Financing a College Education

November 14th, 2015
Facilitator:
Shonna Prickette – Director of Operations
Presented By:
Intro; 1

Today’s objective is education; not advice.
Present the facts, your options, & the process of student
financial aid so that you’re prepared to make educated
decisions when that time comes.
Intro; 2

Watch the trailer at: Takepart.com/ivorytower
The Debate; 4

The Debate; 5
Watch the commercial at: www.youtube.com/Rg0oDCjBPLc

Source = Bloomburg Business Week; 2012 The Debate; 8

“The cost of a college education is rapidly becoming
one of the largest financial challenges that
Americans will face in their lifetimes.”
-Steve Trumble, President & CEO of American Consumer Credit Counseling
Source: http://www.lendkey.com/the-ultimate-guide-to-student-loan-refinancing/ The Debate; 9

Source: Georgetown University Center on Education & the Workforce; The College Payoff: Education,
Occupations, Lifetime Earnings. https://georgetown.app.box.com/s/ctg48m85ftqm7q1vex8y
The Debate; 10

Source: Catherine Rampell, “College is (Still) Worth it,” www.nytimes.com. Feb. 1, 2013. http://college-
education.procon.org/view.resource.php?resourceID=005435
The Debate; 12

Source: Georgetown University Center on Education & the Workforce.
http://americanradioworks.publicradio.org/features/tomorrows-college/dropouts/value-of-college-degree.html
The Debate; 13

When should research begin?
Research; 14

 OCCUPATIONAL OUTLOOK HANDBOOK
 Bureau of Labor Statistics Bls.gov/oco
 Guide to career info on hundreds of occupations
 Highest median pay for 2012
 Projected # of new jobs
 Projected growth rate
 Job Category
Research; 15

Research; 17
 COLLEGE NAVIGATOR
 www.collegecost.ed.gov
 Links to National Center for Education Statistics
 NCES collects, collates, analyzes, & reports complete
statistics on the condition of American education
 Enter the name of any college to see:
 Tuition, fees, net price, & financial aid
 Faculty, enrollment, ethnicity, & gender
 Programs, majors, varsity athletic teams
 Crime stats
 Build a list of “favorite” schools for side-by-side comparison

Education expenses might include any of the following..
 Tuition
 Room & Board
 Supplies, books, & equipment
 Child care expenses
 Transportation
 Personal PC
 Lab fees
What is the “Cost of College”?
Research; 18

Watch the videos online: collegecost.ed.gov/netpricecenter.aspx
Net Price vs. Sticker Price
Research; 19

 NET PRICE CALCULATOR CENTER
 www.collegecost.ed.gov
 Links to net price calculator on desired college site
 Estimate of cost based on your personal situation
 ACT/SAT scores, GPA, & high school rank
 Student tax info
 Parent’s tax info (IE: income, assets, etc.)
 More specific data requested = more accurate results
 Play with variables to see how your cost changes
Research; 20

Research; 21
 INSTITUTE FOR COLLEGE
ACCESS & SUCCESS
 www.ticas.org
 The Project on Student Debt
 Report includes average debt levels by state &
lists of notably high & low-debt colleges
 Interactive map links to “debt” data for more than
1000 colleges nationwide

How will you pay for it?
$$ SAVED MONEY $$
$$ FREE MONEY $$
Scholarships & Grants
$$ BORROWED MONEY $$
Federal or Private Loans
How to Pay; 22

Source: Sallie Mae; Go to: http://news.salliemae.com/research-tools/america-pays-2013
for this study & more information on how America pays for college.
How America Pays; 2013
How to Pay; 23

Source: studentaid.ed.gov/prepare-for-college/checklists/#checklists
Saving; 24

 Save whatever you can
 It’s never too late to start
 Keep saving as long as you can
 Encourage good spending habits
 Create a budget & stick to it
 College = Financial Independence
 GET ADVICE ON HOW TO SAVE*
 Apply
 Repay
Begin Saving Early.
Saving; 25

