as requested by your lender

Once you submit your application, the lender will let you know the next steps regarding approval. If you’re approved for a loan, the lender will provide you with the loan estimate, which will disclose information about the loan interest rate, loan terms, monthly mortgage payment and closing costs. 

Even with bad credit, it’s a good idea to shop around to make sure you get the best rate you can get. 

Refinancing an FHA loan with bad credit

Over time, you may notice that mortgage rates decrease, and you may want to take advantage of the opportunity to lower your monthly payment, change your loan terms or get some extra cash to pay for some things you need. One option is to refinance your FHA loan. 

With very similar guidelines to FHA loans, FHA refinancing options exist, and you may qualify even if you have a low credit score. Check with your preferred lender to see if you meet the requirements for refinancing. 

First-time homebuyers and FHA loans

If you’re a first-time homebuyer, it’s not uncommon to be overwhelmed with the process. FHA loans are a great option for first-time buyers, especially those with bad credit. The below-average mortgage rates and flexible lending rules make it easier for first-time buyers to get approved for loans and get into their first home.

What to know about FHA loans and bankruptcy

Borrowers who have a  bankruptcy on their credit report may think homeownership isn’t an option, but that may not be true. Though bankruptcy can stay on your credit report for seven to 10 years, you may still qualify for an FHA loan. 

Chapter 7

According to FHA loan guidelines, a borrower may be able to obtain an FHA loan just 12 months after Chapter 7 bankruptcy has been discharged. The borrower must prove that the bankruptcy was caused by circumstances beyond their control.  Otherwise, borrowers must wait two years after discharge to qualify for an FHA loan.

Chapter 13

Qualifying for an FHA loan after Chapter 13 bankruptcy might be easier than after Chapter 7 bankruptcy. The borrower will need to be at least one year into the repayment plan to apply for an FHA loan and be current. Additionally, your bankruptcy attorney must give written permission for you to take out a new loan. 

Repairing your credit

If you have bad credit, you may think you’re stuck with it—at least for now. But you have options. You can work to improve your credit yourself or you could reach out to a credit repair company like CreditRepair.com. The credit advisors at CreditRepair.com can work with you to remove inaccurate items from your credit report, potentially improving your credit score.

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

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If you’re worried about losing your house, car or personal belongings because you’re behind on your bills, filing for bankruptcy in California might be an option to eliminate debt or get better repayment terms. To file for bankruptcy, you need to see if you qualify and then follow the steps outlined in this guide.  

What is bankruptcy? 

Bankruptcy is a legal action you can take if you’re unable to pay your outstanding debts. Depending on the type of bankruptcy you file, you may either give back the assets that you owe money on in return for forgiveness of your debts or restructure how these debts are paid back. Filing for bankruptcy has an immediate impact on your credit score, which may make borrowing more difficult while the bankruptcy appears on your credit report.  

There are two types of bankruptcy individuals may file. 

Chapter 7 bankruptcy 

A Chapter 7 bankruptcy completely dissolves your debt so you don’t owe money on that debt. Before you can have your debts discharged, however, you must liquidate your assets to pay as much of your debt as possible. The court decides which of your creditors are entitled to the proceeds from the sale of your assets. 

This is an option if you have protected assets due to exemptions or if most of your debts are unsecured. It’s also the quickest way to file for bankruptcy and can be completed in four to six months.  

Chapter 13 bankruptcy 

If you have secured debts, such as a mortgage or a car payment, and wish to keep your assets, a Chapter 13 bankruptcy may be the better option. This type of bankruptcy allows you to restructure your debt and make payments to your lenders through a court-appointed trustee. In many cases, you’re able to save money on the interest you owe on your outstanding debts. 

Chapter 13 bankruptcies can take three to five years to discharge because you’re required to make payments in installments over this time. However, it’s an option if you’re looking to prevent foreclosure on your home or car repossession.  

How to file for bankruptcy in California 

Filing bankruptcy in California isn’t that different from other states because bankruptcy is regulated under federal law rather than state laws. The primary difference is that California has different laws regarding the types of assets you may retain possession of during a bankruptcy.

For example, federal bankruptcy laws allow you to keep only $25,150 in equity in real property, while California bankruptcy laws allow either $29,275 or $75,000 depending on how you file. Married couples with a joint bankruptcy petition may be eligible to keep real property up to $150,000.

