Savvy Family Strategies for paying for College!

1. Savvy Family Strategies for paying for College! Cozy Wittman, Education & Partnership Manager College Inside Track 612-850-5729 cwittman@collegeinsidetrack.com

2. 3 Key Factors For Success Social Academic Financial

3. University of Chicago: $74,526 Northwestern: $72,980 NYU: $71,784 Drexel University: $ 71,763 University of Pennsylvania: $68,687 St. Thomas: $54,133 University of CA-Berkley: $36,015* University of Michigan: $31,396* University of Minnesota: $28,304* *Resident Tuition

4. There is no purchase as significant as college that people know so little about BUT think they know the facts.

5. Average family college debt: $57,800in loans for students & families per child • *Sources: Nerdwallet.comGot Parent PLUS Loans? Save Money With These Alternative Payment Plans and The Institute for College Access and Successaccessed 8-18-17

6. Why is it harder for families to afford college?

7. 10 years ago, a family could shelter $52,400 in assets, today that number is $11,900

8. Determining the Family Strategy How do families know what they can afford?

9. There are multiple ways to pull a successful financial college experience together!

10. Parent and Kid contribution potential?

11. What is the family philosophy? Who has skin in the game? • “We will pay it all, we don’t want our kids to have loans” • “We have a 529 /other savings, that’s our contribution, everything else is theirs” • “We have a 529/other savings but we would love the college to cost $X so they have money for grad school” • “Our student needs to pay for X percentage and we cover the rest” • “School is all on the student, we expect them to take out loans for school”

12. Break Down Where Money is Coming From! Parents • Is there savings? 529? • Sports fees, private school payments convert to tuition payments, etc • Pay as you go monthly • Loans Student • Savings • Merit Aid Grants/Scholarships • AP/PSEO/CIS • Work or Work Study • Loans Have this conversation NOW!

13. 4 Tips to Take Consider! Have this talk with the student early in the college search Make financial considerations an equal part of this search along with academic and social fit Determine the family strategy for who has skin in the game and determine what the “maximum” bottom line is Have an open discussion around loans and use real world examples to illustrate payback

14. How Does “Aid” Factor into the Discussion?

15. What is a FAFSA and what on earth does it mean? • Free Application for Federal Student Aid – FAFSA • Application for Federal student loans • Formula determines Expected Family Contribution – Roughly 47% of the net income • Colleges use the number to determine “Need”– sticker price of the college minus the Expected Family Contribution (EFC) = Need We aren’t getting any “aid” so we aren’t filling out a FAFSA • True, a family might not get need based aid, but if the parents want your student to take out loans, it is required • Some merit based schools use the FAFSA as a key that unlocks the grants and scholarships they are giving • Some colleges add merit to your package just because you filled out the form and there is no way to determine which schools those are

16. How does a family’s “need” status impact their potential for loans? • Need changes school to school • Need gives students access to subsidized student loans through the Federal loan program (Stafford) • Subsidized portions have limited access so plan accordingly

17. Forms Need Based Aid • FAFSA – Schools use it to determine need at their college • EFC – Expected Family Contribution • Not tied to tax returns for divorced families • Done yearly • CSS Profile & school specific forms Grants & Scholarships • Added to your financial package • Revised yearly based on FAFSA outcome

18. An over focusing on “need” means people blind themselves to great options to reduce cost!

19. Criteria Merit BasedAid • Varies school to school • Grades are only one factor of many that determine the amount • Location, talent, demographics Grants & Scholarships • Added to your financial package • Generally applies for all four years if your student meet basic terms • Read carefully!

20. Top 2 mistakes families make with merit aid? Not all colleges offer merit aid! Narrow the field of colleges too soon!

21. Consider schools where the student brings something interesting to the table

22. Myth What about other scholarships? • There are millions of dollars of unclaimed scholarship money! If we just spend enough time, we should be able to get some! Truth • The vast majority of kids don’t “win” that money • Ave award amount: $1950 • Deducted from Merit Aid package by the school • SO MUCH MORE MONEY is given by colleges

23. Scholarship/Grant Sources 6% Employers Federal government 40% 7% Private scholarships State governments 11% 35% Colleges

25. Loan Considerations!

26. LoanConsideration • Subsidized- 5.05% (2018) • Interest does NOT accrue while in school • Unsubsidized-5.05% (2018) • Interest DOES accrue while in school • Payment • Begins 6 months after graduation on both • Loan Forgiveness available • Public service jobs (teacher, non profit, etc.) Federal Student Stafford Loan Federal Parent PLUS Loan • Interest - 7.6% - Credit check required • Available for full amount minus other financial aid • Can be used for all educational expenses • Payments begin immediately • http://www.gocollege.com/financial-aid/student-loans/states/ • Vary by state significantly • MN Self Loan – 6.0% fixed. Variable also available • Requires co-signature • Limited to $20K State Loans

27. Stafford LOAN Limits Federal Student loan – maximal set amount Called the Stafford Loan Freshman - $5500 – subsidized max - $3500 Sophomore - $6500 – subsidized max - $4500 Junior - $7500 – subsidized max - $5500 Senior - $7500 - subsidized max - $5500 5th year Senior – up to $7500 with a Stafford loan max limit of $31,000 Only accessible in the year they are offered, they cannot be accessed in subsequent years Parent Plus vs HELOC Generally, private loans should be reserved as a last resort!

28. Guidelines for Debt • Never take out more in loans than a first year salary in your chosen field • For every $10,000 in loans, it will be roughly $100/month loan payment • Federal loans are only available for the year they are offered, so consider the entire 4 years before declining loans

29. AdvisorConsiderations 529 Loans Other Contributors

30. 529’s

31. Loan Use

32. OtherContributors

33. What would you recommend? Scenario #1 Carly (mom) wants her daughter, Megan, to have skin in the game, Her current strategy includes having her daughter pay for year one, Carly will pay for year two and grandparents will cover years three and four. Megan’s school of choice costs about $26K/year. Carly is your client; how might you advise her differently.

34. What would you recommend? Scenario #2 Jon and Liz have a 529 with about $100K in it per child in their family. Their son, Wesley is planning to attend a school that will cost about $30K/year. Their EFC was 058472 and so at this school they will not get need based aid. Their philosophy is that their student should have some skin in the game and Wesley should work summers to contribute. They want ideas from you on the best way to fill it.

35. What would you recommend? Scenario #3 Kyle is a junior, his family makes about $60K/year. Kyle's college fund had to be drained when times were tight. Kyle's parents are planning to take out loans or tap retirement to help Kyle pay school. They feel he did his part and got great merit and need-based scholarships from his college of choice. They are left with about $15K/year gap. Marcia and Gary, his grandparents, have been saving for their grandson and are excited to help. They plan to pay for all of freshman year for Kyle which is about $15K.

36. Questions? Cozy Wittman, Education & Partnership Manager College Inside Track 612-850-5729 cwittman@collegeinsidetrack.com