$100 = Initial Deposit
+ $50 = Monthly Deposit
X .15% = Interest Rate
X 18 = Years of contribution
$10,900 (Actual) + $150 (Interest)
Begin Saving Early.
Saving; 26

$100 = Initial Deposit
+ $50 = Monthly Deposit
X 3% = Interest Rate
X 18 = Years of contribution
$10,900 (Actual) + $3800 (Interest)
Begin Saving Early.
Saving; 27

Standard Savings
Money Market Savings
CD (Certificate of Deposit)
Traditional IRA
Custodial Account (UGMA/UTMA)
Educational Savings Bonds
College Saving Options:
Saving; 28

 Named for tax code
 Savings product tied to mutual funds
 Return is based on performance of the market
 Can be used only for higher education expenses
 Each state has their own 529 Plan
 WI 529 Plan is called Edvest or Tomorrow’s Scholar
 WI residents receive state income tax deduction for
contributions up to $3000 per child, per year
 DIY & Advisor plans offered
 Earnings can be exempt from WI & Federal tax
 You can use ANY state’s 529 plan
 No income limits
 Contribute up to $350,000 per child
 Not a “short-term” investment option
 www.edvest.com
Saving - 529 Plan
Saving; 29

 Named for Senator who pushed through Congress
 Savings product tied to mutual funds/securities
 Return is based on performance of the market
 Qualified distributed earnings are federal income tax free
 No state income tax benefits
 Can be used for elementary, secondary, or higher
education expenses (K – grad school)
 Not available to high income families
 $220K max joint income/$110K max single income
 Contribute up to $2000 per beneficiary, per year
 Not a “short-term” investment option
Saving - Coverdell ESA
Saving; 30

Saving – You vs. them
“YOUR RETIREMENT TRUMPS THEIR EDUCATION
You know when you’re on an airplane and they always tell you to put
your oxygen mask on first before assisting a child? Saving for long-
term financial needs is the same. If you don’t save for your own
future first, you won’t be able to help your children when they need
it. Worse, they may be forced to help you when they are trying to
put their own kids through school. There is no financial aid for
retirement. There is plenty of financial aid for college. Don’t feel
guilty about this.”
Source: Jean Chatzky; Money Rules: The Simple Path to Lifelong Security
Saving; 31

PRIVATE
INSTITUTIONAL
GOVERNMENT
Free Money!
Free Money; 32

 Do your best in school
 SAT/ACT scores are important
 Colleges you apply to will offer “merit”
scholarships with your financial aid package
 Start looking for private scholarships early
 Junior year of high school
 Do your research to find the best fit
 Ask questions
 Use your time wisely
 Pay attention to deadlines & terms
Free Money: Scholarships
Free Money; 33

USE YOUR RESOURCES!
 Guidance Counselor
 On-line Databases contain info on millions of
scholarships worth BILLIONS of dollars
 Cfffoxvalley.org (Local)
 Salliemae.com/scholarships
 Studentaid.ed.gov/scholarship
 Tuitionfundingsources.com
 Careerinfonet.org/scholarshipsearch
 College Financial Aid Office
Free Money: Scholarships
Free Money; 34

“I’d recommend applying to 3-4 schools, even if you’re SURE you
know where you want to go. It might cost a little to apply but you’ll
get a better comparison of what different colleges offer for financial
aid. Then, don’t take the first offer on your aid package. Negotiate
with the financial aid office if you feel the offer could be better.
Colleges will compete for your student!
What’s the worst they can say?”
Free Money;36

What is a federal student aid?
 Money from the government
 Helps you pay for educational expenses at an eligible
college, tech school, vocational school, or grad school
Who gets aid?
 Every student, regardless of age or family income
 Must meet some basic eligibility requirements
 14 MILLION students currently receive aid
How much aid is available?
 More than $150 BILLION is available every year
Why Federal Student Aid?
Federal Aid; 37

WHY FEDERAL AID?
 Lower interest rates (loans)
 Flexible repayment options
 Longer repayment terms
 Tax-deduction of interest paid
 Student can borrow to build credit
When considering the options to fund a college
education, it’s recommended that you exhaust
federal loan funds BEFORE looking at private
loans!
Federal Aid; 38