If you’re considering filing for bankruptcy, here’s the process you’ll need to follow: 

• Do your due diligence and research bankruptcy to determine if it’s right for you. The most important questions you need to answer are if you qualify for bankruptcy and if there are alternatives that might be better. 
• While it’s possible to file for bankruptcy without an attorney, most people would benefit from a lawyer’s expertise and experience. You should look for an attorney who specializes in bankruptcy law. 
• There are a lot of financial documents you need to gather before you can file for bankruptcy, such as pay stubs and income statements, bills, bank statements, tax returns and other financial paperwork. If you retain a bankruptcy attorney, they can help you gather this information. 
• Stop making payments on the types of debt that qualify for bankruptcy. Please note that some debts can’t be discharged through bankruptcy, including student loans, domestic support agreements such as child support or alimony and most tax debts. After you file a motion for bankruptcy, the court will notify your creditors, and they’ll stop demanding payment on your debts. 
• To qualify for bankruptcy, you need to sign up for a credit counseling class. This is meant to teach you skills that may help you budget more effectively in the future so you don’t fall behind on your bills. 
• After you file for bankruptcy, a trustee or representative of the U.S. Trustee program will conduct a 341 meeting that you are required to attend. During this meeting, your creditors can ask questions about your assets and debts.  
• If you’re filing Chapter 13, there will also be a confirmation hearing. In this meeting, a bankruptcy judge will evaluate whether you qualify for bankruptcy and approve a payment plan so you can repay your debts. A judge may approve or reject a repayment plan or send you back to revise it.  
• After completing your credit counseling class, you’ll need to provide the court with your course certificate before your debt can be discharged. 

What are California’s bankruptcy exemptions? 

Exempt property includes assets you own that can’t be liquidated to repay your lenders. Exemptions might include the following: 

California homestead exemption

The California homestead exemption allows you to protect the equity in your home. If you own more than one property, you can only use this exemption for the property you reside in, and your additional properties aren’t protected. There are two systems you can choose when declaring exemptions, and the one you select affects how much equity you may declare exempt. There are also requirements about how long you’ve owned your home. 

It also doesn’t mean you’ll automatically get to keep your home. In some situations, trustees may opt to sell your property, pay you back any exempted amount of equity from the proceeds of the sale and use the remainder to pay creditors.

California motor vehicle exemption 

If you own a vehicle that’s essential to your ability to get to and from work and to perform daily activities, you can use this exemption to protect some of the equity in your vehicle. If you owe more on your vehicle than the exemption allows, you’ll need to repay the rest in a Chapter 13 bankruptcy or give up the vehicle if you’re filing Chapter 7. 

California household goods exemption

This exemption allows you to declare any item in your home that’s worth less than $800. The items you declare must be considered necessary, so be careful when choosing what you declare as exempt.  

California wildcard exemption

If you qualify for this exemption, you can use any part of the homestead equity you didn’t use plus an additional $1,700 to declare any property you choose as exempt.  

These are only some of the exemptions that are available under California law. To learn what else might be exempt, you should speak with an attorney so you can decide the best course of action.  

Will filing for bankruptcy in California erase your debt? 

Filing bankruptcy in California can erase many types of debt. However, there are some types of debt you may still be responsible for, even if you choose to file Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, some of your debt might be discharged immediately due to exemptions, but you’ll need to pay the rest in installments. 

The types of debt you might not be able to discharge include tax debts and student loans. While discharging student debt is difficult, it’s not impossible, so discuss with your attorney whether it’s worth it to try. Tax debts can’t be erased, but you may be able to repay them over time as part of a Chapter 13 bankruptcy.  

What property will you get to keep after filing? 

If you’ve filed a Chapter 7 bankruptcy, you’ll lose any property that’s not exempt that you owe money on. In a Chapter 13 bankruptcy, you’re often allowed to keep your car, house and other property while you repay the debt. If you default on your bankruptcy payments, the court-appointed trustee may file a motion to have your case dismissed, which would allow your lenders to foreclose on your home or repossess your vehicle.  

Is bankruptcy the right choice for you? 

If you owe medical debt, are behind on your house or car payments or have a lot of credit card debt, it’s easy to feel despair over your financial situation. While bankruptcy is an option, it’s only right in certain situations.

The credit advisors at CreditRepair.com can help you review all your options before you take this step. We’re also able to help you dispute inaccuracies on your credit report

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

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Every week, 3,800 more people move into homes in Texas than move out. In 2021, the state saw 416,853 home sales, which was a 5.9% increase from the previous year, and the median home price in Texas as of January 2022 was $376,363, having risen 16% from the previous January. If you’re looking to buy a house in Texas, expect a healthy market with lots of demand and competitive pricing. 

