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Between school, homework, and extracurriculars, you likely have a packed schedule. Now, you also need to find time to work on your college applications. The question is, how many should you fill out?

You don’t want to apply to too many schools, since each application takes time and money (thanks to steep application fees). At the same time, you don’t want to apply to too few, and risk not getting into college at all.

There’s no one ideal number but, as a general guideline, the College Board recommends applying to five to eight colleges, and to include a mix of reach, target, and safety schools. However, the perfect number for you will depend on your personal circumstances.

Read on for a closer look at how to pick the right number — and the right mix — of applications to set yourself up for college success.

How to Decide How Many Colleges You’re Going to Apply to

Like many things in life, there isn’t one simple answer. However, a common rule of thumb is to apply to between five and eight colleges. As you make your list, it can be a good idea to include one to two schools in each of these three categories: safety, target, and reach schools.

A reach school is one where acceptance may be a stretch based on your academic profile, but it also shouldn’t be entirely unrealistic. A target school is one where you stand a relatively good chance of admission.

A safety school is one that you are fairly confident that you’ll be accepted to. This way, you can create a balance of dream schools that you’d be thrilled to attend and schools that would be a good fit if some of the other, loftier options don’t work out.

💡 Quick Tip: You can fund your education with a low-rate, no-fee private student loan that covers all school-certified costs.

Determining Reach, Target, and Safety Schools

To determine which schools are a reach, target, and safety, you’ll want to compare your grades, GPA, and SAT or ACT scores to the average academic profile of recently admitted students at each school. This should give you an idea of how you line up when compared to students currently enrolled at the school.

Most colleges and universities have admissions profiles where they include information like the average GPA, SAT, and/or ACT scores of current classes. Another option is to take a look at the College Board’s Big
Future , where you can create a profile and compare yourself to the academic profile of the schools you’re interested in attending. This isn’t a guarantee, but it can give you a good idea of what types of schools you can realistically expect to get into.

Recommended: Do Your SAT Scores Really Matter for College?

Is More Better?

If you are extremely passionate about attending a highly selective college, you may have to increase the number of applications you submit. Generally, the more selective a school is, the greater the chance you won’t be accepted. So it could be worth sending out a few extra applications to be sure you get admitted into a school that you are excited about attending.

Is Less Best?

Applying to colleges requires both time and money. While some students may qualify for fee waivers, students can generally expect to pay an application fee for each application. College application fees currently average $56 and, in some cases, run significantly higher. It could be worth setting up an application budget so you have an idea of how many schools you can reasonably afford to apply to.

Each college application will also require your time and attention. Students may not realistically have the time to fill out 20 applications. Another reason some students may consider applying to fewer colleges is if they have specific needs or are interested in a particular major or field of study that is only offered at a few schools.

Planning Your Applications

With that in mind, you’ll want to take some time to review which schools you are actively interested in applying to. Before applying to a school, try to get a good sense of the types of programs offered and what life on campus may be like.

You can take this time to think honestly about what you want out of your college experience and craft a list of schools that could fit the bill. Try to avoid applying to any schools you wouldn’t realistically want to attend. As you compare schools, it can be a good idea to rank your choices. This can help you determine when you may want to apply early decision or early action to a top school.

Both early action and early decision are application routes that allow students to indicate that a specific school is their top choice. If a student applies early decision, they are committing to attending that school should they be admitted. Early action usually allows students to receive a decision earlier than traditional applications, but admission is not binding.

Note that some schools may only offer either early action or early decision, or may not offer either.

The college applications process can be a lot to handle. If you are ever feeling overwhelmed by the scope of it all, consider talking to your guidance counselor or another confidante who has experience with college applications. They can help you navigate the ins and outs of the process and may be able to provide some insightful advice.

Recommended: Ultimate College Application Checklist

Planning for the Future

Part of the college planning process also involves figuring out how you’ll pay for your education. So in addition to your college applications, you’ll want to be sure you fill out the Free Application for Federal Student Aid (FAFSA). This provides access to federal financial aid, including grants, scholarships, work-study, and federal student loans.

