Pay As You Earn or PAYE is a repayment plan for federal student loans that limits monthly payments to 10% of discretionary income, and forgives the borrower’s entire balance of student debt after 20 years of payments. PAYE is similar to Income-Based Repayment, which caps monthly payments at 15% of discretionary income. PAYE is only available to those who first borrowed during or after October 2007.

The Lifetime Learning Credit (LLC) is a non-refundable tax credit to reduce education costs for those pursuing higher education, including traditional undergraduate and graduate programs as well as other professional development courses. The credit can be claimed for any number of years, and covers up to $2,000 of educational expenses (25% of the first $10,000 of expenses). The LLC cannot be claimed if modified adjusted gross income exceeds $68,000 if filing individually or $136,000 jointly, and it cannot be combined with the American Opportunity Tax Credit.

The American Opportunity Tax Credit (AOTC) is an annual credit to relieve the financial burden of college for students who are enrolled between half-time and full-time at an institution of higher education. It can only be claimed for 4 years, and covers up to $2,500 of educational expenses per student (the first $2,000 of qualified expenses are automatically covered, followed by 25% of remaining expenses until the $2,500 limit is reached). The AOTC cannot be claimed if your modified adjusted gross income exceeds $90,000, and it cannot be combined with the Lifetime Learning Credit.

UGMA (Uniform Gift to Minors Act) and UTMA (Uniform Transfer to Minors Act) Accounts are custodial accounts, which are designated for a child but managed by a parent until the child becomes an adult. While these accounts are less tax-favorable than 529 accounts and they reduce how much financial aid the student will be eligible for (because they are counted as the student’s asset, rather than the parent’s asset), they have the advantage of greater flexibility in spending. These accounts can cover testing, transportation, and application fees. They can also be used for non-education related expenses.

Direct PLUS Loans are federal loans offered by the U.S. Department of Education to assist with the costs of higher education. Direct PLUS loans accrue interest at fixed rates throughout the student’s education. Direct PLUS loans may cover any part of full tuition that is not covered by the student’s financial aid package. These loans come in two varieties: Parent PLUS Loans, which are owed by parents of students, and Graduate PLUS Loans, for students pursuing a graduate or professional degree.

The College Scholarship Service Profile is a form that some colleges and universities use as part of their application for financial assistance. The CSS Profile is more detailed than the FAFSA, a form required to apply for federal government assistance at most schools. The CSS Profile is often used together with the FAFSA at private schools, and at some public universities which have their own funds for need-based financial assistance.

A Coverdell Education Savings Account is a special account into which up to $2000 per year can be invested. These investments and any earnings on the must be used for educational expenses (college/university, and certain primary and secondary school costs). There is no federal income tax on any of the investment earnings, so long as they are used for the intended purpose.

The Free Application for Federal Student Aid is form used to apply for financial assistance for college students. This for collects information about a student’s income and assets, and their parent’s income and assets. This information is used for federal financial assistance programs as well as most college and university financial assistance programs. It is typically completed when a student applies to college, and while attending college.

The Pell Grant is an educational benefit provided by the federal government to college students based upon information provided through the FAFSA. The Pell Grant is, well, a grant! This means that it does not need to be repaid. The maximum Pell Grant for the 2021-2022 school year is $6495.

Expected Family Contribution or EFC is a number computed from information provided through the FAFSA form. The EFC, together with the cost of attending a particular college or university determines eligibility for federal student assistance, and many need-based scholarships. A lower EFC means that the student and their family are expected to contribute less towards the cost of their education.