Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 1 TRENDS IN EDUCATION FINANCE Karen Foust, Managing Director Sallie Mae Confidential and proprietary information © Sallie Mae, Inc. All rights reserved.

2 This presentation is an overview of trends in the industry and how families are paying for college ► Total Cost of Education ► How America Pays for College ► Best Practices for Counseling Families Agenda

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 3 3 Total Cost of Education

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 4 College Costs Continue to Increase SOURCE: College Board, Trends in College Pricing Average Published Charges for Undergraduates, AY

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 5 College Costs Continue to Increase (cont.) SOURCES: The College Board, Annual Survey of Colleges; NCES, Integrated Postsecondary Education Data System (IPEDS).

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 6 Student Loans: Growth of Federal & Private Loans SOURCE: College Board, Trends in Student Aid 2011.

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 7 ► Trends likely to shape Federal Student Aid  Rising cost of attendance  Decline in availability of non-federal sources of funding Decline in family contribution Decline in state and institutional funding due to budget constraints  Increase in enrollment  Expanded role of the federal government in student aid  As borrowers increase the FSA continues to increase its budget Federal Student Aid: Plan SOURCE: FSA Strategic Plan FY

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 8 Media Bylines on College Costs & Value ► US News “College Tuition Growth Rate Is Biggest Bubble of Them All” ► CNN Money “Surging College Costs Price Out Middle Class” ► Plain Dealer “Is a College Education Worth the Price?” VS ► New York Times Blog “College Students Don’t View Debt as Burden” ► Los Angeles Times “College Research Shows That It Could Easily Be The Best Investment You Ever Make” ► TIME Magazine “Actually College Is Very Much Worth It”

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 9 A College Education Continues to Have Value ► Estimated Cumulative Earnings Net of Loan Repayment for Tuition and Fees, by Education Level SOURCES: College Board, Education Pays 2010, Figure 1.3; U.S. Census Bureau, 2009; The College Board, 2009; calculations by the authors.

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 10 Students Value a College Education Considering the money and time involved in getting a college degree, do you think getting a college degree today is worth it? SOURCE: College Board (by Hart Research Associates): One Year Out, Findings from a National Survey Among Members of the High School Graduating Class of 2010

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 11 Students Value a College Education (cont.) ► Majority of enrolled undergraduates and Parents strongly agree that, “College is an investment in the student’s future.” In 2011, student Strong agreement rose to 90%. SOURCE: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2011

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 12 ► The biggest challenge faced in transition to college was financial Students’ Challenges Going to College SOURCE: College Board (by Hart Research Associates): One Year Out, Findings from a National Survey Among Members of the High School Graduating Class of 2010.

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 13 Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 13 How America Pays for College

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 14 College Savings College savings reach new high in 2011 SOURCE: College Board Trends in Student Aid 2011 and Financial Research Corp., data as of June Total Assets in State-Sponsored Section 529 Savings Plans ($ Billions)

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 15 ► 97% of families took at least one cost-saving measure including:  Student lived at home  Student added roommates  Students reduced personal spending  Families taking income tax credits or deductions Cost-saving Measures RESEARCH SOURCE: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2012

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 16 Families’ Attitude Toward College RESEARCH SOURCE: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2012 Students Parents

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 17 Percent of Total Costs Paid From Each Source, AY RESEARCH SOURCE: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2012

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 18 Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 18 Best Practices for Counseling Families

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 19 Scholarship Search - Best Practices ► Families Should Look for Resources that Offer: ► FREE, easy-to-use database ► Calendar listing scholarships by deadline ► Filtering capabilities  By name  By deadline  By award amount ► Rating of scholarships ► Adjustable settings

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 20 Scholarship Tools ► Sallie Mae’s free scholarship search provides access to more than 3 million scholarships  SallieMae.com/ScholarshipSearch ► Fastweb.com features over 1.5 million scholarships  Fastweb.com/College-Scholarships ► Private Scholarship Resources  KFC Scholarship  Coca-Cola Scholarship  Ronald McDonald Scholarship  Scholarships for Women  WalMart Scholarship  African American Scholarships  Target Scholarship Application  Scholarship America  ScholarshipAmerica.org

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 21 More Families Completed the FAFSA RESEARCH

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 22 Federal Grants SOURCE: College Board, Trends in Student Aid 2011.