If you find that savings and federal aid, including federal student loans, aren’t enough to pay for school, you might then explore getting a private student loan. These are available through banks, credit unions, and online lenders. Loan limits vary from lender to lender, but you can often get up to the total cost of attendance (which is more than you can borrow from the federal government). Interest rates vary depending on the lender. Generally, borrowers (or cosigners) who have strong credit qualify for the lowest rates.

Keep in mind, though, that private loans may not offer the borrower protections — like income-based repayment plans and deferment or forbearance — that automatically come with federal student loans.

💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.

The Takeaway

The college application process will look slightly different for everyone. But a general guidelines to apply to five to eight schools and to include a mix of reach, safety, and target schools. To come with a balanced list, it’s a good idea to compare your academic profile to that of the average accepted student at your desired schools.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOIS0823049

If you’ve decided to apply to grad school, you may be wrestling with a few questions, including how many schools you should apply to in total. The answer will depend on your personal situation, but a general rule of thumb is to apply to somewhere between four and six grad schools, including at least one reach school as well as one or two safety schools.

Read on to learn more about how to choose which grad schools — and how many — to apply to, plus options for financing your graduate degree once you get in.

Follow the Money and Consider Cost

When deciding where to apply to grad school, it can be a good idea to consider the quality and reputation of each program, as well as the potential cost. Even if you didn’t take out loans for your undergrad education, you may need to for your graduate-level studies. Indeed, according to the Education Data Initiative, grad students currently shoulder a significant portion of student debt — a full 46% of federal loans issued each year. Federal loans can reach the six figures, and many graduates of grad programs may not have earning power to pay back these loans comfortably until years or even decades after their degree is conferred.

If you’re in the early stages of considering going to grad school, here are a few questions and actions that may help you navigate the choices available to you:

•   Talk with people who have gotten a similar master’s degree. What did they wish they had known?

•   Talk with the department or departments at the schools you’re considering and ask about graduate scholarships, fellowships, and other programs that may lower program cost.

•   Consider your career path. Look on various salary sites for median salaries for your proposed field of study.

In the early stages of heading to grad school, you may also want to determine how you’ll pay for graduate school, as this may impact the school you choose to attend. Here are a few suggestions for crafting a plan to pay for your graduate education.

💡 Quick Tip: You can fund your education with a low-rate, no-fee private student loan that covers all school-certified costs.

Talk with your family

Some students have found that their family may support some or all of their grad school journey. Contributions such as free housing or the use of a family car add up as well, so it can be important to factor those in. For example, some students may look at programs where they can live at home, so they don’t need to pay for housing and travel expenses. If this is the case, make sure everyone is very clear about expectations so there are no surprises later on.

Apply for Federal Student Aid

Be sure to fill out the Free Application for Federal Student Aid (FAFSA). Unlike undergrad education, direct subsidized loans are not available to graduate students. Your loans will also be considered in conjunction with any federal loans you took out as an undergrad when it comes to determining the number of federal loans you’re eligible for as a grad student. Talking to the financial aid office at the schools you’re considering attending can also help you understand what loans, scholarships, and other programs may be available to you.

Recommended: What is the Maximum Amount of Student Loans for Graduate School?

Consider Private Loans

Some students may find they need more money than they are offered in federal loans, and that’s where private graduate student loans student loans. Private lenders generally won’t lend more than what it costs to go to school, and rates and terms will vary. Note that because private student loans lack the borrower protections that federal loans offer (like Public Service Loan Forgiveness or deferment options) it’s generally recommended that borrowers rely on these after tapping all federal aid options.

Consider Relevance And Practicality

In addition to prestige, it’s also important to consider degree relevance and how it may be practical for your future career path. Looking at salaries from people who graduated from that program or with that degree can help you assess what the future after graduation will look like. Sometimes, students can become so focused on getting into a grad program and affording the program that they may forget that the first year out of grad school may require a few months to find a job and find footing in a new career.

Asking yourself some questions can help you further drill down into the best programs to apply for:

How Much Will Expenses Cost?