Generally speaking, you need a FICO® credit score of at least 620 to be approved for a conventional loan in the United States. However, having a score above 700 significantly increases your chances of getting approved and securing a lower interest rate.

Keep reading to find out more about the Texas market so you can prepare yourself for purchasing a home in the Lone Star state. 

What is a credit score?

A credit score is measurement used by lenders to determine your creditworthiness (or the likelihood of you paying off your debts). The most commonly used score is the FICO credit score, which generally ranges between 300 and 850; the higher your credit score, the less risky you’re deemed as a borrower.

Credit scores are based on the information from your credit report, including data about your current loans and balances, your payment history, your outstanding debts, and incidents of bankruptcies. More specifically, your credit score is made up of five factors, each of which is weighted differently:

• Payment history: 35 percent
• Amounts owed: 30 percent
• Credit history length: 15 percent
• Credit mix: 10 percent
• New credit: 10 percent

Credit scores are commonly broken down as follows:

• 800-850: Exceptional
• 740-799: Very Good
• 670-739: Good
• 580-669: Fair
• 300-579: Poor

How does my credit score affect my mortgage interest rates?

For a conventional mortgage, your credit score is one of the main factors considered when reviewing your mortgage application. For this reason, many people try to improve their credit score when they know they’ll be purchasing property in the next few years. Your credit score can also impact how large a mortgage you qualify for, your interest rate, and the loan terms

As your mortgage is such a large loan, securing the best interest rate possible is crucial. A difference of 1 percent in your mortgage loan can cost you significantly. For example, let’s look at a person purchasing a $300,000 home with a 30-year loan term. The difference between securing an interest rate of 5.50 percent and 5.25 percent means paying nearly $17,000 more in interest over the life of the loan.

What credit score do I need to buy a house in Texas?

You’ll need a score of at least 620 to be approved for a conventional loan in Texas, but there are many options for you if your score sits below 620 (see below). Remember, mortgage lenders look at your credit score in conjunction with other financial factors when determining if you qualify for a loan. 

Unfortunately, even a score of 620 doesn’t guarantee loan approval. Ideally, prospective buyers in Texas should aim to have a credit score of 760 or greater to increase the chances of approval and securing the best interest rate possible. 

What is the average credit score needed to buy a house?

Generally, the higher the credit score, the better your chances of getting accepted for loan approval. The good news is that if you don’t qualify for a conventional loan (minimum credit score of 620 required) there are many other options for home loans for your to look into. 

The different types of mortgage loans and their minimum credit score requirements are:

• Conventional loan: Credit score of 620 or higher and a 3% to 5% minimum down payment.
• USDA loan: If you’re looking to purchase rural property in Texas, you could potentially qualify for a loan from the USDA’s Single-Family Housing Direct Home Loan Program. USDA loans don’t technically have minimum requirements, but typically borrowers need a credit score of at least 640 to qualify. 
• VA loan: The Veteran Benefits Administration offers qualifying veterans, service members, and spouses VA loans, a type of government-backed mortgage. Similar to the USDA loan, the VA loan doesn’t have a minimum requirement, but people typically need a score of at least 640 to be approved. 
• TDHCA loans: Texas has two state-specific programs to help individuals purchase a property: My First Texas Home and My Choice Texas Home. My First Texas Home is available to all first-time homebuyers, veterans, and homebuyers who haven’t purchased a property in the last 3 years that meet certain income guidelines. My Choice Texas Home is a program for those who don’t qualify for the My First Texas Home program. Both of these programs have a minimum credit score requirement of 620. 
• Federal Housing Administration (FHA) loan: FHA loans require a credit score of at least 580, with a down payment between 3.5%-10%. However, lenders with a score between 500 and 579 may still qualify if they have a down payment of at least 10%. 

Can I get a mortgage with bad credit?

Yes, it’s possible to get a mortgage with bad credit. As listed above, many programs work with people with lower credit scores. Often, being strong in other areas—such as having a sizable down payment—can make up for a low credit score. 

Remember that getting a mortgage with poor credit likely means you’ll get a high interest rate and less favorable lending terms. This means your mortgage will likely cost you more, so it can be very beneficial to focus on improving your score before you apply. 

What other factors do mortgage lenders look at?

Your credit score is an integral part of your mortgage application, but it’s not the only thing mortgage lenders look at. They may also consider:

• The size of your down payment 
• Income and savings
• Employment history 
• Debt-to-income (DTI) ratio
• Bank statements
• 1-2 years of tax returns 
• The assessed value of your home

How can I raise my credit score?

