Our primary household income comes straight from my husband’s employer. His ability to earn income in the future is our family’s greatest asset.
Shane graduated four years ago with a business degree. At age 26, he can expect to be in the work force for at least another 33 years, possibly more.
We aren’t certain that his current skillset and credentials will translate to him having plenty of career options in the future.
So, Shane is going to continue his education. He wants to pursue his master’s degree in accounting and then sit for the CPA exam. We think having his CPA will give him many more options — qualifying for more types of jobs and starting his own side business if he wants.
It’s hard to say if this would mean an immediate salary increase. Perhaps. We aren’t counting on it.
Most importantly, we think it will help him be more employable.
After checking with IUPUI, we discovered he’ll need two undergrad accounting classes before he can enroll as a master’s student. The earliest he can enroll is the second summer session to give us a full year of being Indiana residents. He’ll begin his master’s program in spring 2013.
At one class per semester, and 30 hours needed (36, if we’re counting undergrad hours), it’s going to take several years to complete. He can do 9-10.5 credit hours per year max.
How will we pay for it?
Shane’s employer will reimburse us 100% of the tuition and fees — IF he earns an “A” in the class. They’ll reimburse 75% for a B.
Note the key word “reimburse.” We’ll have to pay for the course upfront and then submit his final grade before we get money back. We’re on the hook for paying for books, school supplies, and a parking pass.
The undergrad tuition and fees are $1,059 per 3-hour class, plus books. When he’s at the graduate level, it’ll be $1,843 per 3-hour class. That is, until they go and raise tuition again.
A fun surprise: IUPUI is discounting tuition for the summer 2012 term for undergrads. So, his class this summer will cost $758.
We have around five months to save for the first tuition payment.
We’ll keep saving after that point, too, to have enough once he’s at the more expensive graduate fee rate.
Where will we save for tuition?
I opened an Indiana 529 account with Shane as the beneficiary. We’ll transfer money straight into this account, and we selected low-risk, low-fee investment options since we’ll need the money soon.
Putting the money in the Indiana 529 account, as opposed to putting it in a regular savings account with our bank, is a BIG deal. We’ll get a huge 20% tax credit back on our state taxes. So, when we put in $1,200, we’ll get $240 off our Indiana state income taxes for the current year. That’s like getting free textbooks! Big deal! In addition, since we’ll use the money for his school expenses, we will not have to pay federal taxes on the growth.
Compare that with putting $1,200 in a savings account. No tax benefit. And the gain will be taxed. No thanks.
When we finally do get the tuition reimbursement from the employer, you can bet your sweet bippy we’ll put it back in the 529 plan. Rise n’ repeat.
What if your employer doesn’t offer tuition reimbursement?
If your employer won’t pay for your schooling, but you want to take classes anyway, you should look into the Lifetime Learning Credit (and other tax credits that might fit your situation better).
This federal tax credit will reduce your federal income tax by as much as $2,000 in that tax year, assuming you meet the requirements. So, if you are paying more than $2k/year in federal taxes, you could pay $2k in qualified tuition and expenses to your own education and you can reduce your tax bill.
Put another way, if you’re earning enough income to pay at least $2k in federal taxes, you can get as much as $2k/year in “free” tuition. Following me here?
Shane’s employer will cover up to $4k/year in expenses. Once he’s in his master’s program, that’ll cover like 7.5 credit hours. Beyond that, we’ll need to pay. That’s where our Lifetime Learning Credit will come in. You can’t claim the LLC on money that’s reimbursed by an employer, but once we’ve maxed that out, we’ll be able to claim that tax credit.
When I combine the 529 state income tax credit, the employer reimbursement, and the Lifetime Learning Credit, Shane’s master’s degree should cost us very little in money. It’ll be a big time commitment, but it’s something that almost certainly will pay off on down the road.
Since we have a financial interest in Shane earning good grades, and we also want to ya know, see him and spend time with him, we’ll probably hire some things out. For instance, if he’s taking classes in the summer, we might hire out our lawn mowing for that time. Or we’ll hire out other house repairs and maintenance tasks.
His time is valuable and when it’s limited like that, we’ll want to make the best use of his free time.
Same goes for my time. It’s valuable, and it’ll be more limited. I’ll consider hiring a mother’s helper or something of the sort to help my own workload.
Have you gone back to school? Has your spouse? How did you get through it?