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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 continue saving for you childs education?

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Education funding

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

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