If you’re not already in the home buying process, you likely have the time to work on improving your credit score. Some actions you can take to improve your credit score are:

• Paying down existing debts
• Making sure you pay all your bills on time and in full, if possible
• Keeping your credit utilization under 30 percent
• Keeping your oldest accounts open (even if you don’t use them)
• Avoiding applying for new credit, so you don’t have hard inquiries into your account

Also, you’ll want to review your credit report and ensure you don’t have any inaccurate or false information on your file. Errors on credit reports are common and can drag your score down unnecessarily by several points. When you find a mistake, you have the legal right to file a dispute to have it removed from your credit report.

If you need help with the credit repair process, consider hiring the advocates at CreditRepair.com. We can review your credit report with you, help you find errors and file disputes, and give you credit education. Online consultations are free. Start now!

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

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Manifestation may be able to help your financial situation whether you’re new to the practice or not. If you’re struggling with paying your monthly bills or have difficulties paying off debt, learning how to manifest money might be the solution for you.

Manifestation uses multiple methods, and you can experiment to see which ones work best for you. Although some people believe that manifestation isn’t backed by science, we’re going to explain how positive psychology may suggest otherwise.

What is manifestation?

Simply put, manifestation is the practice of thinking about something you want as though it’s already happened, and that positivity and actionable thinking making it so. This process is the same whether you want to manifest money or happiness: the more you think of it as already having happened, the more likely it is to happen.

Manifestation also involves focusing on what you want with your actions. This can be through meditation, journaling, creating a vision board or something else entirely.

What is the law of attraction?

An aspect of manifestation is the law of attraction, which is a belief that whatever we put into our lives is what we receive in return—both good and bad. This is similar to a self-fulfilling prophecy. For instance, you may make a mistake because you’re preoccupied with the worries about making a mistake. On the flip side, if someone is working toward a promotion and raise, that is also likely to happen.

You may have heard of the most famous book on the law of attraction, “The Secret” by Rhonda Byrne. This 2006 book was promoted by Oprah Winfrey and immediately became a smash hit. One could argue that “The Secret” is the primary reason that the law of attraction gained such popularity, which created an entire movement.

People now use the law of attraction to:

• Increase personal wealth
• Get a better job
• Find loving relationships
• Travel the world
• Create the overall life they want

Manifestation and the law of attraction work together. Think about manifestation methods as ways to make the law of attraction work for you. By using some of the methods described below, you’ll be able to attract money and more.

How does manifestation work?

Those who practice manifestation believe that everything in the universe has a frequency, and we can match our personal frequency to attract what we want. This means that the new house or car you want has a frequency. And yes, it even means that your future spouse has a frequency as well.

(Even if the belief of manifestation isn’t for you, consider using the power of positive thinking—or law of attraction—to create positive change in your life.)

How to attract money

Money has a frequency, too. By using manifestation methods, you can match your frequency to attract money. Money and the law of attraction often go hand in hand since money presents all of us with more options.

Eager to get started attracting money?

Next, we’ll discuss what to do before manifesting money, money manifestation methods and how to eliminate obstacles that might get in your way.

What to do before you start manifesting

No matter how you choose to manifest, your mindset is the most important aspect of manifesting abundance and money. If you aren’t in a headspace that is positive and open to receiving money, then you won’t receive it.

Prior to practicing manifestation, there are some internal challenges that many of us need to overcome in order to adapt our mindsets.

Recognize past issues with money

Issues with money can be deeply rooted inside of us, and some people have anxieties around money for most of their lives.

However, in order to manifest money, you first must recognize past issues with it. This is beneficial because a major part of manifestation is thinking positively and not letting obstacles, including unhelpful money mindsets, get in your way.

Everyone’s money issues can be different, but know that everyone has them. Regardless of what you struggle with, manifestation requires addressing those issues before moving forward.

Address any limiting beliefs

Limiting beliefs are negative beliefs that may prevent you from succeeding or possibly lead to self-sabotage. Some limiting beliefs include:

• Believing you’ll never be successful
• Believing you’re not deserving
• Believing that manifestation can’t work for you

Limiting beliefs are not helpful for manifestation because they are closely related to cognitive distortions, or inflated thoughts that can distort your perception of reality. A great example is the limiting belief of never being successful. Having this belief can lead to self-sabotage before you even begin manifesting.

Five money manifestation methods

Much like any other skill, manifesting for money takes practice, so try a few different methods to see what works best for you.

Here are five of the most common methods that you can experiment with.

1. Say money manifestation mantras

Money mantras or affirmations are phrases that you repeat to yourself to stay positive and remind you of what you’re working toward. These simple phrases can help lift you out of a rut or give you a reminder that though the work you’re putting in may be hard, it will all be worth it in the long run.

