How Financial Aid for AmeriCorps Works

The Segal AmeriCorps Education Award is intended to help AmeriCorps alumni pay for education, and the requirements are strictly enforced. Used wisely, though, the award offers great benefits for its recipients.

If you've decided to use your education benefits to pursue a traditional four-year degree, you've got a lot of planning to do. To get the most out of your award, choose your school carefully. Some colleges and universities have benefits designed to attract alumni of AmeriCorps and other service programs. These benefits include a financial match to the award (the school gives you extra money in the form of a grant or a tuition discount), scholarships or course credit for the service you've already completed. You can find a list of participating schools on the AmeriCorps Web site [source: EnCorps].

Even though AmeriCorps has a national focus and aims to build community in government-funded schools, there are options for students with wanderlust. Do you want to travel, learn a new language, study international affairs or apply your newfound service skills abroad? The U.S. Department of Education maintains a list of foreign schools that are qualified to accept the Segal AmeriCorps Education Award [source: EnCorps].

If you already have a college degree or you aren't interested in becoming a traditional student, the award can still be put to good use. Since it can be used to pay for non-degree programs at community colleges or public universities, you can develop a hobby or skill, such as cooking, art or music. Some trade schools are qualified to accept award funds, so the AmeriCorps award can be used to pursue a career in cosmetology, culinary arts, mechanical repair and many other vocations [source: EnCorps]. Keep in mind, the education award is available for seven years after you complete your service. There's no rush if you're not sure what path is right for you.

If you combine your Segal AmeriCorps Education Award with low interest federal student loans, it can provide flexibility even after you've graduated from school. You might be able to take some time off from loan payments, or you can enjoy the satisfaction of quickly paying down debt. We'll discuss student loans and other ways to apply your education award in the next section.

First, it's important to realize that the award funds are held in the National Service Trust and are never given directly to State or National AmeriCorps members (although members of VISTA, or Volunteers in Service to America, an AmeriCorps service program designed to address poverty, can opt for a smaller cash stipend instead of the education award). Members can use the My AmeriCorps Web site to manage award payments. The site is used to track award funds and send payments directly to the school or to the loan holder [source: EnCorps].

Once your online profile is set up and the funds are available, there are a few ways to use the award to help pay for a degree at a public or private college or university. The money can be used immediately toward tuition and fees at qualified schools, which ultimately means that you won't need to take as many loans. This should be done carefully: Since the award counts as income for the tax year it's used, it can potentially push you into a higher tax bracket, which results in paying more income tax (we'll discuss the award's tax implications more in the next section.) [source: EnCorps].

Also, paying the award directly to the school might mean there is less federal financial aid available to you because of the way income and financial need are calculated. In other words, if you're using an AmeriCorps award toward tuition, you might not need federal grant money as much as other students do. In such cases, some financial aid organizations suggest using subsidized loans -- loans on which interest doesn't accrue while you're in school -- to your advantage, covering your costs up front and using the award to pay off the loans later. Read and fill out the Free Application for Federal Student Aid (FAFSA) carefully to avoid this drawback [source: EnCorps].

Loans are a valuable resource if used carefully, so make sure they qualify for the award. Choose loans backed by the federal government under Title IV of the Higher Education Act or Titles VII and VIII of the Public Health Service Act, or loans from state agencies and state schools. Plus, federal loans usually carry much lower interest rates than private student loans [source: EnCorps].

Discuss your options with your loan lender to make your AmeriCorps award work with your goals and priorities. If you decide to use the award to pay down loans, you have two basic options when you finish school and the loans are due. The award can be applied toward future loan payments, which means you won't have to make loan payments for a while. If you want to travel or you haven't yet found a job, this is a good choice. Or, the award can be applied to your loan principal, which immediately reduces the total amount you owe. Because interest is calculated according to principal, reducing the principal means you'll pay less interest on the entire loan [source: EnCorps]. While you're planning and budgeting, keep in mind that the award can be drawn in increments and split up to pay both tuition and loans [source: EnCorps].

The Segal AmeriCorps Education Award has recently been increased to $5,350 for a year of full-time service [source: U.S. Department of Education, Corporation for National and Community Service]. VISTA members have the option of receiving a cash award at the end of the service term, but those who wish to take the Segal Education Award instead of the $1,500 stipend must declare the option before the service term begins [source: AmeriCorps].

AmeriCorps welcomes part-time members, although there aren't as many options or opportunities for part-time positions. Part-time volunteers are still eligible to receive a portion of the education award, which is a prorated amount based on the time spent in service. Members are limited to two terms in the State and National and National Civilian Community Corps (NCCC) programs, three terms in VISTA, or three terms amongst a combination of the programs. Incomplete and part-time service terms count towards the term limit, and AmeriCorps strictly enforces a maximum of two education awards per member [source: Students in Service, AmeriCorps].

Other benefits of the new laws are increased incentives for adults and retirees to volunteer. Senior citizens can now receive a $1,000 education award for 350 hours of service with a variety of registered sponsors [source: Corporation for National and Community Service]. If adults (over the age of 55) decide not to use the education award, the money can be transferred to an account for children, grandchildren and foster childrens' education expenses [source: Committee on Education and Labor, Corporation for National and Community Service]. There are no upper age limits for most AmeriCorps programs [source: AmeriCorps].

