Paying Education Costs with the Segal AmeriCorps Education Award
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].