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Public colleges and universities in the US receive funding from the tax revenue of a state’s residents. While a lot of the country’s public colleges and universities are prestigious institutions with a global reach, they primarily operate with a preference for their state’s residents.
Those from outside the state also do not necessarily contribute to the taxes that fund a particular public college or university. As such, they typically operate on a two-tiered tuition rate, with tuition for out-of-state tuition often two to three times greater than in-state tuition rates.
This difference in tuition rates is highly noticeable in most cases, with overall differences in cost running up to several tens of thousands of dollars. There are a number of circumstantial factors that qualify some students for in-state tuition rates. However, for a majority of prospective students, an equally attractive option is to qualify for residency in a state.
One of these qualifying factors is financial independence. It is only one of a number of must-comply factors to be deemed a state resident, but it is a deep discussion on its own. Let’s look at some important points regarding financial independence.
Benefits of Paying In-State Tuition
It’s a known fact that not all public colleges and universities are equal in terms of academic quality, depth and breadth of academic offerings, opportunities for undergraduates once they earn their degree, and overall prestige. This makes a certain number of public universities highly desirable to students, especially those who are from other states looking for what they may see as the best fit for them academically.
Off the bat, getting an in-state tuition has its own set of clear benefits. Let’s quickly run through some of these.
Cost difference
The rates vary between states, but in general, there’s a stark difference between in-state and out-of-state tuition. Out-of-state tuition rates can be thrice as expensive as in-state tuition. Out-of-state students also need to pay for other associated cost-of-living expenses.
Enjoying education for less
Moving into a new city and state for college gives students the opportunity to experience new cultures, widen their perspectives, and start building their network. With in-state tuition rates, this cultural exposure comes at a lower cost than if a student had to fork out the full out-of-state tuition.
Cost benefits after graduation
The lower in-state tuition rates also leave their mark long after a student has earned their degree. Students typically make use of a number of means to pay for college, including loans. Depending on a student’s employment and career outcomes after graduating, student loans can take years to pay off, as these will accrue interest. A lower overall cost of a degree with in-state tuition rates gives students better chances of paying off any student loan debt sooner.
Who is a Resident?
Getting an in-state tuition rate is centered on the issue of qualifying for state residency. In the most fundamental legal terms, residency in a state involves being physically present within the state and performing a number of activities that signal an intent to stay in the state permanently.
The nature of these activities can be legal (filing tax returns, applying for a driver’s license), civic (voting, joining & participating in various organizations in the state, getting a library card), or economic (owning/renting a house, starting a business).
Some of these activities, in particular, signal a person’s direct involvement in the economic functioning of the state, which entitles them to a number of state services and benefits, such as in-state tuition rates.
This can be compared to visitors and tourists, who, while similarly contributing to a state’s economy and other social aspects, do not have the intent of staying permanently.
An Overview of Residency Requirements
States will typically have their own set of guidelines and laws that govern residency. The specifics vary, but as a whole, there are a number of common requirements between states. Let’s take a look at some of these.
Establish a domicile.
In legal terms, a domicile is a person’s permanent home. Compared to a residence, a domicile has more of a temporary or indefinite connotation.
The basic steps for establishing a domicile include moving to the intended state for reasons other than education. To establish a domicile, you have to surrender previous state documents and obtain the necessary documents from the intended state.
Documents such as identification, vehicle registration, voter registration, and more are the typical requirements that must be submitted within 30 days.
There is also a minimum time of physical presence in the state before a person’s domicile can be established. This minimum typically hovers around the 12-month mark before a person can successfully establish a domicile.
Establish intent and permanence.
Intent, in this case, means intent to stay permanently. There are two sides to this requirement: being able to provide proof of activities expected of typical state residents and severing key ties with any other previous state they may be from (e.g., renouncing domicile in those).
It is equally important to be able to conclusively provide proof of having severed any of these key ties in other states, as evidence of these can be grounds for disqualifying any applications for residency.
Establish financial independence.
If you want to obtain residency for tuition purposes, you will first need to fulfill the requirements of a financially independent student. The process may differ from university to university. In some cases, you may need to complete a questionnaire, usually available online.
After completing and signing the questionnaire, you may be required to provide all the requested documentation to support your claims.
As a financially independent student, you will need to meet the criteria in addition to fulfilling the bona fide residency requirements.