As mentioned earlier, there may be tax implications for using the award. The award qualifies as taxable income in the year(s) that funds are disbursed to a school or lender, and, depending on your income, might push you into a higher tax bracket, which means you'd pay more income tax [source: EnCorps]. Some politicians think the Segal AmeriCorps Education Award should be exempt from income tax and have proposed changes, but the law hasn't been changed yet. We'll describe other new and proposed changes to AmeriCorps-related laws in the next section.

Now that you understand how the AmeriCorps grants can benefit you, read on to see how government initiatives and the new laws we've mentioned have made that money available.

On AmeriCorps' Web site, the organization is described as "a program of the Corporation for National and Community Service, an independent federal agency whose mission is to improve lives, strengthen communities, and foster civic engagement through service and volunteering" [source: AmeriCorps]. But what does that really mean? As we've discussed throughout this article, one of AmeriCorps' biggest motivations is to enable and encourage higher education, fostering skills and innovation that will help develop the United States. Because of the government's renewed focus on developing domestic resources, recent laws and initiatives enable new funding for the program to increase its scope [source: Independent Sector]. Demand for the program is growing: The first four months of 2009 saw a 400 percent increase in AmeriCorps applications [source: The Democratic Party].

The first National Service Act was signed by the first President Bush in 1990, setting the foundation of AmeriCorps as we know it. President Clinton signed the National and Community Service Trust Act in 1993, which paved the way for AmeriCorps' 1994 launch [source: AmeriCorps]. The second Bush administration was noted for its enthusiastic support of the program [source: Waldman].

In a 2001 Washington Monthly article about AmeriCorps' significance, Senator John McCain argued against the notion that community service initiatives are mostly associated with the Democratic Party, "because duty, honor, and country are values that transcend ideology" [source: McCain]. More recently, after Republican Senator Orrin Hatch and Democratic Senator Edward Kennedy worked on the Serve America Act together, Senator Hatch requested that the bill be named after Senator Kennedy to honor the Kennedy family's dedication to service -- a notable change from 1993, when Senator Hatch voted against the original law [source: The Democratic Party, Waldman]. Support for AmeriCorps' initiatives was also demonstrated by the results of the Serve America Act, which passed in 2009 with a House of Representatives vote of 275 to 149 and a Senate vote of 78 to 20 [source: Herszenhorn, Committee on Education and Labor]. The strong approval of volunteer programs demonstrates that AmeriCorps' focus on teamwork has merit.

AmeriCorps and its related programs are paid for by the Corporation for National and Community Service. Money to be used for the Segal AmeriCorps Education Award is held in the National Service Trust, which was allotted $197 million for the fiscal year 2010 in the AmeriCorps budget [source: Corporation for National and Community Service].

There's been a lot more money available for community service in the past couple of years, thanks to the new community service laws. 2009, especially, saw a flurry of activity intended to increase the scope of AmeriCorps' programs. Of the new laws, the Edward M. Kennedy Serve America Act has the biggest impact.

The bill first took shape in 2008, when Senator Orrin Hatch approached Senator Edward Kennedy to discuss the impact of service and some new ideas. Together, they wrote up and proposed their ideas, and President Obama signed the act into law on April 21, 2009.

Many of AmeriCorps' goals are supported by the Serve America Act, which creates incentives to foster a culture of service. The law provides for a nationwide community infrastructure fund, a volunteer generation fund, and a capacity building fund to maximize investments in service through training and development [source: Independent Sector].

The act also focuses on the educational benefits of AmeriCorps service by actively recruiting Americans to volunteer, with an emphasis on encouraging people besides recent college graduates to join, especially adults, retirees and kids in grades 6 through 12 [source: Committee on Education and Labor, Corporation for National and Community Service]. Broadening the pool of candidates will increase the diverse experience that volunteers can bring to the table, and in turn the new positions will reward service members with career-building skills.

New members will be rewarded with a newly-increased Segal Education Award, another provision of the Serve America Act. The award amount was raised from $4,725 to $5,350, and the maximum award will increase over time [source: AmeriCorps]. The award amount was boosted to match the Pell Grant, a federal need-based education grant for low-income students.

To support fresh interest and a bigger crop of applicants, the Serve America Act called for an increased number of AmeriCorps positions, boosting the ranks from 75,000 to 250,000 [source: Herszenhorn]. These positions are designed to meet specific goals and challenges according to the government's community service priorities.

There are a number of other acts, bills and laws related to the Serve America Act and the Segal Education Award. Senators Kennedy and Hatch also introduced the Incentive to Serve Tax Act in 2009, which uses tax breaks to encourage employers to allow employees to volunteer on company time. It's closely related to the Serve America Act, but it's a separate bill because it includes tax provisions [source: Independent Sector].

The Segal AmeriCorps Education Award Tax Relief Act of 2009 is intended to change the way the AmeriCorps education award is counted toward gross taxable income. This way, AmeriCorps volunteers would no longer have to pay additional income taxes in the tax year in which the award is used. The bill was referred to the House Committee on Ways and Means on March 18, 2009, but as of February 2010, it hasn't been decided if this bill will become law [source: GovTrack].

In 2007, the College Cost Reduction and Access Act was passed. This act formally recognized AmeriCorps volunteer service as a public service position, making members eligible for the Public Service Loan Forgiveness program. This program helps reduce or eliminate college debt for workers in the traditionally low-paying public service sector [source: AmeriCorps].

With more financial incentives to volunteer than ever before, and the growing needs and opportunities to help across our country, public service is expected to be a vital part of America's growth. If you've been inspired to pursue higher education or simply feel the call to serve, see the Lots More Information section for other helpful articles and links.