Room, board, and travel all add up. Considering those costs can help assess overall expense. It can also be helpful to consider the cost of living, too, which can vary based on where the program is based.

Recommended: 6 Ways to Save Money for Grad School

Can I Work and Study Simultaneously?

Some programs may be structured for grad students to do both; others might be created primarily for students who can devote all their time to their studies. If you’re self-funding your grad school experience and are currently employed, it may be worth speaking with your HR office to see if there are any options for your company to fund your studies if you are planning to study and go to school at the same time.

How Long Is the Program?

Different grad programs have different time frames. While some, such as law schools, may have relatively standard coursework for traditional students, other programs may offer different structures depending on the school. And it may make sense to see how long or how short the degree can take depending on life circumstances. It can also be helpful to know if an internship or other hands-on experience is essential for the degree, as that may influence feasibility with fitting the degree in with other work.

Recommended: Is it Possible to Take Online Classes While Working?

Consider All Information

When applying to grad programs, getting as much data as possible can be helpful in determining the next steps. Talking with professors, people currently working in the industry, current students, and faculty at several schools you’re considering can all be helpful in assessing how well you may fit in a program — and why a program may be the best fit for you. Because graduate departments tend to be smaller than undergrad departments, you may find it easier to have these sorts of conversations.

It can also be helpful to speak to graduates of a program and to talk with mentors and employers about how a grad degree may enhance your career. While some career paths demand a grad degree, such as an attorney, social worker, or doctor, there are other career paths where a grad degree may not be necessary — or may be subsidized by an employer when they consider it essential. So having a range of opinions can be helpful when it comes to homing in on the best grad school programs for your needs.

💡 Quick Tip: Master’s degree or graduate certificate? Private or federal student loans can smooth the path to either goal.

The Takeaway

When figuring out how many grad schools to apply to, you may want to shoot for somewhere between four and six. The idea is to apply to enough schools to ensure that you are accepted to at least one program, but not so many that the time, effort, and cost (application fees can add up quickly) becomes too much.

When narrowing your list of target schools, keep in mind both the quality and cost of different programs. And even before you get accepted, it can be a good idea to fill out the FAFSA, and start making a plan for how you’ll cover your graduate school expenses.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Photo credit: iStock/MicroStockHub

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIS0823050

While a graduate certificate program is not as long or intense as a graduate degree, certificate programs can still be a significant commitment — both in terms of time and money. On top of tuition, there may be ongoing additional fees to consider, such as materials, exam fees, and professional association fees.

Not all certificate programs qualify for federal aid, although some may. Fortunately, there are other financial aid avenues that can potentially help you afford your graduate certificate. To help you decide which path is right for you, here’s a look at some of your financing options, plus the pros and cons of each.

Finding Financial Aid for Graduate Certificate Programs

There are many reasons to pursue a graduate certificate, including access to more job opportunities and the ability to earn more money. In some fields, such as finance, employers may encourage their employees to obtain certificates to move up in their fields. In these cases, employers may provide financial assistance to pay for the certificate program.

Some people may obtain a graduate certificate with an eye toward completing additional coursework toward a master’s degree in the future. While some graduate certificates have discrete coursework unique to the certificate, other post-grad certificates have credits that may go toward a master’s degree. If you’re considering a grad degree, then it may be a good idea to explore what the coursework entails and whether you may be able to use those credits toward a master’s in the future.

If you’re planning on funding your graduate certificate yourself, it may be helpful to speak to people who have done the certification program to hear the pros, cons, and time commitment required. It can also be helpful to hear how other people have funded the certificate, because it could open up certain avenues, such as specific scholarships for that certificate that you may not have heard of yet.

Strategies to fund your graduate certificate include self-funding, funding from your employer, funding from scholarships, or a private student loan. Here, some of the considerations of all avenues.

Recommended: A Guide to Private Student Loans

Funding From Your Employer

In some cases, your employer may recommend you obtain a post-grad certificate. In other cases, you may need to ask your manager and go through your employer’s process for tuition reimbursement.

Pros of funding from your employer:

•   Your employer is covering some or all of the financial burden.