Below are some popular and effective mantras for manifesting your money. This is not an exhaustive list, so feel free to use these and any more you find that help you in your manifestation journey. Use these to help you with your money manifestation or when you need a reminder of why you’re manifesting in the first place.

• Wealth flows into my life with ease.
• I am a magnet for money.
• My income exceeds my expenses.
• There is always enough money in my life.
• I am worthy of the wealth I desire.
• I am financially free.
• I can look at my finances without fear.
• I attract money on a daily basis.
• There are no limits to the amount of money I can receive.
• I release all resistance to attracting money.

2. Journal regularly

Developing the habit of journaling on a regular basis allows you to have a space for your thoughts and goals without the fear of judgment. Keeping a journal will help you keep an eye on the money you want to attract, and it’ll also help you address limiting beliefs that may arise.

One great benefit of having a journal is that you can look back and see how far you’ve come. When you get that raise or promotion, you’ll be able to go to that page and remember that success is possible.

3. Create a vision board

A vision board is a collage of images or words representing your wishes or goals, intended to serve as inspiration. One of the most popular methods of manifestation, it helps you attract what you desire while also serving as a daily reminder of your goals.

Your vision board can include pictures of the car you want or a big home you’d like to live in. You can add places you want to travel to as well as big piles of money. It’s your vision board, so feel free to get creative!

4. Surround yourself with positivity

If you’re hoping to manifest money and other positive aspects in your life, you need to surround yourself with positivity. This may require you to set boundaries with people in your life who bring negativity. The people in your corner should be the ones who see the glass as half full and motivate you to reach your goals.

5. Fake it until you make it

There’s an old saying, “Act as if,” which refers to acting as if you have what you’re seeking. In reference to manifesting money, act as if you’re a confident, successful person who has all the money they need. This doesn’t mean going out spending money recklessly or racking up bad debt.

Faking it until you make it means adopting the mindset of someone who has an abundance of money. For example, would a person with plenty of money lack self-confidence and be filled with doubt? Of course not! So, hold your head up high and attract money and opportunities by acting like you have it and deserve it as well.

Does money manifestation work?

Manifestation works, but people have their doubts. On the surface, manifestation sounds like some sort of magic, but there is research that shows these methods can work.

The science of money manifestation

There’s an entire field called “positive psychology,” which was popularized by Martin Seligman, Ph.D., former president of the American Psychological Association (APA). When looking at positive psychology as well as other branches of psychology, you’ll find many parallels with manifestation methods that are backed by research. Research shows that:

• Belief can change your reality
• Feeling in control leads to happiness and a longer life
• You can overcome helplessness

Below are some studies that back up these three points.

Belief can change your reality

One study conducted by Ellen Langer found that beliefs can actually help you with weight loss. Researchers told a group of housekeepers how many calories they burn while working, and one month later, those housekeepers had lost more weight than a control group.

Feeling in control leads to happiness and a longer life

In another study, Langer and her research partner Judith Rodin gave residents of a nursing home more control over their day-to-day lives. This group of older adults were not only happier, but they also ended up living longer than the control group after the experiment was completed.

You can overcome helplessness

Positive psychologist Shawn Achor also explores Martin Seligman’s research about learned helplessness in his book “The Happiness Advantage.” Seligman found that past experiences can make a person give up. But when you eliminate limiting beliefs, you’re more likely to pursue your dreams.

Money manifestation best practices

A common misconception is that manifestation is simply putting some pictures on a vision board and letting the universe do the rest. Those who manifest money successfully know that taking action is required to achieve their goals. Below are a few best practices for manifesting money by taking action:

• Use your confidence: There’s no more being silent. Tell people what you want.
• Work hard: Showing up and doing your best at work will be noticed and improve your chances of a raise or promotion.
• Catch your limiting beliefs: When limiting beliefs arise, turn to your mantras.
• Develop good habits: Whether it’s journaling or saying affirmations, designate a daily time where you can use these manifestation methods.
• Recognize bad habits: No amount of manifestation can counteract bad spending habits, so develop a budget and keep your goals in mind.

Now that you understand how to manifest money, it’s time to address any obstacles that may be standing in your way. We’ve discussed how negativity and past struggles with money can hold you back, and this can include negative marks on your credit report. Collection calls and a low credit score may prevent you from properly manifesting, and that’s where CreditRepair.com can help.