 HOW MUCH AID WILL A STUDENT RECEIVE?
 How much you get depends on:
 Financial Need
 Cost of Attendance
 Enrollment Status (F/T vs. P/T)
 There are limits:
 Annual (per year)
 Aggregate (total)
 The limits depend on:
 Year in school
 Dependant Status
Federal Aid; 39

 HOW MUCH AID WILL WE RECEIVE?
 Must complete Free Application for Federal Student Aid
(FAFSA) for official eligibility
 Fafsa4caster.ed.gov
 Early eligibility indicator
 For anyone not ready to file an official FAFSA
 Provides an estimate
Federal Aid; 40

 The FAFSA determines your eligibility for
federal loans, grants, work-study, & some
state & institutional aid.
 It’s the ONLY way to apply for federal financial aid
 It’s REQUIRED if you want federal financial aid
 Completed online at fafsa.gov
 Complete ASAP after Jan. 1 of the year you’ll start
school b/c some aid is awarded on a first-come,
first-served basis
 www.takepart.com/ivorytower (FAFSA Video)
 www.studentaid.gov/sa/fafsa (EFC Video)
Applying for Federal Aid
Federal Aid; 41

Source: studentaid.ed.gov/prepare-for-college/checklists/#checklists Federal Aid; 42

 The Student Aid Report (SAR) summarizes
the info you provided on the FAFSA & will
contain your Expected Family Contribution
 SAR is returned 3-10 days after FAFSA is submitted
 Review the SAR carefully to make sure it’s correct
 Colleges listed on your FAFSA will also receive your
SAR (up to ten colleges)
 From this point, stay in contact with your college’s aid
office as they will put together your aid package
Federal Aid; 43

Expected Family Contribution (EFC) is
calculated based on the info you reported on
the FAFSA, according to a legal formula
 How much are you expected to contribute
 EFC will appear on your SAR
 Income, assets, family size, & # attending college are
considered in the formula
 EFC is used to determine need for federal student aid
• Cost of attendance – EFC = Financial Need
 www.studentaid.gov/sa/fafsa (EFC Video)
Federal Aid; 44

 Colleges that accept you for admission will
send an award letter detailing the financial
aid package you’re being offered
 Award letter shows COMPLETE aid package
 This is all grants, scholarships, loans, & work-study
offered from state, federal, & institutional sources
 Evaluate the aid package paying close attention to
loan interest rates, fees, & repayment terms
Federal Aid; 45

Types of Federal Aid
www.studentaid.ed.gov
Federal Aid; 46

Federal Pell Grant
 Undergrad, up to $5,730 (2014-2015 award year)
Fed Supplemental Ed Opportunity Grant (FSEOG)
 Undergrads with exceptional financial need, up to $4,000
TEACH Grant
 Elementary or secondary school teacher
 Must teach full-time in a designated teacher shortage area
 4 year commitment, up to $16,000
Iraq & Afghanistan Service Grant
 Parent passed away as a result of military service after 9/11
Federal Aid: Grants
Federal Aid; 47

Federal Work Study
 Guaranteed employment while you’re in school
 On campus – usually work for your school
 Off-Campus – usually private NPO or public agency
 You will earn at least minimum wage
 Employer must pay you directly, once a month
 Important considerations:
 Will work interfere with studies or sports?
 Do I want to work while in school?
 Could I get a higher paying part-time job elsewhere?
Federal Aid: Work Study
Federal Aid; 48

 WHAT IS A LOAN?
 A loan is a borrowing agreement made between two
parties, where one party lends money to another party who
agrees to repay the borrowed money on specific terms,
with interest.
 A loan is made up of 2 components:
 PRINCIPAL = Original amount borrowed
 INTEREST /FEES = Expenses paid by the borrower
Interest is calculated (compounded) monthly. With
student loans, the interest can be paid right away, or
CAPITALIZED (added to the unpaid principal).
Federal Aid: Loan Terms
Federal Aid; 49

