Smart Ways to Finance Your Continuing Education

Whether you're a high school or college graduate, continuing-education courses can be a great way to boost your career—or start a new one.

Adult classes can burnish your existing skills or help you add new ones. And that can increase your value as an employee or a potential job candidate. It's also a smart way to prepare for a second career or earn extra money in retirement.

Continuing education can take many forms. But whether it's a single online class or a full-time graduate program, don't forget to do your homework on how you'll pay for it.

“You want to make sure that the cost of continuing education doesn’t derail your overall financial picture,” says Andrew Rafal, president of Bayntree Wealth Advisors in Scottsdale, Ariz.

Here are some tips to help you get started:

Check out free online options. If you want to study only a few specific topics, there are plenty of free or dirt-cheap classes online. Dozens of great schools offer online certificate courses in almost 1,000 subjects through the nonprofit EdX consortium, which was founded by Harvard University and the Massachusetts Institute of Technology. EdX also offers graduate-level "micromasters" degrees in programs such Artificial Intelligence, which is taught by Columbia University and costs $300 per course.

Ask your employer to chip in. According to the International Foundation of Employee Benefit Plans, 83 percent of public and private employers surveyed offer some form of financial assistance for employees that want continuing education to increase their skill set.

“Even if there’s not a formal program, it pays to sit down with your manager and the human resources department,” says Kristin Pintarich, editor of "The Adult Student Guide to Survival and Success." “If you are a valued employee and you are looking to add skills that will help your employer, you may be able to negotiate some assistance.”

A bonus is that you won't have to pay tax on up to $5,250 in annual education benefits your company provides.

Consider a 529 college savings plan. If you expect to go back to school in five or 10 years, you can open a 529 plan in your name and build up a fund that you will be able to tap tax-free for qualified school expenses. The funds can be used for any post-high school education expenses. That means a four-year college education, a community college education, and vocational training expenses all qualify.

You can also switch the beneficiary of an existing 529 to yourself and tap the funds tax-free. Rafal says a client with young children recently did this to fund her continuing education in psychology. “We know her income will be higher with the degree, at which point she will replenish the 529 funds she tapped,” he says.

Pick the (financially) right school. Whether you're going back to school full time or just taking a few courses, the kind of school you choose can make a big difference in how much you pay.

“An in-state public school is a great education at half the price of attending a private university,” notes college financing expert Mark Kantrowitz, publisher of Cappex, a website that helps students make decisions about the college application process.

Kantrowitz also recommends that adults follow the same tactic as on-the-fence younger students: Take some courses at a community college to see whether you really like a field before committing to a much more expensive public or private program.

You can also save money by taking prerequisite coursework at a community college before transferring. Just be sure to check with the community college about its credit-transfer agreements with four-year schools.

Borrow only from Uncle Sam. If you intend to use student loans to finance any courses, federal Stafford loans (which offer fixed interest rates and flexible payback options) are smarter than private student loans (which typically have variable rates). Of course, you should borrow responsibly and make sure you'll be able to repay those loans once you finish your coursework.

Adults who support themselves (independents in IRS lingo) are eligible for larger Stafford loan limits than children who are claimed as dependents. Still, Kantrowitz stresses that your goal should be to repay the loan within 10 years, or before you retire, whichever lands first. “Stretching beyond that is a sign you are borrowing too much.”

Grab a federal tax credit. The Lifetime Learning Credit provides a tax break of up to $2,000 per year for qualified expenses. The credit is per tax return, so if you also have kids in school, your maximum benefit is $2,000 per year. Singles with income below $65,000 and married couples with income below $130,000 are eligible for the Lifetime Learning Credit. A tax pro can help you determine whether you are eligible for other back-to-school breaks, such as the American Opportunity Credit and deductions for tuition and expenses.

More from Consumer Reports:
Top pick tires for 2016
Best used cars for $25,000 and less
7 best mattresses for couples

Consumer Reports has no relationship with any advertisers on this website. Copyright © 2006-2017 Consumers Union of U.S.