SAVING FOR COLLEGE 101 Name, title(s), designation(s) The Principal Financial Group  Date

SAVING FOR COLLEGE 101 BB I 04/2014 | t n Insurance products from the Principal Financial Group ® are issued by Principal National Life Insurance Company, Principal Life Insurance Company and the companies available through the Preferred Product Network, Inc. Securities offered through Princor Financial Services Corporation, 800/ , Member SIPC. Principal National, Principal Life, the Preferred Product Network, and Princor ® are members of the Principal Financial Group ®, Des Moines, IA While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that none of the member companies of The Principal are rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. The Principal Financial Group ® and its members are providing links to other Web sites to give you the option to explore information on financial services. The Principal ® did not create and does not claim any responsibility for the content on those pages. No part of this presentation may be reproduced or used in any form or by any means, electronic or mechanical, including photocopying or recording, or by any information storage and retrieval system, without prior written permission from the Principal Financial Group ®. Copyright © 2014 Principal Financial Services, Inc.

SAVING FOR COLLEGE 101 BB I 04/2014 | t n Insurance products from the Principal Financial Group ® are issued by Principal National Life Insurance Company, Principal Life Insurance Company and the companies available through the Preferred Product Network, Inc. Securities offered through Princor Financial Services Corporation, 800/ , Member SIPC. Principal National, Principal Life, the Preferred Product Network, and Princor ® are members of the Principal Financial Group ®, Des Moines, IA is not an affiliate of any member company of the Principal Financial Group ®. is not an affiliate of any member company of the Principal Financial Group ®. While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that none of the member companies of The Principal are rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. The Principal Financial Group ® and its members are providing links to other Web sites to give you the option to explore information on financial services. The Principal ® did not create and does not claim any responsibility for the content on those pages. No part of this presentation may be reproduced or used in any form or by any means, electronic or mechanical, including photocopying or recording, or by any information storage and retrieval system, without prior written permission from the Principal Financial Group ®. Copyright © 2014 Principal Financial Services, Inc.

COST OF EDUCATION School Tuition and Fees Four-Year Total Cost in Stanford University$42,690$186,752 Princeton University$40,170$175,728 Ohio State University$10,037$43,908 Arizona State University$10,002$43,755 University of Florida$6,263$27,398 Four-year private average$29,056$127,109 Four-year public average$8,655$37, Source: © 2014 collegeboard.com, Inc. All rights reserved. Assumes in-state tuition and fees. 2. Assumes college costs increase at 6% annually. SAVING FOR COLLEGE 101

INFLATION Sources: to , Bureau of Labor Statistics,2011 – CPI-U based on September month-end index values , Bureau of Labor Statistics, CPI Detailed Report Data for September 2013 SAVING FOR COLLEGE 101

INSTANT POLL Let’s take a quick poll. Relative to inflation, what do you think tuition did over this same time period? A.Climbed and fell at about the same rate B.Climbed steadily the whole time at 2 to 3% C.Climbed much faster than inflation D.Still cost a nickel E.Got so much cheaper it’s now almost free SAVING FOR COLLEGE 101

TUITION AND FEES Sources: to , The College Board, 2011 Trends in College Pricing Table 4a , Collegeboard.com. SAVING FOR COLLEGE 101

 Scholarships  Grants  Work study  Loans  Accumulation methods: o 529 plans o Coverdell Education Savings Accounts COLLEGE FUNDING SAVING FOR COLLEGE 101

STUDENT LOANS Subsidized Stafford  Loans to students  Based on financial need  Government pays interest while student is in school Unsubsidized Stafford  Loans to students  Not based on financial need  Interest accrues during school Federal Plus  Loans to parents  Repayment of principal and interest begins 60 days after disbursements SAVING FOR COLLEGE 101

 Amount student’s family is expected to pay toward college expenses  Factors that affect the EFC are: o Number of family members in college o Parental income o Parental assets (examples of excluded assets your home, retirement savings accounts, etc.) EXPECTED FAMILY CONTRIBUTIONS (EFC) SAVING FOR COLLEGE 101

COLLEGE TAX CREDITS American Opportunity Credit Lifetime Learning Credit Note: See your qualified tax advisor regarding qualifications SAVING FOR COLLEGE 101

COLLEGE SAVINGS VEHICLES Coverdell Education Savings Account Tax Treatment Earnings and qualified withdrawals are federally tax-free for primary, secondary or higher education May be subject to 10% penalty if not used for education Contribution Limit $2,000 per year (Income restrictions may apply) Impact on Financial Aid Considered a parental asset Account Control Owner has control until child reaches majority age Transferability May change beneficiary at any time SAVING FOR COLLEGE 101

COLLEGE SAVINGS VEHICLES UTMA Custodial Account Tax Treatment Earnings are taxable. At age of majority, assets are transferred to child Contribution Limit None Impact on Financial Aid Considered a student asset Account Control Custodian has authority until age of majority Irrevocable gift Must be used for benefit of child Not restricted to higher education Transferability Must remain in child’s name SAVING FOR COLLEGE 101

COLLEGE SAVINGS VEHICLES 529 Savings Plan Tax Treatment Earnings and qualified withdrawals are federally tax-free for qualified higher education expenses Contributions potentially eligible for state tax deductions Withdrawals may be subject to 10% if not used for qualified higher education expenses Contribution Limit Varies by state Impact on Financial Aid Considered to be owner’s asset (Consider setting up in name of grandparent) Account Control Owner has authority over account, even after child reaches age of majority Transferability Beneficiary may be changed once per year Investors should consider the investment objectives, risks, and charges and expenses associated with municipal fund securities before investing. More information about municipal fund securities is available in the issuer’s official statement. Please read the official statement carefully before investing.

GIVE THE GIFT THAT KEEPS GIVING College-centric options  529 College Savings Plans –  Coverdell Education Savings Accounts (CESA)  Uniform Transfer to Minor Accounts (UTMA) Other funding options  Mutual funds  Individual Retirement Accounts (IRAs)  Savings bonds  Life insurance SAVING FOR COLLEGE 101

 Look ahead at college costs  Consider all the funding options available  Understand the differences between the vehicles that are available  Determine the best options for you  Start saving early! SUMMARY SAVING FOR COLLEGE 101

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