SUBSIDIZED Vs. UNSUBSIDIZED
 “Subsidized” means the US Dept of Ed. pays
the loan interest during certain time periods
 You’re in school ½ time
 During your grace period
 During periods of deferment
 “Unsubsidized” means you are responsible
for the loan interest during ALL periods
 Interest accrues as soon as the loan is disbursed
 You can choose to pay the interest right away
 You can choose to capitalize the interest
Federal Aid; 50

 LOAN ORIGINATION FEE
 Basically, a processing fee
 Some federal loans have origination fees
 Fee is subtracted from the loan amount before
disbursement
 Your loan is $1,000 with a 1% origination fee
 $1000 (amount borrowed) - $10 (1%
origination fee) = $990
 $1000 is the amount you pay back
Federal Aid; 51

Loan = $5000 (Disbursed 9/2015), No Origination Fee,
5% Interest Rate, Subsidized thru 1/2020
$5000 (Principal)
- $0 (Origination Fee)
$5000 (Amount disbursed on 9/2015)
$5000 (Value of Loan)
X $0 (Monthly Interest accruing @ 5%)
$0 (Monthly interest added for 54 months)
= What you owe in Jan, 2020 (+ interest)
Federal Aid; 52

Loan = $5000 (Disbursed 9/2015), 1% Origination Fee,
5% Interest Rate, Unsubsidized, Interest NOT capitalized
$5000 (Principal)
- $50 (1% Origination Fee)
$4950 (Amount dispersed on 9/2015)
$5000 = Value of loan
$21 = Monthly interest charge @ 5% APY
54 = Number of months you make this payment
$1145 = Total interest paid over 54 months
Federal Aid; 53

Loan = $5000 (Disbursed 9/2015), 1% Origination Fee,
5% Interest Rate, Unsubsidized, Interest capitalized
$5000 (Principal)
- $50 (1 % Origination Fee)
$4950 (Amount dispersed on 9/2015)
$5000 = Value of loan
$21+ = Monthly interest charge @ 5% APY
54 = Number of months interest capitalizes
$1258 = Total interest capitalized over 54 months
Federal Aid; 54

FEDERAL PERKINS LOAN:
 Awarded for exceptional financial need
5% Fixed Annual Interest Rate
Unsubsidized
No Origination Fee
$5,500 per year limit ($27,500 maximum)
 Student is the borrower
 College is the lender
Funds applied to college “bill” first with a refund
issued for excess funds
 Grace period for repayment = 9 months
If attending at least ½ time
Federal Aid: Loan Options
Federal Aid; 55

FEDERAL DIRECT SUBSIDIZED LOAN:
 Also known as: Stafford Loan
 Awarded to students with financial need
Undergrad students only
4.29% Fixed Annual Interest Rate (As of 10/3/15)
1.068% Origination Fee (As of 10/3/15)
Maximum Eligibility Period is 150% of the
published length of your academic program
 School determines eligibility
 Student borrows; US Dept of Education lends
Federal Aid; 56

FEDERAL DIRECT UNSUBSIDIZED LOAN:
 Also known as: Stafford Loan
 No requirement to demonstrate financial need
Undergrad & grad students
4.29% Fixed Annual Interest Rate (As of
10/3/15)
1.068% Origination Fee (As of 10/3/15)
 School determines eligibility
 Student borrows; US Dept of Education lends
Federal Aid; 57

FEDERAL DIRECT LOAN LIMITS:
 Subsidized & Unsubsidized combined
 YEAR 1 = $5,500 (up to $3,500 can be Subsidized)
 YEAR 4+ = $7,500 (up to $5,500 can be Subsidized)
 AGGREGATE LIMIT = $31,000 (up to $23,000 Subsidized)
 GRACE PERIOD = 6 months (as long as enrolled ½ time)
Federal Aid; 58

www.studentaid.ed.gov
Federal Aid; 59

WHAT ABOUT THE REST?
$12,000 (Annual Net Cost of Attendance)
- $2,000 (Perkins Loan)
- $4,500 (Stafford Loan)
- $1,000 (Private Scholarships)
- $1,000 (Work-Study)
= $3,500 (REMAINING BALANCE)
Other Loan Options
Other Loan Options; 60

