seminar: financing your education
DESCRIPTION
It’s no secret that postsecondary education is an investment, but do you find yourself asking how much it will really cost and wondering how you will pay for it? We’ll help you determine the true cost of education after high school and go over all your options for payment – from scholarships and grants to financial aid and student loans. We’ll also cover the topic of timing – when you should begin looking into your options and what to expect from the application process.TRANSCRIPT
Financing a
College EducationMay 27th, 2014
Presented By: Shonna Prickette –
Training & Development Manager
INTRO
Handouts are yoursSources are sitedResources used are
cataloged on several slides at the end
Ask questions!Goal of today is to
prevent this feeling…
INTRO
WHY GO TO COLLEGE?
Source: Bureau of Labor Statistics; Current Population Survey, unpublished tables, 2012
WHY GO TO COLLEGE?
Source: Carnevale, Anthony P., Jayasundera, Tamara, and Cheah, Ban. (2012). The College Advantage: Weathering the Economic Storm. Georgetown University: The Center on Education and the
Workforce.
HOW WILL YOU PAY FOR IT?
$$ SAVED MONEY $$
$$ FREE MONEY $$Scholarships & Grants
$$ BORROWED MONEY $$Federal or Private Loans
HOW AMERICA PAYS; 2013
SAVED = 38% BORROWED = 27% FREE = 35%
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.
PREPAREAPPLY
RECEIVEREPAY
THE FOUR STEPS
SAVED MONEY
PREPARE – Start early, save whatever you can It’s not too late to start now Keep saving as long as you can Change your spending habits GET ADVICE ON HOW TO SAVE*
APPLY – RECEIVE – REPAY -
No Need! It’s already yours!No need!
SAVED MONEY
$100 = Initial Deposit+ $50 = Monthly DepositX .15% = Interest Rate X 18 = Years of contribution
$11,050 Balance ($150 gain)
SAVED MONEY
$100 = Initial Deposit+ $50 = Monthly DepositX 3% = Interest Rate X 18 = Years of contribution
$14,470 Balance ($3800 gain)
PRIVATE
INSTITUTIONALSTATE FUNDED
FREE MONEY: Scholarships
PREPARE – Do your best in school SAT/ACT scores are important Begin research early – spring junior year Look everywhere & keep looking
Local businessesState college funding programsOn-line Databases
FREE MONEY: Scholarships
FREE MONEY: Scholarships
PREPARE –Utilize your resources
Guidance CounselorOn-line Databases contain info on millions of
scholarships worth BILLIONS of dollars Salliemae.com/scholarships Studentaid.ed.gov/scholarship Careerinfonet.org/scholarshipsearch
College Financial Aid Office
FREE MONEY: Scholarships
APPLY – Fill out as many as you can Don’t miss the deadlines
RECEIVE – Based on terms of the scholarship
REPAY - No need! (the best part)
FREE MONEY:Federal Grants
Federal Pell GrantUndergrad, up to $5,730 (2014-2015 award year)
Fed Supplemental Ed Opportunity Grant (FSEOG)Undergrads with exceptional financial need, up to $4,000
TEACH GrantElementary or secondary school teacher Must teach full-time in a designated teacher shortage area4 year commitment, up to $16,000
Iraq & Afghanistan Service GrantParent passed away as a result of military service after 9/11
FREE MONEY:Work Study
Guaranteed employment while you’re in schoolOn campus – usually work for your schoolOff-Campus – usually private non-profit or public agency
You will earn at least minimum wageEmployer must pay you at least once a month, directlyImportant considerations:
Will work interfere with studies or sports commitments?Do I want to work while in school?Could I get a higher paying part-time job elsewhere?
BORROWED MONEY: Federal Student LoansWhat is a federal student loan?
Money from the government that’s repaid WITH INTEREST Helps you pay for educations expenses at an eligible
college, tech school, vocational school, or grad schoolWho 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
BORROWED MONEY: Federal Student LoansWHY FEDERAL STUDENT LOANS?
Lower interest rates Flexible repayment options Longer repayment terms Tax-deduction of interest paid
When considering your options to borrow for a college education, it’s recommended that you
exhaust federal funds before private loans!