Whether you want to pay off a credit card, get a new job or simply fix your credit, through a positive mindset and actionable steps, you can do anything you put your mind to. Contact us today to speak with a credit advocate and see how we can help you reach your financial goals.

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

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If your finances are stressing you out, you have the option of filing for bankruptcy. Keep reading to learn what bankruptcy is, find out about the differences between Chapter 7 and Chapter 13 bankruptcy and learn what steps you need to take to file bankruptcy in Texas.

What is bankruptcy?

Bankruptcy is a legal process that helps people who are struggling to pay their debts. When you decide to file for bankruptcy in Texas, you file a petition with a federal bankruptcy court. The petition provides information about your income, assets, expenses and debts. It also indicates whether you want to file a Chapter 7 bankruptcy or Chapter 13 bankruptcy.

Chapter 7 bankruptcy

In a Chapter 7 bankruptcy, the trustee collects any property that isn’t exempt, sells it and uses the proceeds to pay your creditors. To qualify for this type of bankruptcy, you must pass a means test, which determines whether you have enough disposable income to repay your debts.

Chapter 13 bankruptcy

Some people have too much disposable income to file for Chapter 7 bankruptcy. If you’re one of them, you may be able to file for Chapter 13 bankruptcy instead. Chapter 13 allows you to set up a plan for repaying some or all of your debts. Depending on how much you earn, your repayment plan may last for three to five years, during which time you’ll make payments to your creditors.

One of the benefits of filing for Chapter 13 bankruptcy is that it gives you an opportunity to catch up on missed mortgage payments, which may help you prevent foreclosure. You may also be able to lower your monthly payments on other debts.

How to file for bankruptcy in Texas

The bankruptcy rules are outlined in Title 11 of the U.S. Code, so bankruptcy is a federal matter. That said, Texas is one of the states that allows filers to choose whether to use the state exemptions or the federal exemptions. As a result, filing for bankruptcy in Texas is a little different from filing in many other jurisdictions. Here are the basic steps you need to take to file for bankruptcy in the Lone Star State.

1. Visit the United States Courts website to learn more about bankruptcy.
2. Determine if you qualify for bankruptcy. For both Chapter 7 and Chapter 13, you can’t file if you had a bankruptcy dismissed within the previous 180 days due to your failure to comply with the court’s instructions or appear before the court when required. The 180-day rule also applies if your bankruptcy was voluntarily dismissed because your creditors asked the court to grant them relief related to certain assets.
3. Think about hiring an attorney. Bankruptcy is a complex process, and your case could be dismissed if you make a mistake on your petition or any other forms you file. An attorney can advise you on whether bankruptcy is the best option for your situation, help you determine if you qualify for Chapter 7 or Chapter 13 and guide you through the process from beginning to end.
4. Gather supporting documentation and fill out the required bankruptcy forms. You’ll need documents related to your income, expenses, assets and debts, so look for tax returns, pay stubs, 1099 forms, copies of your monthly bills, bank statements, credit card statements, loan agreements and other related paperwork.
5. Stop making payments on qualifying (dischargeable) debts. Since those debts are going to be discharged anyway, it doesn’t make sense to keep paying them when you could use the money to pay debts that don’t qualify for discharge. An attorney can advise you on which debts qualify for discharge so you don’t stop making payments on the wrong accounts.
6. Take a credit counseling course. All filers are required to participate in credit counseling, regardless of whether they file for individual bankruptcy or business bankruptcy.
7. Complete and file your bankruptcy petition, along with all the supporting documents required to verify that you qualify.
8. Attend the 341 meeting of the creditors. During this meeting, the bankruptcy trustee asks you questions about your petition and supporting documents. Your creditors also have an opportunity to attend the meeting and ask questions related to your case.
9. Complete your pre-discharge debtor education course, file your course certificate and receive your debt discharge.

What are the Texas bankruptcy exemptions?

Bankruptcy exemptions allow you to protect certain property from your creditors. In Texas, some of the state exemptions are more favorable to filers than the federal exemptions, making it wise to discuss your situation with an attorney and determine which set of exemptions to use.

• Texas homestead exemption: Texas allows most filers to exempt the full value of their homes in a bankruptcy. This applies to residences on 10 acres or less in a city or 100 acres or less in the country.
• Texas motor vehicle exemption: Under Texas law, you can exempt the full value of one vehicle per licensed household member.

Texas also allows filers to exempt some of their personal property. For a single individual, personal property is exempted if it has a total market value of no more than $50,000. If personal property is provided for a family, then it’s exempt as long as it has a total market value of no more than $100,000.

