NEW YORK (MainStreet) — As more adults return to college to obtain a degree, finding ways to finance their education without being saddled heavily with debt is essential.

The National Center for Education Statistics, the Washington, D.C.-based federal entity for collecting and analyzing education data, predicts that the enrollment rate for students aged 25 and older will increase 20% by 2023. The number of students who were 25 years old and up increased by 35% between 2000 and 2012.

The average annual cost of a four-year college in 2020 will be $46,368, a 38% increase compared to the current fees, according to The College Board, the New York-based non-profit organization.

For those returning to school to get an education, doing so in a strategic manner can greatly reduce costs.

How to Start Finding Resources

The need for non-traditional students to be financially savvy is important, since there are many options that can make pursuing a degree affordable such as scholarships and grants, employer and veteran benefits and financial aid, said J.J. Montanaro, a certified financial planner at USAA, a San Antonio-based financial institution. Some scholarships are geared only for adult learners and not the traditional, younger counterparts. Check your state’s department of education website to see if there are grants or programs for non-traditional students because it “can pay big dividends,” he said. Students can check out scholarships through the U.S. Department of Labor.

“Education can be a great quality of life multiplier at any point in your life,” Montanaro said. “However, getting it in a financially prudent way will help ensure that’s the case.”

Students should determine if they qualify for federal financial aid, which is a combination of grants and loans, said Kristin Stuhr-Mootz, system director of educational funding at Herzing University, a Menomonee Falls, Wis.-based university with 11 campuses nationwide and an online division.

“Apply early starting with the federal application at,” she said. “There can be many steps to applying for financial aid, so don’t wait. The sooner you apply, the sooner you will know what your options are.”

Scholarships can also be found through Fastweb and the College Board, which both have extensive databases with a multitude of scholarships.

“They can provide adult learners with a variety of scholarships for which they may be eligible based on individual criteria,” Stuhr-Mootz said. “On a local level, talk to community leaders, churches and employers. They often know about scholarships that are not otherwise well-advertised.”

While there are various options for federal or private student loans, the benchmark that should be followed is to “aim to borrow less than your expected annual salary following graduation,” Montanaro said.

“The return on your education investment can be big, but stack the deck in your favor by limiting what you borrow,” he said. “If you have to borrow, borrow as little as possible and start, and hopefully finish, with federal loan opportunities as they typically offer better interest rates and more flexibility.”

Other Funding Options

Some colleges are geared toward non-traditional students and offer a wider breadth of funding and support services. Berea College in Kentucky offers a full tuition scholarship to students they admit if they have a low income but demonstrate a “high academic ability,” while age is not a consideration, said spokesman Timothy Jordan.

“Students can graduate from Berea debt free,” he said. “Berea has developed special student housing in its Ecovillage designed specifically for married students or those with families, complete with daycare/preschool services, so students need not worry about child care during classes or their work assignments.”

It never hurts to ask your employer if they finance part of a degree. Many companies still offer tuition reimbursement as a benefit, especially if the classes are in the field that is related to your job, Montanaro said.

Many industries encourage their employees to have a college degree and will even fund all or a portion of one. In the state of New York, becoming a volunteer firefighter means tuition is reimbursed 100% through the Firemen’s Association of the State of New York if they attend a chartered community college or online courses taken through Empire State College.

Financing your first or second undergraduate or graduate degree as an adult means you might have more options than someone younger. Homeowners can fund their education with a home equity line of credit. For consumers who want to tap into their home’s equity, but want to avoid making payments and paying interest, a HELOC with EquityKey, San Diego equity-based financing company, gives homeowners an upfront lump sum payment in exchange for a share of their home’s future appreciation.

“When the home is sold, they simply pay back EquityKey’s initial investment, plus a percentage of the home’s appreciation,” said EquityKey co-founder Jeffrey Nash. “If the home has lost value, the company takes the loss.”

While 529 college savings plans are commonly considered a savings vehicle for parents to fund their children’s degrees, an individual of any age can be named a beneficiary to a 529 plan, said Derek DeLorenzo, senior vice president at Ascensus College Savings, a Newton, Mass.-based administrator of 529 plans.

A main advantage is that any growth generated in the plans is tax-deferred. Withdrawals which are used for qualified education expenses are tax-free. Some states have their own plans and offer additional income tax incentives for the contributions.

“529 plans can be used to pay for all types of qualified higher education, including two and four -year colleges, graduate schools such as law and medical, vocational and technical schools,” he said. “Tax-free withdrawals can be used for qualified higher educational purposes such as textbooks, tuition, room and board and certain fees.”

Employees who have been socking away money for their IRA might choose to withdraw funds from one to finance their education. The IRS allows an individual to withdraw from an IRA to pay higher education expenses for their degree or their spouse. Although you must pay federal income tax on the amount withdrawn, the money will not be subject to the early withdrawal penalty. 

The only limit as to how much you can withdraw each year is the total amount of your "qualified" education expenses, said Mark Tan, a financial advisor with Thrivent Financial, a Lake Forest, Ill.-based non-profit financial services company.

“If you do need to resort to tapping into an IRA for education purposes, I recommend withdrawing as little as possible,” he said.

Tax Tips for Adult Students

There are two tax credits that students can qualify as they strive to obtain a degree. The American Opportunity Credit allows you to claim up to $2,500 per student per year for the first four years of school as the student works toward a degree. The Lifetime Learning Credit allows you to claim up to $2,000 per student per year for any college or career school for tuition and fees, as well as for books and equipment that were required for the course.

"The Lifetime Learning Credit doesn't have the four years limitation, so it might be more helpful for adult students," said Montanaro. "In either case, take full advantage of all that Uncle Sam does to incentivize education.

In addition, consumers can take a tax deduction for the interest paid on both federal and private student loans you sought for yourself or your spouse. The maximum deduction is $2,500 a year.