BORROWED MONEY: Federal Student LoansPREPARE –
KNOW YOUR COLLEGE KNOW YOUR EMPLOYMENT OUTLOOK UNDERSTAND THE FINANCIAL AID OPTIONS KNOW YOUR FINANCIAL AID OUTLOOK
PREP: Know your college…
COLLEGE AFFORDABILITY & TRANSPARENCY CNTR US Department of Education www.collegecost.ed.gov
1. College Scorecard2. College Navigator3. Net Price Calculator
PREP: Know your college…
COLLEGE SCORECARD Basic, quick comparison Enter the name of the college to see:
Typical CostGraduation Rate Loan Default RateMedian Borrowing
PREP: Know your college…
COLLEGE NAVIGATOR In-depth analysis Enter the name of the college to see:
Tuition, fees, net price, & financial aidFaculty & enrollment numbers
Ethnicity & genderPrograms, majors, varsity athletic teamsCrime stats
PREP: Know your college…
NET PRICE CALCULATOR CENTER Links to Net Price Calculator on college site Enter the following info for personalized analysis of
your cost & an estimated financial aid package:ACT/SAT scores, GPA, & high school rankStudent Tax infoParents Tax infoFamily Assets
PREP: Employment outlook…
OCCUPATIONAL OUTLOOK HANDBOOK Bureau of Labor Statistics Guide to career info on hundreds of occupations At Bls.gov/oco, search by:
Highest median pay for 2012Projected # of new jobsProjected growth rate Job Category
PREP: Key Terms…
HOW DOES A LOAN WORK? 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).
PREP: Key Terms…
WHAT IS A “SUBSIDIZED” STUDENT LOAN? Subsidized =
US Dept of Ed. pays the interest while:o You’re in school ½ timeo During your grace periodo During periods of deferment
Unsubsidized = You pay the interest during ALL periods:
o Interest accrues as soon as the loan is disbursedo You can choose to pay the interest while in schoolo You can choose to capitalize the interest
PREP: Key Terms…
WHAT IS A “LOAN ORIGINATION FEE”? Basically, a processing fee Some federal loans have origination fees Fee is subtracted from the loan amount before
disbursemento Your loan is $1,000 with a 1% origination feeo $1000 (amount borrowed) - $10 (1%
origination fee) = $990o $1000 is the amount you pay back
PREP: Key Terms…
$5000 Principal- $0 Origination Fee $5000 Value of LoanX $0 Interest rate of 5% (Subsidized)
$5,000 Need to repay, starting Jan, 2019
Loan = No Origination Fee, 5% Interest Rate, Subsidized
PREP: Key Terms…
$5000 Principal
- $50 1% Origination Fee (you get $4950)
$5000 Value of loan
$21.21 Monthly Interest @ 5% (Unsubsidized)
X 54 Number of mths in school & grace period
$1145 What you’ve paid by Jan, 2019
$5,000 Need to repay, starting Jan, 2019
Loan = 1% Origination Fee, Unsubsidized, Interest only payments @ 5%
PREP: Key Terms…
$5000 Principal
- $50 1% Origination Fee (you get $4950)
$5000 Value of loan
$1258 Total of 5% Interest compounded monthly; capitalized to the principal for 54 months
$0 What you’ve paid by Jan, 2019
$6,258 Need to repay, starting Jan, 2019
Loan = 1% Origination Fee, Unsubsidized, Capitalized interest @ 5%
PREP: Federal Aid Options…
HOW MUCH CAN A STUDENT BORROW? 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
PREP: Loan Options
FEDERAL PERKINS LOAN: Awarded for exceptional financial need
5% Fixed Annual Interest RateNo Origination Fee$5,500 per year limit ($27,500 maximum)
Unsubsidized You pay all the interest
Student is the borrowerLoan is in student’s name
College is the lender
FEDERAL STAFFORD LOAN (DIRECT): Largest Student Loan Program
3.86% Fixed Annual Interest Rate1.072% Origination Fee
Student is the borrowerLoan is in student’s name –
School determines how muchyou can borrow
US Dept of Education is the lender
PREP: Loan Options
PREP: Loan Options
SUBSIDIZED STAFFORD LOAN: Slightly better terms:
Available to undergrad students Must demonstrate financial need US DOE pays the interest while in school
UNSUBSIDIZED STAFFORD LOAN: Available to undergrad & grad students No need to demonstrate financial needYou pay the interest during all periods
PREP: Loan Options
SUBSIDIZED & UNSUBSIDIZED STAFFORD LOANS: BORROWING LIMITS:
YEAR 1 = $5,500 ($3,500 Subsidized) YEAR 2 = $6,500 ($4,500 Subsidized) YEAR 3 = $7,500 ($5,500 Subsidized) BEYOND = $7,500 ($5,500 Subsidized)
TOTAL LIMITS = $31,000 ($23,000 Subsidized)
PREP: Loan Options
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
PREP: Loan Options
FEDERAL DIRECT PLUS LOAN: Used to borrow the remainder of cost Parent is the borrower
Approval based on credit history No need to demonstrate financial need
6.41% Fixed Annual Interest Rate4.288% Origination FeeBorrow up to 100% of cost of attendance No aggregate limits
Unsubsidized US Dept of Education is the lender Loan cannot be transferred to student
PREP: Loan Options
SALLIE MAE SMART OPTION STUDENT LOAN: Used to borrow the remainder of cost Student/Co-Signor is borrower
Approval based on credit history No need to demonstrate financial need
5.75-12.88% Fixed Annual Interest Rate2.25-9.88% Variable Annual Interest RateNO Origination FeeBorrow up to 100% of cost of attendance – No limits