How to Fulfill the Requirements as Financially Independent Students
Supporting one’s self financially while pursuing a higher education can be both daunting and overwhelming. For those who want to take advantage of in-state tuition and other educational grants, however, proving that they are financially independent makes so much sense.
Obtaining a residence for tuition purposes requires one to fulfill the requirements as a financially independent student. This requirement may vary between universities. Most of the time, a school will require you to complete and sign a Residence Questionnaire form.
You may also be required to provide documentation requested by the school. Often, a documentation checklist is provided.
There are certain criteria that you need to meet if you want to be considered financially independent. This includes meeting all the other residency requirements, along with some of the following:
- Parents or guardians have refrained from claiming and will not be claiming that you are their dependent on Federal Income Tax returns for both the current and previous calendar years.
- Parents or legal guardians have not provided you with significant financial assistance and have no plans to do so in the current and previous calendar years.
- You are paying at least 51% of the combined total expenses with your income or resources for the present and previous calendar year.
- If you are 25 years or younger and married, receiving significant financial assistance from your spouse, you may still qualify as financially independent, provided the marriage has been in place for at least one calendar year before the application for residency.
- For those who are 25 years or older, you will be presumed financially independent without having to provide information from your parents/legal guardians.
- You are serving on active duty in the United States Armed Forces. Simply training with the force cannot be accepted.
- You may also be classified as financially independent if, at any point after turning 13, both of your parents passed away. It is also applicable if you were in foster care or you were in a court case.
For the purpose of establishing residency for educational pursuit, your qualification as financially independent will depend on the cost of attendance and whether you have met the requirements to be considered financially independent.
It is usually the admission staff who evaluates each student’s independence eligibility, depending on the number of credit hours they enrolled in. Other factors that may influence this include the number of full-time hours worked, information on federal income tax for both the student and parents and the student’s income.
Demonstrating Your Financial Independence
You may be required to demonstrate your financial independence and proof of declared income by preparing necessary documents such as the most recent federal income tax returns, pay stubs and the W-2 form.
Federal IRS Tax Return Transcript
It is often a requirement to provide the Federal IRS Tax Return transcript for the previous calendar year before requesting residency. You may also want to check if the IRS offers a tax return transcript, as this document shows dependents.
W-2 Form
This form documents your earnings. It is a US federal wage and tax statement provided by an employer and also sent to the Social Security Administration every year. You may want to get a W-2 form for the calendar year prior to your application for residency.
Pay Check Stub
Schools often require the latest paycheck stub. This document contains your earnings for the current calendar year. You may also include your earnings from unemployment and other state benefits.
Financial Aid Grants and Scholarships
Some schools may require grants, scholarships, and other financial aid packages under the student’s name from the previous terms if you were from a different educational institution.
Trust Education Account
If you have a trust or education account under your name, you may be able to present this as proof of financial independence, too, provided that the account was created before you entered high school. You will also need to submit proof that the account was used for education purposes for the current calendar year.
Other Documents
Other proof of financial independence may include documented financial resources such as the sale of personal or real property, state or financial assistance, loans, statements of earnings of the student’s spouse, and inheritance, among others.
You may not use financial resources such as personal loans, checking and saving accounts, gifts, Parent PLUS loans, and cash earnings. They are not usually counted as income. Some of these may also contradict the status of financial independence.
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Staying Financially Independent While Studying
Once you have proved your financial independence, you will need to maintain your status and ensure you can fund your college education. While it can be hard and challenging, it is not impossible to earn money while juggling your studies.
The modern age of digital technology means plenty of opportunities for students to make money without having to deplete their time and resources. Here are some of the ways you can stay financially independent:
Work as a freelancer.
As a freelancer, you will be able to enjoy a flexible schedule while working remotely. It is also often available for different skills and levels of expertise.
Stick to a budget.
Budgeting is essential if you want to save and grow your money. To do this, you need to account for your income and resources. It is important to monitor your cash flow and determine how much you are spending each month.
Set up a savings account.
You can save any time, but it must be done consistently and with discipline. Setting aside money for rainy days will help you navigate financial independence better.
Find financial aid.
Being able to benefit from in-state tuition should not stop you from seeking additional ways to fund your college education. You may want to check the financial aid resources available at your disposal.
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