Trends in Financial Aid How to Help Families Prepare Carolyn E. Karno Manager, Early Awareness and College Planning

Basic Premise A college education can be assessable and affordable for the vast majority of students who complete a college preparatory program in high school.

A college education can be assessable and affordable for the vast majority of students who complete a college preparatory program in high school.

Access and Affordability Issues College costs Trends Who is going to pay? What amount of debt is considered reasonable? How counselors can help

College costs

Trends

Who is going to pay?

What amount of debt is considered reasonable?

How counselors can help

Tuition and Fees Tuition and fees in Connecticut range from approximately $2,800 - $36,870 Community Colleges $2,828 Central CSC - $6,734 UConn - $8,852 Trinity - $36,870

Tuition and fees in Connecticut range from approximately $2,800 - $36,870

Community Colleges $2,828

Central CSC - $6,734

UConn - $8,852

Trinity - $36,870

Current Trends 44% of students who enroll in college do not graduate after six years Many students who don’t earn degrees are burdened with significant college debt Half of all college freshmen are taking at least one remedial course Source: College Board Connection: April 2008

44% of students who enroll in college do not graduate after six years

Many students who don’t earn degrees are burdened with significant college debt

Half of all college freshmen are taking at least one remedial course

Current Trends – Public Institutions Admission to four year schools has gotten more competitive Graduation rates at many state institutions need improvement 4-Years 5-Years 6-years 2005 CT Graduation Rates Source: CT. Department Of Higher Ed. As reported To IPEDS, Spring 2006 Information on entering Freshmen in 1999* 40% 31% 11% CCSU 35% 28% 10% WCSU 36% 30% 12% SCSU 43% 39% 25% ECSU 72% 69% 50% UConn

Admission to four year schools has gotten more competitive

Graduation rates at many state institutions need improvement

Current Trends at Private Schools College costs continue to rise an average of 6% per year Many elite private institutions are replacing loans with grants for low-moderate income families Students at private colleges receive an average of $5 in institutional aid for every $1 received from the federal government* Private colleges tend to have higher four, five, and six-year graduation rates Source: “Aid to College Students”; New York Times, 3/26/08

College costs continue to rise an average of 6% per year

Many elite private institutions are replacing loans with grants for low-moderate income families

Students at private colleges receive an average of $5 in institutional aid for every $1 received from the federal government*

Private colleges tend to have higher four, five, and six-year graduation rates

Current Trends – Merit Aid High income students tend to get the bulk of merit awards From 1994 to 2004 Students from families in the top income quartile ($111,000 or more) received three times as much merit aid as students from the lowest quartile ($38,000 or less) Source: The Chronicle of Higher Education, February 2, 2007, reporting on a study by Eduventures

High income students tend to get the bulk of merit awards

From 1994 to 2004

Students from families in the top income quartile ($111,000 or more) received three times as much merit aid as students from the lowest quartile ($38,000 or less)

Results of Trends Students are taking longer to graduate Student borrowing is increasing Average debt for public college graduate is approximately $17,000 Average debt for private college graduate is $28,000 Non-federal loans played the biggest role for students enrolled in private colleges with approximately one third of their loans coming from the private sector.* This did not include parent borrowing Source: Trends in Student Aid 2007: The College Board

Students are taking longer to graduate

Student borrowing is increasing

Average debt for public college graduate is approximately $17,000

Average debt for private college graduate is $28,000

Non-federal loans played the biggest role for students enrolled in private colleges with approximately one third of their loans coming from the private sector.*

This did not include parent borrowing

Who is Going to Pay? Sole responsibility of the parent Sole responsibility of the student Shared responsibility of the parents and student

Sole responsibility of the parent

Sole responsibility of the student

Shared responsibility of the parents and student

How Much Will You Pay Toward Your Kids’ College? ABC World News Poll February 2007 Nine in 10 parents say it is likely that their children will go to a 4-year college 48% noted that they are behind in saving for it Only two in 10 plan to pay for the entire cost More than four in 10 are counting on scholarships and grants ALL MOST SOME LITTLE/ NONE

ABC World News Poll February 2007

Nine in 10 parents say it is likely that their children will go to a 4-year college

48% noted that they are behind in saving for it

Only two in 10 plan to pay for the entire cost

More than four in 10 are counting on scholarships and grants

Who is most likely to get gift aid? Most federal need-based aid goes to students in the lowest income quadrille The amount received can be greatly increased if the student qualifies for the Academic Competitiveness or SMART grants Merit aid tends to go to students who are the most academically/athletically, artistically competitive regardless of financial need Source: U.S. News and World Report, Paying for College Sept. 10, 2007

Most federal need-based aid goes to students in the lowest income quadrille

The amount received can be greatly increased if the student qualifies for the Academic Competitiveness or SMART grants

Merit aid tends to go to students who are the most academically/athletically, artistically competitive regardless of financial need

Before the College Search Begins Students should have an idea of the amount their parents are willing to contribute Will impact the list of potential schools For those students who plan to borrow, they should begin examining potential careers Can impact the amount of debt a student should have

Students should have an idea of the amount their parents are willing to contribute

Will impact the list of potential schools

For those students who plan to borrow, they should begin examining potential careers

Can impact the amount of debt a student should have

Are Students Concerned About Debt? According to a recent survey by Key Bank, students ranked “curriculum” as the most important factor when choosing a college. Only 12% selected a school based on affordability 51% 18%

According to a recent survey by Key Bank, students ranked “curriculum” as the most important factor when choosing a college.