•   Your employer is invested in your career.

•   You can be confident that the certificate will be useful to your future career path.

•   There may be coworkers who have done the certificate as well as who can walk you through their experience as well as specifics about the HR process in getting the certificate funded.

Cons of funding from your employer:

•   Balancing work and studying may be challenging.

•   Your employer may have oversight into your success.

•   You may be on the hook for the costs of the certificate if you leave or are terminated during a set period of time.

•   You may still be responsible for part of the tuition, or for additional materials fees.

Free tuition is an obvious pro when it comes to having a certificate employer-funded. But other considerations come into play: How will you simultaneously manage work and studying? What happens if you don’t pass? And if you do accept employer funding, is there a contract that locks you into employment for a certain period of time? Knowing the stipulations can be helpful in managing expectations. And of course, talking to coworkers who have already done the program can be helpful in figuring out the ins and outs of how your specific employer expects you to complete the course and what they anticipate for your career future.

Recommended: Is it Possible to Take Online Classes While Working?

Funding From scholarships

Private scholarships may be available to help pay for the course. They may be issued by the institution granting the certificate. For example, the Certified Financial Planner (CFP®) certificate, a popular financial certificate, has a host of scholarships presented on their website . These scholarships may be distributed by private foundations in honor or memory of certain people. Each scholarship may have specific requirements; some may be exclusive for people who demonstrate financial need, others may be exclusively focused on merit.

Pros of scholarships:

•   They can help offset tuition costs.

•   They can be gratifying to receive and provide motivation for success.

Cons of scholarships:

•   They typically require applications, which can be time-consuming to complete.

•   They may have admission requirements, such as being a U.S. citizen or already completing certain coursework.

•   Receiving the full amount of money may be contingent on performance.

•   You may be required to declare the scholarship on your taxes; scholarships for non-degree programs are generally considered taxable. If that’s the case for you, consider putting aside money for taxes on the scholarship.

Scholarships can be a great way to cover the cost of your certificate. It’s a good idea to research the certificate program you’re considering to uncover scholarship opportunities. Your alma mater’s career development office may also have leads for you to pursue.

Recommended: Finding & Applying to Scholarships for Grad School

Self-Funding a Certificate Program

Maybe you have savings set aside or maybe your family has offered to cover the cost of your degree program. But if you have the funds, should you write the check?

Pros of self-funding:

•   It’s a seamless process — write the check after you’ve been accepted, and you no longer need to worry about payment.

Cons of self-funding:

•   The money used for the degree program may diminish your savings or emergency fund.

•   Payment may come with strings if a family member is covering the program.

If you have the money to cover a certificate program and still have a comfortable emergency fund, then this can be a great option. But if you’d need to decimate your emergency fund or use a credit card to cover the payment, then it could be a good idea to consider other ways to cover the cost.

Student Loans for a Certificate Program

The fourth option is applying for student loans to cover the cost of a certificate program. Unlike a degree program, certificate programs are generally not eligible for federal student loans.

In the case that your certificate program is eligible for federal financial aid, it’s worth filling out the Free Application for Federal Student Aid (FAFSA®). This form will help determine your eligibility for federal aid, including federal student loans.

But private graduate student loans may be an option. Note that private student loans are not subject to the same requirements as federal student loans and don’t offer the same borrower protections, such as the option to pursue Public Service Loan Forgiveness or deferment protections. Be sure to shop around and read all the terms and conditions closely.

Pros of private student loans:

•   You won’t need to deplete your savings.

•   You can compare private loans to find the lowest interest rate.

•   You may be able to find a payback structure that makes sense within your overall budget.

Cons of private student loans:

•   Additional debt can be challenging to take on, especially if you’re not working.

•   Depending on credit history, some lenders may require a cosigner.

How do you choose which company to get private student loans for a certificate program? In addition to checking your interest rate — which will typically not affect your credit score — you also may want to consider additional elements of the loan. Are there any additional fees? Are there any hardship clauses, if you were unable to make payments for a month? What does the payment structure look like?

In addition to comparing lenders, it can also be helpful to ask yourself some what-ifs. These include:

•   How will these payments fit into my budget?

