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Education funding

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As we save for college, what if something unexpected were to happen to us. What if you were diagnosed with a critical, chornic, or terminal illness? What if death were to occur, would you be able to …

As we save for college, what if something unexpected were to happen to us. What if you were diagnosed with a critical, chornic, or terminal illness? What if death were to occur, would you be able to continue saving for you childs education?

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  • 1. 1
    Educational Funding Seminar
    Sponsored by…
    American General Life andAccident Insurance Company
  • 2. 2
    American General Life and Accident Insurance Company
    In business since the early 1900’s
    Provides life insurance, supplemental health insurance, and annuity products
    Over 3 million customers
    Recognized as a technology leader in the insurance industry
  • 3. 3
    Agent Information
    Who I am…
    What I do…
    Why I am here…
  • 4. 4
    Why College?
    Workers with a bachelors degree typically earned 60% more than workers with only a high school diploma.*
    Having a master’s degree can almost double your lifetime earnings*
    In addition to higher wages, college graduates also enjoy:**
    Higher levels of saving and investments
    Increased personal and professional mobility
    More hobbies and leisure activities
    *Education Pays, College Board, 2007
    **Institute for Higher Education Policy, 1998
  • 5. 5
    Average Costs in 2007
    Current Average Annual College Costs*
    Private 4-Year 4-Year Public
    Resident (In-State) College College
    Tuition and Fees $23,712 $6,185
    Room and Board $8,595 $7,404
    Books and Supplies $988 $988
    Transportation $768 $911
    Other Expenses $1,311 $1,848
    Total Annual Expenses $35,374 $17,336
    *Trends in College Pricing 2007, CollegeBoard
  • 6. 6
    Projected Costs in 2017
    Average Annual College Costs 10 Years from today*
    Private 4-Year 4-Year Public
    Resident (In-State) College College
    Tuition and Fees $42,465 $11,076
    Room and Board $15,392 $13,259
    Books and Supplies $1,769 $1,769
    Transportation $1,376 $1,631
    Other Expenses $2,348 $3,309
    Total Annual Expenses $63,350 $31,044
    *Assumes a 6% annual increase
  • 7. 7
    Projected Total Four Year Costs
    Total Four Year College Costs 10 Years from today*
    Private 4-Year 4-Year Public
    Resident (In-State) College College
    Tuition and Fees $169,859 $44,306
    Room and Board $61,569 $53,037
    Books and Supplies $7,077 $7,077
    Transportation $5,502 $6,525
    Other Expenses $9,392 $13,238
    Total Annual Expenses $253,399 $124,183
    *Assumes a 6% annual increase
  • 8. 8
    Worksheet Exercise 1
    Local College Example:
    Tuition & Fees $ 6000
    Room & Board $ 6000
    Books & Supplies $ 1000
    Transportation $ 1000
    Other Expenses $ 1000
    Total $ 15000
  • 9. 9
    Worksheet Exercise 2
    Child’s Name = Example
    Child’s Age = 8
    Annual Cost = $15,000
    Inflation Factor = 7.16
    Est. Future Cost = $107,400
  • 10. 10
    Worksheet Exercise 2
    Est. Future Cost = $107,400
    Investment Factor = .080
    Annual Funding Requirement = $8,592
    Monthly Funding Requirement = $716
    Bi-Weekly Funding Requirement = $330
  • 11. 11
    What Are Some Options?
    Scholarships, Grants, Work Study
    State Lottery Scholarships
    Government Funded Programs
    School Funded Programs
    Privately Funded Programs
    Loans
    529 Plans
    Coverdell Education Savings Accounts
    Custodial Accounts
  • 12. 12
    Financial Aid Statistics
    Private Scholarships
    Average private scholarship amount = $1,982*
    6.7% receive private scholarships
    Grants
    Average Pell Grant = $2,494**(currently 32% of tuition, fees and room & board)
    Average total grant and tax benefits = $3,600***
    *National Postsecondary Student Aid Study, 2004
    **Per Full Time Equivalent (FTE) Student – Trends in Student Aid, College Board, 2007
    ***Public 4 Year Institutions – Trends in College Pricing, College Board, 2007
  • 13. 13
    Financial Aid Sources
    76% Received some form of financial aid.
    62% Federal Aid
    23% State Aid
    31% Institutional Aid
    23% Aid from other sources
    These figures include loan and tax information.
    *Mini-Digest of Education Statistics 2007, National Center for Education Statistics (NCES2008-023)
  • 14. 14
    Completing the Online FAFSA
    www.fafsa.ed.gov
  • 15. 15
    Loans & Educational Plans
    Descriptions of different methods forcollege funding
  • 16. 16
    Perkins Loan Program
    Perkins Loan Program
    Generally applied for by the college for the student
    Need based
    Low interest rate
    No loan payments while in school
    Can be canceled for students who are employed in certain public, military, or teaching service
    Guide to U.S. Department of Education Programs, U.S. Department of Education, 2007.
  • 17. 17
    Stafford Loans
    Federal Family Education Loans (FFEL)& William D. Ford Direct Loans (Direct Loan)
    Need based
    Low interest rates
    Two Types
    Subsidized: Federal government pays yearly interest while the student is enrolled at least half time in college.
    Unsubsidized: The borrower is responsible for the interest payments immediately.
    Guide to U.S. Department of Education Programs, U.S. Department of Education, 2007.
  • 18. 18
    PLUS Loans
    Parent PLUS Loan
    For parents of students
    Can borrow up to the total cost of education, minus any aid received
    Grad PLUS Loan
    For graduate students
    Can borrow up to the total cost of education, minus any aid received
  • 19. 19
    Other Student Loans
    Private Student Loans
    Offered by lenders/financial institutions
    Not subsidized