Unsubsidized Sallie Mae is the lender Co-Signor release = Loan can be transferred to student
PREP: Know your financial aid outlook…
How much federal aid will we receive? Must complete Free Application for Federal Student
Aid (FAFSA) for official eligibility Fafsa4caster.ed.gov
Early eligibility indicatorFor anyone not ready to file an official FAFSAProvides an estimate
BORROWED MONEY: Federal Student Loans
APPLY – COMPLETE THE FAFSA… The FAFSA determines your eligibility for federal
loans, grants, work-study, & some state & institutional aid. It’s the ONLY way to apply for federal student 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 aid might be awarded as first-come, first-served
BORROWED MONEY: Federal Student Loans
APPLY – GET YOUR SAR… The Student Aid Report (SAR) summarizes the info
you provided on the FAFSA & will contain your Expected Family Contribution (EFC). 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 From this point, stay in contact with your college’s aid
office as they will put together your aid package
BORROWED MONEY: Federal Student Loans
APPLY – SEE YOUR EFC…Expected Family Contribution (EFC) is calculated
based on the info you reported on the FAFSA, according to a legal formula. 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
BORROWED MONEY: Federal Student LoansAPPLY –
EVALUATE YOUR AWARD After admissions letter arrives (April), college will put
together an award package & send an award letter. Award letter shows COMPLETE aid package
Grants, scholarships, work-study from all souces Not obligated to accept all aid offered Evaluate the award, your need, & compare it to other
colleges. Then decide which to accept.
BORROWED MONEY: Federal Student Loans WHAT CAN YOU USE STUDENT LOAN MONEY FOR?
To pay for education expenses at the school that awarded your loan. Contact the financial aid office with questions. Tuition Room & Board Supplies & Equipment Child care expenses Transportation Personal PC
BORROWED MONEY: Federal Student Loans ACCEPT YOUR AID PACKAGE
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
BORROWED MONEY: Federal Student Loans
RECEIVE – DISBURSEMENT
Most student loan funds will go directly to the college or come directly from the college
You will be paid thru the college in at least 2 installments (semesters)
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
BORROWED MONEY: Federal Student Loans
RECEIVE – CANCELLATION
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
BORROWED MONEY: Federal Student LoansREPAY – WHEN TO START?
MOST STUDENT LOANS HAVE GRACE PERIODS Not REQUIRED to make payments while enrolled in school Grace periods allow you to get financially settled:
• Perkins = 9 months• Stafford = 6 months• PLUS = No grace period
REMEMBER: 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!
BORROWED MONEY: Federal Student Loans
REPAY– IT’S SERIOUS!Student loans are LEGAL obligations!
Student loans are borrowed money (in your name) 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.
BORROWED MONEY: Federal Student Loans
REPAYMENT PLANS Standard
Fixed monthly payment, $50 minimum, 10-year term Graduated
Monthly payment starts low & increases, 10-year term Extended
Fixed or graduated paymentsMust have more than $30,000 in Direct Loans25-year term
Income Sensitive or ContingentIncome-based repayment options
BORROWED MONEY: Federal Student Loans
REPAY– LOAN SERVICER Loan servicer will give you a repayment schedule:
When first payment is dueNumber & Frequency of paymentsAmount of each payment
You will be notified if your servicer changes The loan is YOUR responsibility!
Make payments regardless of receiving billing noticesYou must pay even if you aren’t getting remindersNotify your loan servicer when you change your address
BORROWED MONEY: Federal Student Loans
REPAY– KEEP TRACK National Student Loan Data System:
www.nslds.ed.govDept of Ed’s central database for student aidAccess & retrieve your student loan data
Repayment Estimatorwww.studentloans.gov
QUESTIONS?
FINANCIAL AID PROCESS INFOGRAPHIC studentaid.ed.gov/prepare-for-college/checklists/#checklists
“FUNDING YOUR EDUCATION – Guide to Federal Student Aid” Document Studentaid.ed.gov/resources
Checklists to begin preparing from Elementary school to 12th grade Studentaid.gov/prepare-for-college/checklists
HELPFUL RESOURCES: The Entire Process
Scholarship Opportunities:– Careerinfonet.org/scholarshipsearch– Salliemae.com/scholarships– Studentaid.ed.gov/scholarship
College Scorecard, College Navigator, and Net Price Calculator– Collegecost.ed.gov
Labor Statistics Occupational Outlook Hndbk– Bls.gov/oco
HELPFUL RESOURCES: Prepare
Free Application for Federal Student Aid– Fafsa4caster.gov– FAFSA.gov
Sallie Mae Smart Option Student Loan– Contact your financial institution
National Student Loan Data System– nslds.ed.gov
Repayment Estimator– studentloans.gov
HELPFUL RESOURCES: Apply & Repay