•   What happens if I don’t obtain the job or payment bump I’m expecting along with my certificate?

•   How will I budget to make sure that my loan payment doesn’t feel like a liability?

Because graduate certificate programs are generally less expensive than degree programs, loan terms may be smaller and shorter-term. Still, applying for any loan is a big deal, and it’s good to go through a few scenarios before you decide on the right avenue for you.

The Takeaway

Even though they may seem lower-commitment than a full degree program, certificate programs have the potential to be time-consuming and expensive. Resources are available for payment, but some expenses, such as professional fees or exam fees, may not be covered under certain scholarships or by your employer. Understanding the full scope of expectations for tuition coverage and knowing how any payback terms may fit into your budget can be key for paying confidently for your certificate program.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Photo credit: iStock/Jacob Ammentorp Lund

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOIS0923011

Generally, scholarships used to pay for qualified educational costs at an eligible educational institution aren’t considered taxable income. The same goes for any grants used to pay for college tuition and fees.

However, there are some cases in which scholarship or grant money may be taxable. For example, if you have money left over after covering your qualified education expenses and use it for other costs (such as room and board or school supplies not required by your program), these funds typically count as taxable income.

If you or your student received scholarship funding, it can be helpful to know ahead if it will contribute to your tax liability. Here’s what you need to know about identifying taxable scholarships and handling filing requirements.

Scholarships That Are Tax-Free

Students can be exempt from paying taxes on their college scholarships if they satisfy certain criteria. For one, they must be enrolled at an accredited college, university, or educational institution that maintains regular attendance.

Additionally, scholarship funds must be used to pay for qualified education expenses — a determination made by the IRS. Under this definition, qualified education expenses include the following:

• Tuition

• Mandatory fees (e.g., athletic and tech fees)

• Textbooks

• Equipment and supplies (e.g., lab equipment)

When it comes to textbooks, equipment, and supplies, anything that is required by your school to complete coursework would be free from taxes. If you use the funding towards an extra-curricular activity, such as a club or intramural sport, however, the amount you spend would be considered taxable.

If the scholarship is used for a certificate or non-degree program, the entire amount is taxable whether or not funds are used for qualified education expenses.

It’s important to note that any scholarship funds leftover after paying for qualified education expenses would become taxable income.

Scholarships Considered Taxable Income

How are scholarships taxable? According to the IRS, scholarships used for expenses outside the scope of qualified education expenses must be reported in gross income — making them taxable.

Scholarship funds used for the following costs are considered taxable by the IRS:

• Room and board

• Travel

• Medical expenses

• Optional equipment (e.g., new computer)

But are scholarships taxable income in any other situations?

Scholarships that are awarded in exchange for services like teaching or research, often known as fellowships, are classified as taxable compensation in most cases. Students would have to pay taxes even if their fellowship money is used to pay for tuition and other qualified education expenses.

However, there are a few exceptions when education-related payments could be tax-exempt. Specifically, students do not have to pay taxes on funds received for required services through the following scholarship programs:

• National Health Service Corps Scholarship Program

• Armed Forces Health Professions Scholarship and Financial Assistance Program

• Student work-learning-service programs operated by a work college

Other forms of financial aid could be considered taxable income as well.

Earnings through the Federal Work-Study program are subject to federal and state payroll taxes. If you stay below 20 hours a week while enrolled full-time, you won’t have to pay FICA (taxes for Medicare and Social Security) taxes.

Even Pell Grants — a federal aid program for students with significant financial need — are taxable if they’re not used for qualified education expenses.

Making it Legal: Reporting Taxable Awards

If a college scholarship is considered taxable, the student would need to report the scholarship (or portion of the scholarship) on their tax return.

Some students may receive a W-2 form from the scholarship provider outlining the taxable amount. Otherwise, they may need to calculate and enter the amount on their own tax return.

The student would report any taxable amount of a scholarship, grant, or fellowship as follows:

• If filing Form 1040 or Form 1040-SR, you would include the taxable portion in the total amount reported on Line 1a of your tax return. If the taxable amount wasn’t reported on Form W-2, enter it on Line 8 of Schedule 1 (and attach the form).

