New Ways To Finance Adult Classes
By Kelly Smith

(MONEY Magazine) – Are you thinking of going back to school to refresh your computer know-how or enrolling in a financial planning course to acquire new skills? Does the idea of earning your M.B.A. online intrigue you? If so, you're not alone. According to the College Board, nearly half of the 15 million students taking undergraduate and graduate credit courses at U.S. colleges and universities are over 25; half are enrolled part time. Internet-based education programs for off-campus students are spreading faster than a computer virus. As a result, the federal government and private lenders have come up with new ways to help part-timers and distance learners soften the financial blow of going back to school.

Before you look for financial help, see if your employer will foot some or all of the tuition bill for a job-related course. A full 86% of large companies do. If not--or if you're studying outside your current job field--it's up to you to cover the costs.

Unfortunately, federal financial aid is somewhat limited. To qualify for the most widely available federal student loans, namely need-based subsidized and unsubsidized Stafford loans (current rate: 7.46% after you finish your course work), you must be enrolled at least half time. What's worse, no federal aid is available if you take classes at an institution where more than 50% of the students are distance learners or more than 50% of the courses are offered by computer, correspondence or video. As part of a five-year pilot program starting this July, however, the Department of Education will waive these restrictions for 15 distance-education programs, making students eligible for all types of federal aid. By late June, a list of participating programs should be available at www.ed.gov/offices/OPE/PPI/DistEd/.

There are also two relatively new tax breaks. If your class--whether part of a full load or just one course--will help you improve your job skills or is leading toward a post-secondary degree or certificate program, you may be eligible for a lifetime learning credit of up to $1,000. Specifically, the write-off is equal to 20% of as much as $5,000 that you pay in tuition and fees. To qualify for the full credit, your adjusted gross income (AGI) cannot exceed $40,000 (or $80,000 if you are married and filing a joint return). If your AGI is below $50,000 (or $100,000 for joint filers), you'll qualify for a partial credit.

The second tax break applies to student borrowers. Assuming your AGI is $40,000 or less ($60,000 for joint filers), you may be able to deduct up to $1,500 of the interest you pay on any type of college loan. The maximum deduction will rise to $2,000 in the year 2000 and to $2,500 in 2001. Singles with an AGI below $55,000 and joint filers with an AGI below $75,000 can take a partial deduction. One important catch: The deduction is allowed only for interest paid during the first 60 months of the loan payback.

Finally, private lenders are picking up where federal aid ends. In January, SLM Financial (800-559-3220), a subsidiary of Sallie Mae, began offering an education loan for part-timers, distance learners and students taking job-training courses. Rates on the Education Capital Professional Loan start at prime plus one percentage point (currently 8.75%), and you make interest-only payments while you're studying. Other lenders, such as KeyBank USA (800-539-5363), offer similar deals. By the time you write off the interest, the tuition hit might not feel so bad.

--KELLY SMITH