You're probably already familiar with the usual ways to reduce the cost of attending college, like saving money in advance in a tax-free savings account (TFSA), earning college credit in high school by excelling on advanced placement exams, and applying for scholarships until you're blue in the face. (To learn more about saving for college, read Pay For College Without Selling A Kidney.)
But if none of these options has worked out for you, you still have a shot at reducing the cost of your education while you're in school - or even after you're out. Read on to find out how work-incentive programs. These programs either supply financial aid while students earn their degrees or provide loan repayment or forgiveness afterward. They also provide students with a way to gain valuable work experience while helping them pay the bills.
How Do They Work?
Unlike the oft-touted college internship, work-incentive programs (also called workforce-contingent financial aid programs) actually pay students with money, not just with experience and a resume entry. These programs stipulate a set period of work in exchange for a set period of financial assistance, usually in yearly increments. They select their participants based on academic merit, financial need, or both, although academic merit alone is the most common selection criterion. Students may need to be in good standing at their academic institutions, or they may need to meet a minimum GPA requirement.
A few of these programs exist at the federal level, but most are state run (though a few states don't offer them). The amount of funding a program provides toward education expenses can vary widely, from $500 to $25,000 per year. On average, most programs provide students with $2,000 to $5,000 annually toward tuition costs or loan repayment. That's on top of an hourly wage or annual salary.
The programs help address workforce shortages in areas such as teaching, nursing, medicine, engineering and technology. The programs may then address more specific shortages within a field. For example, although teachers may be in short supply, but public school teachers are often in even shorter supply, and public school math and science teachers tend to be rarer still. As another example, a work-incentive program for medical school students might require participants to work in primary care. While some workforce shortages are nationwide, their effects may be more acutely felt in particular communities, so these programs are often located in rural and other underserved locations. To accomplish the goals of addressing shortages in certain professions and certain locations, work-incentive programs will specify the job location, line of work or both.
Work-incentive programs exist at both the undergraduate and graduate levels, and some even fund associate degrees. Most post-school programs pay a set amount for each year of service, with a limit of usually three to five years on the total length of service and thus a limit on the amount of tuition reimbursement that students can earn. A few programs pay a percentage of students' loans for each year of service until the student has worked enough to have 100% of loans repaid, but these programs are usually geared toward physicians, who have unusually large amounts of debt to repay. Many programs require students to either reapply or provide updates annually to continue in the program. Most programs last more than a year if the student wishes to participate for longer.
Work-incentive programs offer students the following benefits.
- These programs can make it easier to line up post-college employment. Programs for students still in school provide experience that future employers will be glad to see on a resume, while programs for students who are finished with school can be an excellent source of entry-level employment that provides real responsibility.
The programs create opportunities for those who otherwise wouldn't be able to afford college.
- They offer a second chance at getting free or reduced schooling for those who didn't or couldn't secure financial aid beforehand.
- College debt can limit choices after school. Work-incentive programs can give students the freedom that comes with being debt free in exchange for a relatively short period of service.
- These programs are good for students who are already interested in going into the fields that are covered by these programs. For example, if you already want to be a teacher, why not consider participating in a teaching program that will help pay for your tuition?(To learn more about one type of work-incentive program, read Are The Volunteer Corps Right For You?)
Before getting too excited, though, consider what you may have to give up by accepting workforce-contingent financial aid.
- Students who didn't enter college planning to go into one of the sponsored fields give up their choice of post-school employment and often their choice of major in order to finance their educations. While having a bachelor of anything is far better than not having a degree at all, not getting to choose your major can detract from the college experience.
- Career options through these programs may be limited, depending on what's available in the student's state. For example, nationwide, the vast majority of programs are for teaching positions.
- Some of these programs steer students into lower paying professions, like teaching, which make the program almost necessary to pay back student loans, whereas if the student went into a higher paying profession, like consulting, they would make enough money to pay back school debt without relying on a special program.
- If you don't complete the program, any money you've received will be considered a loan that must be repaid. Most programs have a four- to 10-year payback time frame. They also charge interest at prevailing federal student loan rates. If you default on the loan, the penalties are the same as they would be if you defaulted on any other kind of loan.
- In-school programs generally require state residency. Students attending schools outside of their home states may not be eligible for in-school programs.
- On-the-job programs generally do not have state residency requirements, but students choosing this option will have their geographic options limited by the locations of the programs they're qualified for and interested in, at least for a few years. It's also worth considering that sometimes temporary geographic choices become permanent ones.
- There are more in-school programs than out-of-school programs. In order to participate, many students have to make decisions early on about majors, career paths and geographic location. Many students change their minds on these topics multiple times while in school, and some might say the freedom to do so is one of the benefits of being young. Being tied to particular decisions might force students into true adult life sooner than they'll be happy with.
Workforce-contingent financial aid programs are an excellent alternative to traditional forms of student financial aid. They bring qualified workers to underserved areas while opening doors for students with limited financial resources. However, they can also limit students' career and life choices at an early age and there are consequences for dropping out of a program, so students should weigh their financing options and the pros and cons of the available programs before applying.
For more unconventional ways to pay for college, read Five Ways To Fund Your College Education.
EconomicsSpending a few thousand dollars on school could help you earn millions more.
Credit & LoansThere is a worldwide generation of young, educated individuals mired in unmanageable debt. Find out why.
Personal FinanceIn 600 B.C. Aesop determined that a bird in the hand was worth two in the bush. Warren Buffett claims that this axiom can be used to determine the most valuable uses of capital. In this article ...
Savings529 savings plans are not restricted by geography. So if your in-state offering has high fees or poor investment choices, look elsewhere.
Credit & LoansThese terms may sound the same, but they mean very different things for homebuyers.
Options & FuturesInvesting during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
InsuranceTough times call for desperate measures, but is raiding your life insurance policy even worth considering?
Fundamental AnalysisA decision tree provides a comprehensive framework to review the alternative scenarios and consequences a decision may lead to.
InvestingPeople who became successful despite dropping out of Harvard University.
Credit & LoansHere is a look at some of the major changes to FAFSA in 2015 - 2016 and how they will affect student financial aid.
The short answer is that one loan program still exists (Federal Direct Loans) and one was ended by the Health Care and Education ... Read Full Answer >>
With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
The cost of a college education now rivals many home prices, making student loans a huge debt that many young people face ... Read Full Answer >>
If you are older than 59.5 and have been contributing to your IRA for more than five years, you may withdraw funds to pay ... Read Full Answer >>
If you are over 59.5, or separate from your plan-sponsoring employer after age 55, you are free to use your 401(k) to pay ... Read Full Answer >>