Going back to college may be one of the most important financial investments an adult can make (see story, page 38), whether it’s undergraduate or post-graduate work, or a certificate program.

According to the U.S. Census Bureau, the expected lifetime earnings of a bachelor’s degree-holder are $2.1 million, whereas those with only high school educations are expected to earn $1.2 million. Tack on a master’s degree, and the earnings jump to $2.5 million.

Statistics show the significant financial benefits of holding a degree; however, the road to get there is sometimes blocked by hidden financial barriers. Mike Sullivan, director of education for Take Charge America (www.takechargeamerica.org), a national nonprofit credit counseling agency based in Arizona, says adult students often have more financial burdens than their younger counterparts.

Despite the additional expense, many adults are finding their way back into the classroom. The U.S. Census Bureau reports that 6.1 million college students — or 37 percent — are older than age 25.

If you’re thinking of hitting the books to advance your career, keep in mind these five expenses as you make our plans and set your budget:

Child care. Parents of young children will need to pay for child care during school functions if a spouse, family member, or close friend is not available. In addition to class time, you may need a babysitter to cover you when the kids need to be driven to sports practices and school events, and may even need to hire someone to supervise homework. To ease the burden, check with your school to see if child care is offered and consider trading child care services with another parent in a similar situation so you each have time to study.

House and yard work. Extensive school work can take you away from daily house chores and yard work. Many adult students find it easier to hire a cleaning or lawn maintenance service; yet, that could set you back considerably each month. Sullivan suggests doling out chores to family members. Use these chores as “together time.” This should make the work go faster and will go a long way toward instilling a positive work ethic, while giving everyone the benefit of some extra exercise.

Healthcare and retirement. If you are leaving your job to return to school, or switching to a part-time position, you may lose full-time benefits, such as healthcare. This can be especially burdensome if your spouse and/or children are attached to your health plan at work. Single-enrollment plans can easily be three times as expensive as being part of a group.

Before you quit your job or go part-time, check out the company’s COBRA plan to see if you can continue your current benefits for less than a single-enrollment plan. If you and your family are relatively healthy, consider a higher deductible to keep payments as low as possible. Consider an HMO rather than a more expensive PPO. And, don’t forget the vitamins.

Switching to a part-time job could force you to stop regular deposits into a 401k plan. If you have been counting on a specific retirement date, does this force you to delay your plans? Do you have other investments to pad the loss? Will your increased earnings potential make up the difference?

If you are relatively young, it is probably worth it to get the degree and delay the 401(k) savings. How about asking parents and friends who regularly give you gifts on birthdays and holidays to consider cash gifts that you can deposit into your 401(k)? If you get a tax refund, put it in your 401(k) to give it an extra boost. Every little bit helps.

Extended commute. Rising gas prices are a hot topic nationwide. Depending on your location, you may have to shell out more money each month in extra gas and parking fees. So consider sharing the ride. Ask around or post a message letting others know you are willing to carpool.

Funding traps. Using high-interest credit cards to cushion the financial strain of returning to school is generally not a good idea. If you need additional money to complete your degree, rely on financial aid or student loans, which have much lower interest rates.

Meanwhile, as summer fades into memory and classrooms come alive with students, those who pay the costs of higher education may find some relief in the various tax benefits associated with education-related expenses.

“Taxpayers should consider higher education tax credits and deductions for which they might be eligible in 2006,” said IRS spokesperson Gregg Semanick in a prepared statement. “Education tax credits and deductions can help offset those costs.”

The following is a back-to-school checklist on education credits, tax deductions, and tax-free benefits:

Education credits. Reduce your tax, not just your income. The Hope and Lifetime Learning Credits are education credits taxpayers can subtract in full from their federal income tax, not just deduct from their taxable income. Taxpayers may claim only one of these credits for the same student in the same tax year. The credits phase out as income rises from $45,000 to $55,000 ($90,000 to $110,000, for married filing jointly). Taxpayers use Form 8863, Education Credits, to claim either the Hope or Lifetime Learning Credits.

Hope credit. Applies only for the first two years of higher education and can be worth up to $1,650 per eligible student, per year. Taxpayers are allowed 100 percent of the first $1,100 of qualified tuition and related fees paid during the tax year, plus 50 percent of the next $1,100.

Each student must be enrolled at least half-time for at least one academic period during the year. This credit does not apply to graduate and professional-level programs.

Lifetime learning credit. Applies to most higher education, including non-degree courses, with a maximum credit of $2,000 per tax return, regardless of the number of qualifying students. This credit equals 20 percent of the first $10,000 of post-secondary tuition and fees paid during the tax year for all eligible students. Credit is available for enrollment in one or more courses.

Tax deductions. There are a number of ways to lower your taxable income with deductions for educational expenses. There is, for example, a deduction for work-related education that allows taxpayers to claim costs of education required to keep their jobs or to maintain or improve skills needed in their present work. But this work-related deduction cannot be used if the education is needed to meet the minimum requirements of a position or is part of a program to qualify a taxpayer for a new trade or business.

Another deduction helps out with loan interest. There is a maximum deduction of $2,500 for interest paid on qualified student loans. This phases out as income rises from $50,000 to $65,000 ($105,000 to $135,000 for married filing jointly). The person legally obligated to make interest payments on a student loan may deduct interest payments on that loan made by someone else.

Tax-free benefits. Certain payments or special programs’ distributions are free of tax when used for qualifying educational expenses. Such expenses cannot duplicate one another or be used to claim education credits or deductions.

Scholarships and fellowships are generally tax-free when used to pay qualified expenses for degree candidates at eligible schools. Generally, amounts for room and board do not qualify as tax exempt and are considered taxable income.

Coverdell Education Savings Account (ESA) distributions that don’t exceed the beneficiary’s qualified education expenses are not taxed. Primary or secondary school expenses are eligible for ESA benefits. The beneficiary must be under age 18 when an ESA contribution is made. The annual contribution limit is $2,000 and is reduced if the contributor’s income is between $95,000 and $110,000 ($190,000 and $220,000 for married filing jointly).

Interest on qualified U.S. Savings Bonds is tax-free if proceeds are used to pay qualified education expenses and income is under $63,100 ($94,700 for married filing jointly). The exclusion completely phases out as income rises to $78,100 ($124,700 for married filing jointly).

Employers can give up to $5,250 in tax-free benefits each year; courses do not have to be work-related.

Although a canceled debt is usually taxable, a student loan may not be if the cancellation depends on the taxpayer working for a certain time in a specified occupation for a section 501(c)(3) organization.

For more information on higher education tax credits and deductions, see IRS Publication 970, “Tax Benefits for Higher Education,” which can be obtained online at www.irs.gov or by calling 800-829-3676. Assistance is also available at 800-829-1040.

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