Financing Educational System in the US


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Financing Educational System in the US

  1. 1. FINANCING HIGHER EDUCATION IN THE UNITED STATES I. Education in the US a. System II. Post Secondary Education 1. Features 2. Expenditures 3. Federal Student Loan Programs 4. Disbursement 5. Repayment Mary Queen T. Bernardo
  2. 2. Education in the United States  Child education is compulsory. Public education is universally available. PUBLIC SECTOR LOCAL STATE FEDERAL
  3. 3. Locally Elected School Board School curricula Funding Teaching, e mployment, other policies School Districts State Legislature Directives
  4. 4. • Ages for compulsory education • Compulsory education requirements can generally be satisfied by:  educating children in public schools state-certified private schools, approved home school program. 5- 8 14 -18
  5. 5. • In most public and private schools, education is divided into three levels: elementary school middle school (sometimes called junior high school high school (sometimes referred to as secondary education).
  6. 6. • In almost all schools at these levels, children are divided by age groups into grades:  Kindergarten First Grade (for the youngest children in elementary school) twelfth grade, (the final year of high school) Post-secondary education, better known as "college" in the United States, is generally governed separately from the elementary and high school system.
  7. 7. • Commonly consists of four years of study at an institution of higher learning. • There are 4,495 colleges, universities, and junior colleges in the country.
  8. 8. THE EDUCATIONAL LADDER The exact age range of students in these grade levels varies slightly from area to area.
  9. 9. • In 2008: 36% of enrolled students graduated from college in four years 57% completed their undergraduate requirements in six years, at the same college they first enrolled in. • The U.S. ranks 10th among industrial countries for percentage of adults with college degrees.
  10. 10. • Like high school, the four undergraduate grades are commonly called:  freshman  sophomore  junior  senior • Students traditionally apply for admission into colleges. • Schools differ in their competitiveness and reputation; generally, the most prestigious schools are private, rather than public.
  11. 11. • Admissions criteria:  involve the rigor and grades earned in high school courses taken  the students' GPA  class ranking  standardized test scores (Such as the SAT or the ACT tests). • Most colleges also consider more subjective factors such as a commitment to extracurricular activities, a personal essay, and an interview.
  12. 12. • Professional degrees offered as graduate study: Law Medicine Pharmacy Dentistry offered after earning at least three years of undergraduate schooling or after earning a bachelor's degree depending on the program. These professional fields do not require a specific undergraduate major, though medicine, pharmacy, and dentistry have set prerequisite courses that must be taken before enrollment.
  13. 13. COMMUNITY COLLEGE • Operated either by a division of the state university or by local special districts subject to guidance from a state agency. • May award Associate of Arts (AA) or Associate of Science (AS) degree after two years.  • Those seeking to continue their education may transfer to a four-year college or university (after applying through a similar admissions process as those applying directly to the four-year institution).
  14. 14. • Some community colleges have automatic enrollment agreements with a local four-year college, where the community college provides the first two years of study and the university provides the remaining years of study, sometimes all in one campus.
  15. 15. Master's degree Master of Arts (MA),  Master of Science (MS), Master of Business Administration (MBA) Other less common master's degrees such as Master of Education (MEd), and Master of Fine Arts (MFA) Specialist in Education (Ed.S.). (in between a master's degree and a doctoral Graduate Study
  16. 16. Doctoral degree Doctor of Philosophy (Ph.D.) Doctor of Arts Doctor of Education Doctor of Theology Doctor of Medicine Doctor of Pharmacy Doctor of Physical Therapy Doctor of Osteopathic Medicine Doctor of Podiatry Medicine Doctor of Veterinary Medicine, Doctor of Psychology, or Juris Doctor.
  17. 17. • Some programs, such as medicine and psychology, have formal apprenticeship procedures post-graduation, such as residencies and internships, which must be completed after graduation and before one is considered fully trained. • Other professional programs like law and business have no formal apprenticeship requirements after graduation (although law school graduates must take the bar exam to legally practice law in nearly all states).
  18. 18. • The United State’s system of higher education is widely seen to be the best in the world: US colleges and universities offer more choice Their graduates receive greater wage premiums They attract more than twice as many foreign students as any other country 17 out of 20 research universities in the world are in the US according to Jiao Tong University
  19. 19. FEATURES OF HIGHER EDUCATION Competitive Decentralized structure - the decision making power is distributed and the departments and divisions may have different degrees of independence.
  20. 20.  Diverse - America's colleges and universities differ in many ways. Some are public, others are independent; some are large urban universities, some are two-year community colleges, others small rural campuses. Some offer graduate and professional programs, others focus primarily on undergraduate education.  Three-quarters of full-time undergraduates – attend public institutions  About 1/5 attend private non-profit private institutions  A small fringe attend for profit institutions FEATURES OF HIGHER EDUCATION
  21. 21. Expenditure on Tertiary Education Institutions (2003) • The United States spends much more on higher education than other countries. • In 2003, it devoted 2.9% of its GDP to tertiary education. About twice as much as the Organization for Economic Co-operation and Development (OECD) average.