• If filing Form 1040-NR, you would report the taxable amount on Line 8 and fill out and attach a Schedule 1.

If you have questions about whether or not any portion of your scholarship money is taxable and how to report those funds on your tax return, it’s a good idea to consult a tax professional for personalized guidance.

How Education Tax Credits Fit in

Students and their family members may be eligible to claim the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC) if they paid for college and related costs in the past year. Take note that you can’t use both tax credits for the same student in the same year.

To claim either tax credit, you’ll need Form 1098-T from your college. This form shows any reportable transaction for an enrolled student.

To qualify for the AOTC or LLC, you could have paid educational expenses out of pocket or with student loans. Expenses that were paid for by tax-free scholarships are not eligible for a tax credit.

The AOTC and LLC differ in scope and eligibility, so it’s helpful to compare both to see which may apply and provide a greater tax return.

American Opportunity Tax Credit (AOTC)

The AOTC can be used for qualified education expenses — tuition, fees, textbooks, and necessary supplies — for a student’s first four years of college.

The maximum credit currently stands at $2,500 a year for eligible students. This is calculated as 100% of the first $2,000 in qualified education expenses paid for an eligible student plus 25% of the next $2,000 in qualified education expenses.

If the AOTC reduces your taxes to zero, it’s possible to have 40% of the remaining credit (up to $1,000) refunded.

Eligibility for the AOTC is based on the tax filer’s modified adjusted gross income (MAGI). If you’re filing separately, your MAGI must be $80,000 or less to qualify for the full AOTC credit. The threshold is $160,000 for married filing jointly.

It’s possible to receive a reduced AOTC amount if filing separately with MAGI between $80,000 and $90,000 or $160,000 and $180,000 for married filing jointly.

Recommended: 23 Tax Deductions for College Students and Other Young Adults

The Lifetime Learning Credit (LLC)

The LLC can apply to a broader range of expenses than the AOTC. It can be used to claim up to $2,000 for tuition and related educational expenses for undergraduate, graduate, or professional degree courses. Costs of non-degree programs that improve job skills are also eligible for the LLC.

This credit does not have a limit on the number of years it can be claimed on your tax return. However, the LLC has stricter income requirements.

For Tax Year 2022, the amount of your LLC is gradually reduced (phased out) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return).

You can’t claim the credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return).

Recommended: Can You Deduct Your Child’s Tuition from Taxes?

Don’t Forget Deductions

If you’re paying interest on a student loan, you may be eligible to deduct up to $2,500 of that interest with the student loan interest deduction. To be eligible, interest payments must be legally obligated and your filing status can’t be married filing separately.

There are also income requirements, which can vary annually, to factor in for the deduction calculation. For the tax year 2022, the filer’s MAGI must be less than $85,000 (or $170,000 if filing jointly) to be eligible for the full $2,500 deduction.

If your MAGI is between $70,000 and $85,000 (or $140,000 and $170,000 if filing jointly), you could qualify for a reduced deduction.

💡 Quick Tip: Need a private student loan to cover your school bills? Because approval for a private student loan is based on creditworthiness, a cosigner may help a student get loan approval and a lower rate.

The Takeaway

Scholarships, grants, and fellowships can help make college more affordable. Not only that, the funds you receive typically aren’t taxable.

A general rule is that your college scholarship is tax-free when it is used to pay for “qualified education expenses.” Exceptions include any part of the scholarship or grant you used to pay for supplemental things (not required for a course) or as payment for work or services you performed.

If scholarships, grants, other aid, and federal student loans are enough to cover the cost of your college education, you may want to consider applying for a private student loan. Loan limits vary by lender, but you can often get up to the total cost of attendance. Interest rates may be fixed or variable and are set by the lender. Generally, borrowers (or cosigners) who have strong credit qualify for the lowest rates.

Keep in mind, though, that private loans may not offer the borrower protections — like income-based repayment plans and deferment or forbearance — that automatically come with federal student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

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Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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