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.

Related Articles
  1. Economics

    Invest In Yourself With A College Education

    Spending a few thousand dollars on school could help you earn millions more.
  2. Credit & Loans

    Avoid The Generation Debt Trap

    There is a worldwide generation of young, educated individuals mired in unmanageable debt. Find out why.
  3. Personal Finance

    Top Universities for Getting an MBA Abroad

    Going abroad for an MBA can add cachet when it comes time to get a job.
  4. Personal Finance

    Five Things To Avoid at Your Next Interview

    Do you have an interview coming up? Avoid these five mistakes and leave a lasting impression on your potential employer.
  5. Credit & Loans

    10 Ways Student Debt Can Destroy Your Life

    If you're getting a student loan, think critically about how you will manage your loan. Student debt could have a profound negative impact on your life.
  6. Investing Basics

    What Does Plain Vanilla Mean?

    Plain vanilla is a term used in investing to describe the most basic types of financial instruments.
  7. Options & Futures

    Pick 401(k) Assets Like A Pro

    Professionals choose the options available to you in your plan, making your decisions easier.
  8. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  9. Budgeting

    Top 10 Ways College Students Can Save Money

    College costs are soaring, but fortunately, there are several ways for college students to save money - and some are quite painless.
  10. Personal Finance

    8 Ways to Find Cheap Textbooks

    Textbooks are so expensive. What are the tricks to find cheaper books?
  1. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  2. Student loans, federal and private: what's the difference?

    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 >>
  3. Can I use my IRA to pay for my college loans?

    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 >>
  4. Can I use my 401(k) to pay for my college loans?

    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 >>
  5. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  6. What are the best MBA programs for corporate finance?

    Opinions vary based on which publications you consult, but the best MBA programs for a career in corporate finance are at ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!