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Intrinsic value of education More and better opportunities Less likelihood of unemployment Annual median earning differential: –High School Grad = $33,800.

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Presentation on theme: "Intrinsic value of education More and better opportunities Less likelihood of unemployment Annual median earning differential: –High School Grad = $33,800."— Presentation transcript:

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2 Intrinsic value of education More and better opportunities Less likelihood of unemployment Annual median earning differential: –High School Grad = $33,800 –Associate Degree= $42,000 –Bachelor's Degree= $55,700 Lifetime difference: –Bachelor Degree recipient earns 66% more –$800,000 to $1 million Source: College Board, Education Pays 2010 Value of Higher Education

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4 Combination of: Grants/Scholarships –Federal –State –School/Institutional –Private Loans –Federal –State –Home Equity –Credit Cards Then-current income Savings Financing College

5 PA 529 College Savings Program –PA 529 Guaranteed Saving Plan (GSP) –PA 529 Investment Plan (IP) Offered by the Commonwealth of PA Managed by the PA Treasury Recognized by the federal government Provides features and benefits not available elsewhere Great Way to Save

6 Tax deferral and exemption PA income tax deduction Estate and gift tax benefits Pa inheritance tax exemption No income restrictions Tax Advantages

7 Protects state financial aid eligibility Small impact on federal financial aid eligibility Opportunity for guaranteed tuition discounts at over 260 private colleges -- SAGE Opportunity for cash back rewards – Upromise Protection from creditors Other Advantages

8 1.Savings grow to keep pace with tuition increases (subject to premiums and fees) –Save now for one semester, have enough for one semester later –Peace of mind – not subject to ups and downs of financial markets 2. Use for nearly all education-related expenses 3. Use at nearly any college and many career schools nationwide, and even some abroad 4. Withdraw funds for any reason at any time (subject to taxes and penalties) PA 529 GSP Overview

9 Contributions grow at inflation rate of your designated Tuition Level (subject to premiums and fees) –Not tied to investment performance –GSP Fund obligated to pay at tuition inflation rate Obligation of GSP Fund itself, not the Commonwealth Dedicated to payment of PA 529 GSP obligations and cannot be used for any other purpose About the “Guarantee”

10 Contribution of $2,942 in 9/98 = 1 semester at Pitt In 9/10 1 semester at Pitt = $7,038 Market value of contribution in 9/10 = $4,000 Payment = $7,038 Guarantee Example

11 Tuition Mandatory Fees Room & Board * Required Books Required Equipment Required Supplies Special Needs Services Computers (through 2010) *For both on-campus and and-off campus. To be a qualified expense, student must be attending at-least half-time. Qualified Expenses

12 Use your funds at: Nearly all Private Colleges and Universities Nearly all Public Colleges and Universities Nearly all Graduate and Professional Schools Many Vocational, Technical and Career Schools U.S. Dept. of Education Web site for Eligible Schools: Any school with a FAFSA school code is eligible. Eligible Schools

13 Exclusively for Pennsylvanians: Account Owner or Beneficiary must be Pennsylvania resident Account owner must be over 18 years old Account Owner Controls: All account decisions Anyone can make contributions to the account, but account owner retains control Names beneficiary: any age, no relationship requirement Change beneficiary to “family member” of previous beneficiary Account Owners & Beneficiaries

14 Open an account (minimum $25; maximum $368,600) –Online at PA529.com –Free enrollment: Code SAVE50 –Designate “Tuition Level” Make contributions –Any amount of $25 or more at any time –Set-up payroll deduction or automatic bank withdrawals –Have family and friends help through Ugift Watch your account grow –Contributions are converted to “PA 529 GSP Credits” –Value of PA 529 GSP Credits increase each year with tuition inflation Use your account when your child enters college –You direct who gets paid, how much, and when How the PA 529 GSP Works