Wages, health aids prescribed by a doctor, religious books/texts and alimony/support payments are exempt, but they’re not included in the market value limits above.

You should also be aware of the following personal property exemptions:

• Tools and vehicles used for farming or ranching
• Home furnishings
• Clothing
• Jewelry up to a certain limit
• Tools, books and equipment used for a job or trade
• Athletic equipment/sporting goods
• Two firearms
• Certain animals for consumption (e.g., 120 fowl, 12 head of cattle); exemption includes food for the animals
• Household pets
• Ingredients and equipment used to prepare meals/items for consumption

Will filing for bankruptcy in Texas erase your debt?

Chapter 7 bankruptcy wipes away most of your unsecured debt, giving you a fresh start. Unsecured debts are debts that aren’t secured by any collateral, such as credit cards, past-due utility bills, medical bills, personal loans and collection agency accounts.

Chapter 7 bankruptcy doesn’t eliminate spousal support or child support payments, court fines, criminal restitution, debts to government agencies and certain other types of debts. Chapter 13 bankruptcy doesn’t erase your debt; it just allows you to set up a repayment plan with your creditors.

What property will you get to keep after filing?

You should be able to keep anything that’s considered exempt, such as your home, clothing, home furnishings and tools you use for your job.

If you have personal property with a market value above the exemption limit ($50,000 for individuals and $100,000 for families), the trustee may sell some of the excess property and use the funds to repay your creditors. It all depends on which type of bankruptcy you file, what kind of property you own and other factors.

Is bankruptcy the right choice for you?

Again, it depends on your situation. If you have a lot of unsecured debt and don’t own your own home, bankruptcy may be a good option, as your unsecured debt will be wiped away and you won’t have to worry about finding a new place to live.

Even if you do own a home, bankruptcy may be right for you if most of your debts are dischargeable and you want to stop the calls from collection agencies or prevent your creditors from taking legal action against you. If most of your debt isn’t the kind that can be discharged in a bankruptcy, however, you may want to explore other options.

Bankruptcy has a big impact on your credit score, so think carefully before you decide to file. A credit repair company can help you determine the right course of action.

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

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Most college students can’t afford to work full-time while studying and rely on student loans to fund their degrees. This situation usually means money is tight. And, in addition to having little spending money, students know that their enormous student loans will be due as soon as they graduate. (The average student loan debt as of 2021 is $37,693.)

This is why it’s essential students take advantage of any tax breaks they can. Understanding the common deductions college students can claim can save a person thousands throughout their degree! Luckily, this guide is your one-stop shop for all the tax breaks available to college students. 

Credits and deductions: what is the difference?

First, before we get into the exact tax breaks you can take advantage of, let’s define the two main types of tax breaks. As a college student, you can take advantage of tax credits and tax deductions—and these are not the same thing. 

A tax credit reduces the amount of tax you owe, dollar for dollar. For example, if you file your personal taxes and find you owe $2,500, a $500 tax credit would bring your balance to $2,000. 

In contrast, a tax deduction reduces the amount of income subject to income tax. So, if you earned $25,000, a tax deduction of $500 would mean you only have to pay income tax on $24,500 of your income. 

In general, tax credits are thought to be better than tax deductions because they directly, dollar for dollar, reduce the amount of money you owe. Still, it’s important to remember that tax deductions can also make a big difference in your tax filing. Both tax deductions and credits hold benefits and should be taken advantage of. 

College tax credit

There are two major tax credits college students can try to take advantage of:

Lifetime Learning Credit 

The Lifetime Learning Credit (LLC) is available to students enrolled in just about any degree or nondegree course. The credit applies to qualified tuition and related expenses paid for eligible students attending qualifying schools. Students don’t have to pursue a degree or attend school at least half-time to qualify.

Eligible students can claim 20 percent of the first $10,000 of their qualified education expenses, to a maximum of $2,000 per tax return. 

The LLC is available for an unlimited amount of years, meaning students can claim it every tax year they’ve been enrolled. 

There’s an income threshold for this tax credit. Single-income earners making above $69,000 or partners who file together making above $138,000 aren’t eligible for the Lifetime Learning Credit.

Sometimes parents pay for their children’s college fees and take advantage of the tax breaks. If a parent claims a dependent’s LLC, they should understand that the LLC can only be claimed once per household per year. So, if there are two students attending college, the parent can only claim the LLC for one of them. 

Lastly, the LLC is nonrefundable. Let’s say your tax liability for the year was $1,400 and you qualified for the entire $2,000 LLC. In this situation, you won’t receive the $600 difference back as a refund. 

