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College Financing Seminar

College Financing Seminar. Presented by: The Massachusetts Association of Student Financial Aid Administrators (MASFAA). Agenda. Early College Planning Financial Aid Overview Your Financing Options Where to Get More Information. Loans Greater Factor In Financing College.

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College Financing Seminar

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  1. College Financing Seminar Presented by: The Massachusetts Association of Student Financial Aid Administrators (MASFAA)

  2. Agenda • Early College Planning • Financial Aid Overview • Your Financing Options • Where to Get More Information MASFAA

  3. Loans Greater Factor In Financing College • Financial Aid For Families Has Grown • Increasingly Aid Means Loans Loans as a % of Financial Aid Source: The College Board, 1999 Trends in Student Aid

  4. Benefits of Saving • ALL educational options left open, regardless of cost • Reduces or eliminates the need to borrow • Spreading out the cost of college over time, minimizes the impact on your lifestyle during the years you pay for college • Minimum impact to financial aid Need Analysis • Family contribution from parents’ assets = 6% • Family contribution from student’s assets = 35% MASFAA

  5. Why Save? • An example of the positive effect of saving versus borrowing • To accumulate $10,000 in 10 years at 7% interest • Save $79 per month • To repay $10,000 over 10 years at 7% • Pay $116 per month • The real cost of borrowing rather than saving • $116 - $79 = $37 x 12 months x 10 years = $4,440 MASFAA

  6. Overview • Over $68 Billion given out in Financial Aid in 1999-00* • Parents in the same circumstances should be able to afford the same amount for college; those in different circumstances, different amounts • Parents & Students have the primary responsibility for financing college cost • *The College Board Massachusetts Association of Student Financial Aid Administrators

  7. IOU $$ What is Financial Aid? • Grants, Scholarships • Free Gifts • Do not have to be repaid • Loans • Money that must be repaid • Borrowed by student, parent, or both • Work Study • Money student is given the opportunity to earn

  8. COA = Cost of Attendance - Includes tuition, room, board, fees, books, supplies, transportation, personal expenses EFC = Expected family contribution - Measure of what a family is expected to contribute over a year Vocabulary Financial Need (Eligibility) = Difference between COA and EFC

  9. Resources for Estimating YourExpected Family Contribution (EFC) • Federal EFC Handbook 1(800)4FED-AID • On the Web • http://www.finaid.org • http://collegeboard.com

  10. ‘Financially’ Manageable During and AFTERthe College years Look at your entireFinancial Situation Estimate the ‘Total’ Cost of Education 4+ years of expenses STUDENT PARENT Make financial decisions that : • Will not jeopardize • Financial Security • Comfortable Retirement • Educating other children • other financial goals • Will not leave excessive debt • Will not jeopardize financial independence after graduation

  11. Strategies for Financing Higher Education • Parent savings • Transfer of income producing assets to a child under the Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) • Series EE and Series I US Savings Bonds • Education IRA • Traditional IRA • Roth IRA • Qualified Savings Tuition Plans

  12. College Savings and Investment Options Zero Coupon Bonds Mutual Funds Money Markets Municipal Bonds Savings Bonds Treasury Bills Investment Options CD’s Individual Stocks U. PlanPrepaid Tuition Program Education IRA Traditional & Roth IRA’s U. FundCollege Investing Plan Investment Considerations • Ownership of Investment • Parent versus Student Tax Exemption Time Factor Risk

  13. College Savings Plans Options in Massachusetts • U.Fund College Investing Plan • Tax-advantaged investing opportunity • Use at any college for all qualified educational expenses

  14. Using the U.Fund • Use for qualified educational expenses (tuition, room, board, fees, books, and supplies) • Use anywhere in the United States • Accredited post-secondary institution • Public and private • Two-year community college • Vocational technical schools • Undergraduate and Graduate Education

  15. U.Plan Prepaid Tuition Program • Lock in tomorrow’s tuition at today’s rates • 82 Participating Colleges and Universities

  16. Financial Planning Recommendations • Estimate your total costs for all 4 years of college • Parents and Student together should develop a plan to fund and finance=> know what you’re signing up for=> know how you will pay for it • If you need to borrow:=> understand your options educational loans, personal loans, home equity loan => know the terms • Apply to at least one financially ‘safe’ school

  17. It’s Never Too Early or Too Late to Start Saving • Determine how much you’ll need • Don’t be discouraged..financial aid could be available • Determine how much you can afford to save • No amount is too small • On a regular basis (weekly, monthly) • Select appropriate investment vehicles • Evaluate your financial situation annually

  18. How Parents Can Help • Encourage student to keep options open • Facilitate decision-making and access to appropriate courses • Make students aware of all the opportunities available and the academic requirements involved • Be aware of opportunities for financial aid and the benefits of early financial planning • Visit a public and private college campusand look around

  19. Questions… Thanks For Your Attention!

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