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 23 ► Parents are key contributors to college education, paying 37% of the overall cost  75% of parents believe paying for college should be a shared responsibility  13% say parents should be entirely responsible for costs  94% of parents intend to pay some of the costs of college for their child  72% planning to pay half or more of the cost ► Parents use various sources to fund the gap:  Parent’s current income  529 plans  401k loans and withdrawals  Other savings & investments Parents Want Shared Responsibility Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2011  PLUS loans  Private loans  Home equity loans  Credit cards

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 24 Gap Financing Tips ► Families should understand the total cost of funding and should consider a package of gap financing options and not limit themselves to just one  Cash, Tuition Payment Plans and Private Loans ► Families should only borrow what they need ► Responsible borrowing: A creditworthy borrower has good or excellent credit, an ability to repay the loan and the capacity to take on the debt  The Ability to Pay: A comparison of the applicant’s total debt to their total income and a review of their outstanding student loan indebtedness  Stability: How long they have been at their current address, job stability, and established credit history  Willingness to Pay: Credit score and payment history on other types of credit

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 25 Commonly Used Gap Financing Tools Financing ToolAdvantages/MotivationDisadvantages 401(k) Withdrawal or Loan No credit check No lengthy application process Parent wants to help pay for college Tax penalties Lost investment growth Can severely reduce retirement income Home Equity Loan/Line of Credit Parent wants to help pay for college and control use of funds Tax benefits Equity may not be available in this economy Closing costs Foreclosure risk in financial emergency Credit Cards Easy, quick access to funds Parent wants to help pay for college Most expensive choice Limited funds (determined by credit limit) Long-term investments (Mutual Funds, Stocks, Bonds…) Not borrowed; does not have to be repaid Parent controls funds Lost investment growth May sell investments at a loss in current economy May involve penalties for withdrawing funds Cosign a Private Student Loan Parents willing to help out Can borrow up to the full cost of attendance Option to defer if needed Pricing lower than PLUS for well-qualified families (See next slide) Loan in student’s name, some parents may want to give the gift of a college Terms and cost can widely vary between Lenders Cosigner is responsible for paying the loan if the student defaults

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 26 Parents: PLUS vs. Cosigning a Private Loan Direct PLUS LoanPrivate Student Loan* Responsibility to repay Parent Parent and student on cosigned loan (most students need a cosigner) Can responsibility be transferred? NoYes, with cosigner release Interest rate 7.9% fixed LIBOR +2.0% to % or 5.75% to % fixed Fee 4%0% Benefits 0.25% ACH Other benefits may be available as well Repayment term 10 – 25 years5-15 years Enrollment status At least half-timeIncludes less than half-time Consumer safeguards Death & disability loan forgiveness Tuition insurance ► Parents want shared responsibility – and they have the option to take on some of the cost by borrowing a Direct PLUS Loan in their own name ► Cosigning a private student loan is another form of sharing the financial responsibility – most private loans offer a cosigner release * Private Student Loan column is based on the Sallie Mae Smart Option Student Loan.

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 27 Tuition Payment Plans ► Most colleges and universities offer tuition payment plans ► 26% of families report using a tuition payment plan in AY to pay for undergraduate education ► Tuition payment plans help attract and retain students by giving them an additional interest free funding solution

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 28 Private Loan Trends ► Death and disability discharge ► Families are becoming concerned about using 401K to pay for their child’s education ► Peer to Peer lenders ► Credit unions ► AY trends  Embedded Benefits: Tuition Insurance  Fixed vs. Variable Interest Rates

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 29 Questions

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. 30 The information contained in this presentation is not comprehensive, is subject to constant change, and therefore should serve only as general, background information for further investigation and study related to the subject matter and the specific factual circumstances being considered or evaluated. Nothing in this presentation constitutes or is designed to constitute legal advice.