FEDERAL DIRECT PLUS LOAN:
 Used to borrow the remainder of cost for education
 Parent is likely the borrower
Approval based on credit history
 No need to demonstrate financial need
6.84% Fixed Annual Interest Rate (as of 10/1/15)
4.272% Origination Fee (as of 10/1/15
Borrow up to 100% of cost of attendance
No aggregate limits
 Unsubsidized
 US Dept of Education is the lender
 Loan cannot be transferred to student
Other Loan Options

SMART OPTION STUDENT LOAN:
 Used to borrow the remainder of cost
 Student & Cosigner are likely the borrower
Approval based on credit history
 No need to demonstrate financial need
5.74-8.56% Fixed Annual Interest Rate
2.25-7.37% Variable Annual Interest Rate
NO Origination Fee
Borrow up to 100% of cost of attendance
 Unsubsidized
 Sallie Mae is the lender
 Cosigner release = Loan can be
transferred to student
 Grace period = 6 months
Other Loan Options

HOME EQUITY LOAN OR LINE OF CREDIT:
 Also known as: Second Mortgage
 Borrowing against the equity in your home
 Used to borrow any of the of cost of education
 Homeowner is borrower
Loan cannot be transferred to student
No need to demonstrateneed
 Rates are low right now
Interest paid may be tax-deductible
May incur closing costs
Other Loan Options

To accept, sign the award letter and return it to
the school for processing.
 The financial aid office at your college will guide
you thru the paperwork which includes signing a
promissory note, (you PROMISE to repay your loans
according to the terms)
 College is required to provide entrance counseling
Accepting Aid; 64

 Loan funds will be “disbursed” in at least 2
installments
 Most student loan funds will go directly to the college
or come directly from the college
 College will use aid money first to pay for tuition,
fees, room, board, and other expenses on your
student account. If any aid money remains, you will
receive the funds by check
Accepting Aid; 65

 For MOST student loans, you are not required to
make payments during certain periods
 While enrolled in school
 During periods of forebearance
 During “grace period” after graduation:
• Perkins = 9 months
• Stafford = 6 months
Unsubsidized loans start to accrue interest as soon as the loan is
disbursed which will be capitalized onto the principal, unless you
choose to pay the interest charges while in school!
Repayment; 66

 Standard
Fixed monthly payment, $50 minimum, 10-year term
 Graduated
Monthly payment starts low & increases, 10-year term
 Extended
Fixed or graduated payments
Must have more than $30,000 in Direct Loans
25-year term
 Income Sensitive or Contingent
Income-based repayment options Repayment; 67

Before loan money is disbursed, you may cancel
all or part of your loan by notifying the school.
 After the loan is disbursed, you may cancel all or part
of the loan within certain time frames
 Promissory note will explain procedures for
cancelling loans
Repayment; 68

Student loans are LEGAL obligations!
Student loans are borrowed money that MUST
be repaid just like car loans & home
mortgages. You MUST repay a student loan
ever if your circumstances become difficult.
Non-payment of student loans has serious
consequences (legal default on a loan) and
will negatively affect your credit rating.
Repayment; 69

 Repayment schedule from loan servicer
Exit counseling will be provided at graduation
When first payment is due
Number of, amount of, & frequency of payments
You will be notified if your servicer changes
 The loan is YOUR responsibility!
Make payments regardless of receiving billing notices
You must pay even if you aren’t getting reminders
Notify your loan servicer of all change of addresses
Repayment; 70

 National Student Loan Data System:
www.nslds.ed.gov
Dept of Ed’s central database for student aid
Access & retrieve your student loan data
 Repayment Estimator
www.studentloans.gov
Repayment; 71

Shonna Prickette
Director of Operations
Shonna.prickette@myprospera.com 920-882-4801
Jeff Garrett
Licensed Financial Consultant
Jeff.garrett@myprospera.com 920-882-4780
72

Financing a College Education

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