Only 12% selected a school based on affordability

Should Students Be Concerned? Although college graduates tend to earn more than high school graduates, almost 1 in 3 Americans in his/her twenties is a college drop out. What happens to them? Young adults 18-24 are most likely to hold minimum-wage jobs Source: Generation Debt: Why Now is a Terrible Time to be Young; Anya Kamenetz

Although college graduates tend to earn more than high school graduates, almost 1 in 3 Americans in his/her twenties is a college drop out.

What happens to them?

Young adults 18-24 are most likely to hold minimum-wage jobs

The Impact of Changing Demographics In the 1970’s the nation’s largest private employer was General Motors Paid an average of $17.50 per hour in today’s dollars Today, the largest employer is Walmart Average pay is $8.00 per hour Many of these young adults are part of the working poor Source: Generation Debt: Why Now is a Terrible Time to be Young; Anya Kamenetz

In the 1970’s the nation’s largest private employer was General Motors

Paid an average of $17.50 per hour in today’s dollars

Today, the largest employer is Walmart

Average pay is $8.00 per hour

Many of these young adults are part of the working poor

What Students Should Know About Debt Students should know how to estimate how much debt is reasonable Most lenders advise students not to exceed 15% of their anticipated income A good rule of thumb is that the manageable debt load for a student is about the same as a student’s anticipated starting salary

Students should know how to estimate how much debt is reasonable

Most lenders advise students not to exceed 15% of their anticipated income

A good rule of thumb is that the manageable debt load for a student is about the same as a student’s anticipated starting salary

Student Borrowing Students should borrow from the federal student loan program before looking at any alternative loans Students should borrow as little as possible during their first two years Students who make it through the first two years are more apt to graduate and should be able to handle increased debt

Students should borrow from the federal student loan program before looking at any alternative loans

Students should borrow as little as possible during their first two years

Students who make it through the first two years are more apt to graduate and should be able to handle increased debt

Student Loan Advisor Student Loan Advisor at www.finaid.org Field of Study/Career: If you've selected Other , what is the current starting salary for your field? Expected Graduation Year: Educational Debt-to-Income Ratio: Can choose 10 to 15% Loan Interest Rate: Loan Term (Years): Calculate

Student Loan Advisor at www.finaid.org

Field of Study/Career: If you've selected Other , what is the current starting salary for your field?

Expected Graduation Year:

Educational Debt-to-Income Ratio: Can choose 10 to 15%

Loan Interest Rate:

Loan Term (Years):

Calculate

What Can Families Afford to Pay? One third rule Families should have saved at least one third of the anticipated cost of a child’s education One third will come from current cash flow One third will come from parent and student borrowing Loans

One third rule

Families should have saved at least one third of the anticipated cost of a child’s education

One third will come from current cash flow

One third will come from parent and student borrowing

Ways Families Pay for College Current cash flow Tuition payment plan Parent and student savings and investments Inheritance or gifts College savings plans (529) or ESA Federal student and/or parent loans Private education loans Home Equity loans Borrowing against a retirement account Withdrawals from an IRA account Credit cards Second job Postponing Retirement

Current cash flow

Tuition payment plan

Parent and student savings and investments

Inheritance or gifts

College savings plans (529) or ESA

Federal student and/or parent loans

Private education loans

Home Equity loans

Borrowing against a retirement account

Withdrawals from an IRA account

Credit cards

Second job

Postponing Retirement

How Counselors Can Help Integrate financial literacy into your program

Integrate financial literacy into your program

How Counselors Can Help Make sure your students know the answers to the following questions: Did you complete the FAFSA? What is your Family’s Expected Family Contribution? Are you eligible for a Pell grant? Are there any other financial aid forms required at the schools on your list? - DEADLINES Are you eligible for an ACG? Do you know what your parent(s) can contribute towards your education?

Make sure your students know the answers to the following questions:

Did you complete the FAFSA?

What is your Family’s Expected Family Contribution?

Are you eligible for a Pell grant?

Are there any other financial aid forms required at the schools on your list? - DEADLINES

Are you eligible for an ACG?

Do you know what your parent(s) can contribute towards your education?

Financing Questions What is the cost of attendance of the colleges on your list? What percentage of need does each school meet? Do you have a list of grants and scholarships that you will pursue?

What is the cost of attendance of the colleges on your list?

What percentage of need does each school meet?

Do you have a list of grants and scholarships that you will pursue?

Financing Questions Do you know how long it will take to pursue a degree? Do you have any back-up schools on your list – schools you can afford with limited financial aid ?

Do you know how long it will take to pursue a degree?

Do you have any back-up schools on your list – schools you can afford with limited financial aid ?

Financing Check List Comparison of award letters Use College Cost Comparison Worksheet at www.cslf.com

Comparison of award letters

Use College Cost Comparison Worksheet at www.cslf.com

CSLF Bottom Line Work Sheet

Bottom Line: Students need to know if borrowing is a wise investment for their future?

Bottom Line: Students need to know if borrowing is a wise investment for their future?

? Questions