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is “a credit for qualified education expenses (tuition, fees and course materials) paid for an eligible student for the first four years of their education,” (IRS) Expenses for housing, transportation, medical care, insurance and nonrequired fees don’t qualify for the AOTC. 

College students can get up to $2,500 annually with the AOTC. The credit offers up to 100 percent of the first $2,000 of qualified expenses and 25 percent of the next $2,000. The maximum per annual year is $2,500. 

A critical difference between the LLC and the AOTC is the number of years you can claim the credit. If the student takes longer than four years to complete their degree, they’ll no longer be eligible for the AOTC. 

Unlike the LLC, the AOTC is partially refundable. Students can get up to 40 percent (or a maximum of $1,000) refunded to them if the credit brings their tax liability to zero. 

Additionally, parents can claim an American Opportunity Tax Credit per student in their household. 

To qualify for the AOTC, students must be pursuing a degree and enrolled in school at least half-time. 

As is the case with the LLC, there’s an income limit to qualify:

• An individual must make less than $80,000, and couples who file jointly must make less than $160,000 to qualify for the full AOTC
• People making over $80,000 but less than $90,000 (over $160,000 and less than $180,000 for joint partners) can still receive the credit but won’t qualify for the maximum $2,500 
• Anyone over $90,000 as an individual or $180,000 as a joint pair is ineligible

Claiming dependency: what may be best for your situation

Some parents who continue to financially support their children after they start college consider listing them as dependents. However, deciding whether or not to claim dependency can be tricky and should be evaluated on a case-by-case basis. 

First, it’s essential to understand if claiming a college student dependent is even an option in your specific situation. Be aware that the IRS does have specific criteria for which college students can be dependents. The eligibility requirements include details around their age, relationship, financial support and residency. 

If it’s determined that dependency is an option, the next question is to ask who the tax breaks will benefit more. If the parent pays for the school, they’ll likely want to see some of their money back with these tax credits. However, if the parent’s income exceeds the allowable LLC and AOTC thresholds, it’s better to allow the student to claim the tax credits instead—so at least someone gets them! 

College deductions

There are two common deductions college students can claim: 

Tuition and fees deduction

As the name implies, the tuition and fees deduction offered an income tax deduction for those paying eligible college expenses. The expenses have to be directly related to education, so items such as household costs, transportation and medical expenses aren’t eligible. 

Unfortunately, the tuition and fees deduction expired as of December 31, 2021, and will not be continued going forward. Still, individuals who paid qualified tuition and fees from 2018-2020 and didn’t claim this deduction already can still do so. The maximum amount an individual can claim is $4,000 to reduce their taxable income. 

As this is a tax deduction and not a credit, individuals will not receive any money back if their tax liability is brought down to zero. 

The tuition and fees deduction has an income threshold of $80,000 or less for individual earners and $160,000 or less for those who file taxes jointly. 

Student loan interest tax deduction

While it may be a bit of a disappointment that the tuition and fees deduction has been canceled, the good news is that the student loan interest tax deduction still applies. Anyone paying for interest on their student loans can deduct up to $2,500 in interest fees annually. This applies to both interest on mandatory payments and interest paid on bonus payments, all up to a maximum of $2,500 in deductions combined. 

This deduction only applies to qualifying student loans, so private loans from friends, family and workplaces aren’t eligible. 

To qualify for this tax deduction, the individual must have paid interest on a qualified student loan in the previous tax year. Additionally, single filers must make an income of less than $85,000 (as of 2021) and joint filers must earn less than $170,000 to be eligible for the student loan interest tax deduction. This income threshold is set annually and can potentially change every year, so it’s important to do your research. 

Tax-free college payment accounts, bonds and programs

Tax credits and deductions aren’t the only place for savings as a college student. Individuals can use a 529 or Coverdell Education savings account to keep their college savings. These accounts allow for tax-free withdrawals and tax-free earnings growth, which can save hundreds or thousands of dollars. Some states even offer programs that give you tax benefits when you contribute to these accounts. 

• A 529 account allows you to enroll in a prepaid tuition plan, so you lock in current tuition rates. Alternatively, you can use a 529 account as a savings account where your money can grow tax-free. 
• A Coverdell Education savings account allows you to save and withdraw money tax-free as long as it’s used to pay for education. 

Additionally, you can explore the idea of investing in an education savings bond program. These programs allow individuals to invest in savings bonds that are tax-free when they’re cashed out as long as they’re used to pay for higher education. 

Lastly, students can consider taking advantage of student credit cards, which often come with low or no fees and perks such as gift cards, cash back and travel points. 

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

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