  22. 22. • Public institutions receive most of their funding from state government and set tuition fees that are relatively low by US standards. • At private schools, fees are higher and more variable with top-tier schools (such as Harvard, Chicago and Stanford) charging between $ 32,000 and $ 34,000 a year.
  23. 23. • Student considering going to college faces the prospect of spending an average $ 10 000 to $ 23 000 a year depending on the institution (Tuition Charges and living expenses-include room and board, transport, books, supplies and miscellaneous expenses). • The median annual earnings of a 20-year- old high school graduate was $ 22 000 in 2005. Average tuition and Other expenses: AY 2006-2007
  24. 24. FEDERAL STUDENT LOAN PROGRAMS  Student loans in the United States are a form of financial aid that must be repaid, in contrast to other forms of financial aid such as scholarships and grants.  Student loans play a very large role in U.S. higher education. In most of the rest of the developed world, higher education is provided free (or highly subsidized) at the point of service, and funded through general tax revenues.  However, in the U.S., much of higher education is funded by students and their families and is viewed as an investment rather than a basic human right.
  25. 25.  The largest federal student loan program
  26. 26. • Prior to 2010, Federal loans included: direct loans--originated and funded directly by the U.S. Department of Education guaranteed loans--originated and funded by private investors, but guaranteed by the federal government Guaranteed loans were eliminated in 2010 through the Student Aid and Fiscal Responsibility Act and replaced with direct loans because of a belief that guaranteed loans benefited private student loan companies at taxpayers expense, but did not
  27. 27. • They may be subsidized by the U.S. Government or may be unsubsidized depending on financial need. • Both subsidized and unsubsidized loans are guaranteed by the U.S. Department of Education either directly or through guaranty agencies. • Both types offer a grace period of six months, which means that no payments are due until six months after graduation or after the borrower becomes a less-than-half-time student without graduating. Both types have a fairly modest annual limit.
  28. 28. • Subsidized federal student loans are only offered to students with a demonstrated financial need. Financial need may vary from school to school. For these loans, the federal government makes interest payments while the student is in college.  For example, those who borrow $10,000 during college owe $10,000 upon graduation.
  29. 29. • Unsubsidized federal student loans are also guaranteed by the U.S. Government, but the government does not pay interest for the student, rather the interest accrues during college. Nearly all students are eligible for these loans regardless of demonstrated need. For example, those who borrow $10,000 during college owe $10,000 plus interest upon graduation. For example, those who borrowed $10,000 and had $2,000 accrue in interest owe $12,000. Interest begins accruing on the $12,000. The accrued interest is "capitalized" into the loan amount, and the borrower begins making payments on the accumulated total. Students can pay the interest while still in
  30. 30. • Students who borrow money for education through Stafford loans cannot exceed certain aggregate limits for subsidized and unsubsidized loans. • Once both the subsidized and unsubsidized aggregate limits have been met for both subsidized and unsubsidized loans, the student is unable to borrow additional Stafford loans until they pay back a portion of the borrowed funds. A student who has paid back some of these amounts regains eligibility up to the aggregate limits as before.
  31. 31. Attractive Features  Available for both tuition fees and living costs  Available to almost all students  Albeit up to differing limits  Subsidy levels vary but tend to be light  Repayments can vary with post graduation income • Main Problem with the Stafford Loan Programme – Low limits on how much students can borrow.
  32. 32. • Usually these are PLUS loans (formerly standing for "Parent Loan for Undergraduate Students"). • Unlike loans made to students, parents can borrow much more — usually enough to cover any gap in the cost of education. However, there is no grace period: Payments start immediately. •
  33. 33. • The parents are responsible for repayment on these loans, not the student. Loans to parents are not a 'cosigner' loan with the student having equal accountability. • The parents have signed the master promissory note to repay the loan and, if they do not repay the loan, the credit rating of the parents may suffer.
  34. 34. • Also, parents are advised to consider "year 4" payments, rather than "year 1" payments. • What sounds like a "manageable" debt load of $200 a month in freshman year can mushroom to a much more daunting $800 a month by the time four years have been funded through loans. • The combination of immediate repayment and the ability to borrow substantial sums can be expensive.
  35. 35. • Under new legislation, graduate students are eligible to receive PLUS loans in their own names. These Graduate PLUS loans have the same interest rates and terms of Parent PLUS loans. • Parents should also be aware that legislation raised the interest rate on these loans significantly — to 8.5% on July 1, 2006.
  36. 36.  School-based loan program  For undergraduates and graduate students with exceptional financial need  The lender is the school
  37. 37. Disbursement: How the money gets to student or school? Student COLLEGE/UNIVERSITY US Department of Education US TREASURY DEPARTMENT
  38. 38.  Loan Servicer – (most likely the school you were attending when you received the loan)  Lender – the organization that made the loan initially (bank, credit union or other lending institution)  Electronic Payments