    Higher interest rates
    College Sponsored Loans
    Some colleges provide their own loans
    Low interest rates
    Other Loans
    Offered by private organizations and foundations
  • 20. 20
    Education Savings Plans
    529 Plans
    Coverdell Education Savings Accounts
    Custodial Accounts(UGMA & UTMA)
  • 21. 21
    Advantages
    Certain states offer tax deductions for contributions
    Qualified distributions are not taxed
    Disadvantages
    Money is only tax free for qualified education expenses (Tuition, Fees, Books, etc.)
    Annual $12,000 IRS Gift limits
    Can only contribute up to $250,000 depending on the plan
    For tax advice, consult with your tax professional.
    529 Plans
  • 22. 22
    Coverdell Education Savings Accounts
    Advantages
    Tax benefits for growth and distributions
    Investment flexibility
    Can be used for elementary, secondary & college educational expenses
    Disadvantages
    Annual contributions are nondeductible & limited to $2,000
    Contributions can only be made until age 18
    Excess distributions may be penalized
    Eligibility is subject to contributor income limits
    For tax advice, consult with your tax professional.
  • 23. 23
    UGMAs & UTMAs
    UGMA – Uniform Gifts to Minors Act
    UTMA – Uniform Transfers to Minors Act
    Guidelines for certain custodial accounts
    Permit you to transfer assets to minor without establishing a trust
    Generally simpler, quicker, and less expensive than typical trusts
    For tax advice, consult with your tax professional.
  • 24. 24
    Custodial Accounts
    Advantages
    Possible Tax advantages
    Does not have to be for education only
    Disadvantages
    May cause reduction in financial aid
    Donor / Transferor gives up all rights to the property
    Transfer may not be revoked or changed
    Earnings may be taxed
    For tax advice, consult with your tax professional.
  • 25. 25
    Planning for the Unexpected
    Putting Your Educational Planning in Perspective
  • 26. 26
    What If…
    You do all of the right planning,
    use the available funding resources,
    but an unplanned life event occurs before your education funding is complete?
  • 27. 27
    Unplanned Life Events
    A disabling accident can happen to anyone.
    Death could occur at any time.
  • 28. 28
    Do You Have a Plan?
    Do you have a plan that can provide for your family’s educational funding…
    • …if you had a debilitating illness.
    • 29. …if you suffered a stroke and could no longer work.
    • 30. …if you were in an accident and became disabled.
    • 31. …if you died prematurely.
  • 29
    Millions Rely on Insurance
    The plan that millions of Americans have turned to is insurance.
    Life Insurance
    Disability Insurance
    Supplemental Health Insurance
    Why should you use insurance?
    *For specific Quality of Life…InsuranceSM policy benefits, please speak to an AGLA agent after the seminar.
  • 32. 30
    Quality of Life…InsuranceSM
    What if there were a solution that could provide your family with income to help meet important needs if…
    …you or your spouse should suffer a critical or chronic illness.
    …you or your spouse became disabled.
    …you or your spouse died prematurely.
    *For specific Quality of Life…InsuranceSM policy benefits, please speak to an AGLA agent after the seminar.
  • 33. 31
    Quality of Life…InsuranceSM
    AGLA is changing the way American’s think about, purchase and use life insurance.
    Life insurance you don’t have to die to use.
    *For specific Quality of Life…InsuranceSM policy benefits, please speak to an AGLA agent after the seminar.
  • 34. 32
    Quality of Life…InsuranceSM
    Visit www.qualityoflifeinsurance.comto see a four minute move that highlights someof the features of Quality of Life…InsuranceSM
  • 35. 33
    Summary
    Education Funding Requires a Plan
  • 36. 34
    Additional Thoughts
    Higher education is expensive, but it is a worthwhile cost.
    Not everyone will qualify for federal financial aid.
    You must be prepared for unplanned circumstances.
  • 37. 35
    More Information is Available!
    High School Guidance Counselors
    College Financial Aid Offices
    Federal Student Aid Information Center
    1-800-4FED-AID
    Internet
    www.ed.gov
    www.studentaid.ed.gov
    www.collegboard.com
    www.savingforcollege.com
    www.sec.gov
  • 38. 36
    Education Costs Survey Card
    American General Life and Accident Insurance Company
    Please take a moment to complete the survey card.
    Your feedback is important to us!
  • 39. 37
    Agent Contact Information
    Write my contact information on the Worksheet.
    How to reach me…
  • 40. 38
    Bibliography
    1 College Board. Education Pays: The Benefits of Higher Education for Individuals and Society. Washington D.C., 2007.
    2 _____, Trends in Student Aid. Washington D.C., 2007.
    3 _____, Trends in College Pricing. Washington D.C., 2007.
    4 Office of Communications and Outreach, Guide to U.S. Department of Education Programs, U.S. Department of Education, Washington, D.C., 2007.
    5 National Center for Education Statistics, Projections of Education Statistics to 2016, U.S. Department of Education, Washington, D.C., 2007.
    6 _____, Digest of Education Statistics 2007. Washington, D.C., 2007.
  • 41. 39
    Bibliography
    7 VSA, L.P., Education Funding Analysis. AGLA 3a-16 ed. 01-08, <http://vsa.fsonline.com/vsa/na_calculators/3a-16is-0.html>, accessed on June 8, 2008.
    8 Thomas, Kaye A. Problems with Custodial Accounts, <http://www.fairmark.com/custacct/problems.htm>, accessed on July 16, 2008.
    9 FinAid Page, LLC. Number of Scholarships, <http://www.finaid.org/scholarships/awardcount.phtml>, accessed on May 30, 2008.
    10 DeFrancesco, Roccy. Funding for College Education with “Out of the Box” Concepts: Part I, The Wealth Preservation Institute, St. Joseph, MI, 2008.