15 Choose Average Level OR Specific PA Public School State RelatedPenn State (including the Pennsylvania College of Technology); Pitt; Lincoln; Temple State System of Higher Education Bloomsburg, California, Cheyney, Clarion, East Stroudsburg, Edinboro, Indiana, Kutztown, Lock Haven, Mansfield, Millersville, Shippensburg, Slippery Rock, and West Chester Community CollegesAllegheny County, Beaver County, Bucks County, Butler County, Delaware County, Harrisburg Area, Lehigh-Carbon County, Luzerne County, Montgomery County, Northampton County, Pennsylvania Highlands, Philadelphia, Reading Area, and Westmoreland Area Thaddeus Stevens College of Technology Ivy League Private 4-yr Tuition Levels

16 Flexibility of Tuition Levels Beneficiary does not have to attend the school - or type of school - designated by your Tuition Level Change Tuition Level any time Change retroactive to date of each contribution Automatically changed if student attends a Pennsylvania publicly funded school Importance of tuition levels Aids actuarial analysis Helps account owners measure progress Changing Tuition Levels

17 PA 529 GSP Credits Each contribution is divided by the PA 529 GSP credit rate for designated tuition level Result is number of PA 529 GSP credits for that contribution Number of PA 529 GSP credits of each contribution are added to yield total number of credits in account Converting contributions to PA 529 GSP Credits

18 PA 529 GSP credit vs. academic credit PA 529 GSP credit = Unit of value Academic credit = Measure of progress toward degree 12 PA 529 GSP credits generally cover cost of one semester’s tuition Allows full-time student to take academic credits at no additional cost 96 PA 529 GSP Credits = 4 years of tuition** **Additional credits needed to cover other qualified expenses

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20 Set annually by PA Treasury (effective 9/1 - 8/31) for each Tuition Level Based on actual tuition at Tuition Level May be same, more (include “premiums”) or less (include “discounts”) PA 529 GSP Credit Rates

21 Tuition inflation rate –Each year, when schools increase tuition, each GSP Credit increases in value by the same percentage (subject to fees); the accumulation of the yearly increase is your tuition inflation rate. Tuition inflation value –Dollar amount available for qualified expenses –Dollar value is calculated by multiplying the total GSP Credits times the then-current per- credit actual tuition rate at the appropriate tuition level. Note: Each contribution subject to approximate one-year maturity requirement Your Tuition Inflation Value

22 Tuition inflation gained in last 5 years ( Academic years to ) Community College Average12.84% State System of Higher Education12.93% Ivy League Average18.55% State-related Average22.26% Penn State University23.40% University of Pittsburgh24.29% Private 4-year College Average24.03% Past performance is not a guarantee of future results PA 529 GSP Past Growth

23 Enrollment Fee –$50 by mail; $25 on website. Further discounts may be available –FOR YOU! Free enrollment: Code SAVE50 Annual Account Maintenance Fee –0.49% of Tuition Inflation Value (less than ½ penny per dollar) Fees

24 My child decides not to attend school My child receives a scholarship My child dies or becomes disabled My family has a financial hardship You can withdraw your money at any time, for any reason – Nonqualified Withdrawal What If?

25 It’s never too early, but it’s never too late! It’s easy! Enroll:  Online:  Or call: for enrollment materials. Start Saving Now!

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27 . Pennsylvania 529 Investment Plan Investments by Vanguard Group Subject to risk of financial markets Wide array of investment options Offers many of the same benefits and options discussed today For more information –Visit PA 529.com –Call Pennsylvania’s Other Plan

28 The PA 529 Guarantee Savings Plan 37,724 students used their accounts Attended over 1,748 different schools $792 million has been paid $239 million has been growth 43.2% increase in value from contribution to use. The PA 529 Investment Plan Over 7,100 students used their accounts $129 million has been paid $12.9 million has been growth 11% in value from contribution to use Past performance is not a guarantee of future results – Success Story

29 This presentation provides only highlights of the PA 529 GSP. For important details about the PA 529 GSP, including how the guarantee works and its limitations; the tax benefits, requirements and consequences of nonqualified withdrawals; and investment objectives, risks, and costs, please carefully read the PA 529 GSP Disclosure Statement before investing. It is available by visiting PA529.com or by calling Questions ?

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