Investing in Value Financing a College Education

Cost and Value What are you hoping to get for the money you invest? ▫All college degrees and experiences are not equal How do you measure educational value? ▫What’s important to you and your student? What can you afford to invest and what do you want to invest? ▫Ability to invest is different than willingness to invest

A Monthly Commitment What type of payment would you be able to make on a monthly basis from available resources? ▫What’s comfortable and how far could you stretch it if you wanted to? How long are you prepared to make those payments? ▫Larger investments might be possible by elongating the payment schedule

Different EFCs The EFC calculated by the FAFSA may not be what colleges expect you to pay. ▫Merit programs may take you below your EFC ▫Gapping – a college may not be able to meet your demonstrated financial need ▫Some private colleges may establish a different EFC based on Institutional Methodology  CSS PROFILE provided by College Board  Other institutional form  Net Price Calculators

College ACollege BCollege C (FAFSA)(FAFSA)(Institutional) Family EFC$20,000$20,000$25,000 Direct Cost of Attendance$25,000$45,000$55,000 Aid Offered$6,000$23,000$30,000 (Merit)(Merit/Grant)(Grant) Remaining Cost $19,000$22,000$25,000

Scholarship versus Grant Scholarships are typically based on some criteria OTHER than financial need ▫Academic, artistic, athletic, etc. ▫Thought of as a reward, but it is actually an incentive ▫Because it is an incentive, what you are offered in scholarship will differ from college to college Grants are based on financial need ▫Federal, State and Institutional ▫May differ from college to college since your need level will differ according to cost ▫May change as your need level changes from year to year

Student Loans Most common loan is the Federal Stafford loan, and the typical student can borrow $27,000 over a four-year period ▫The average college student spends 250 days in college per year, or 1,000 days over four years. ▫That comes out to $27 per day for a student to have a place to live, eat three meals a day, enjoy a place to workout, use library and lab resources, participate in social activities AND receive a college education.

Loan Tips As a general rule of thumb, students should not borrow more for their undergraduate degree than what they expect to earn in a starting salary ▫May differ from major to major Pay attention to loan default rates for different colleges ▫It may make sense to borrow more for a college where job placement is high and the loan default rate is very low versus borrowing less for a college where job placement is lower and loan default rate is high

Campus Jobs Students, even the most involved students, can still easily fit in time to work a part-time job ▫Most campus jobs are about 10 hours per week ▫In high school, students are in school eight hours a day, activities are on top of that, and a job would be on top of that ▫In college, students are in class an average of about three hours per day, leaving lots of “time pockets” to fit in a couple of work-study hours

Sample FA Proposal ($8,000 EFC) Academic Scholarship$12,000 Institutional Grant$10,083 Explore Grant$1,000 Residential Grant$2,500 State MAP Grant$4,720 Stafford Loan (subsidized)$3,500 Stafford Loan (unsubsidized)$2,000 Institutional Loan$2,000 Total Aid Applied to Charges$37,803 Employment Opportunity$2,400 Tuition, Room, Board & Fees$48,482 Remaining Cost w/out job$10,679

Sample FA Proposal ($40,000 EFC) Academic Scholarship$12,000 Explore Grant$1,000 Stafford Loan (unsubsidized)$5,500 Total Aid Applied to Charges$18,500 Tuition, Room, Board & Fees$48,482 Remaining Cost$29,982

Assessing the FA Proposal You can accept or decline any part of a financial aid proposal Make sure you understand what each item is (e.g. gift aid versus loan), and whether or not it is renewable each year If it is renewable, make sure you understand the renewal process (e.g. GPA, filing status, etc.) Be aware of any packaged PLUS loan (Federal Parent Loan for Undergraduate students) ▫PLUS can be a helpful resource, but you don’t have to take out the maximum

Sample FA Proposal (with PLUS) Academic Scholarship$12,000 Institutional Grant$10,083 Explore Grant$1,000 Residential Grant$2,500 State MAP Grant$4,720 Stafford Loan (subsidized)$3,500 Stafford Loan (unsubsidized)$2,000 Institutional Loan$2,000 Federal PLUS Loan$10,679 Total Aid Applied to Charges$48,482 Employment Opportunity$2,400 Tuition, Room, Board & Fees$48,482 Remaining Cost w/out job$0

Comparing FA Proposals Make sure you are comparing “apples to apples” ▫Total gift aid to gift aid  Renewable versus non-renewable ▫Total loan to total loan  Student versus parent ▫Remaining Out-of-Pocket  May need to factor in graduation rates  May need to factor in difference for travel or cost of living ▫Packages may be different from college to college, but should be some similarities  Should be getting PELL grant at any college  Stafford loan total for first year should be $5,500

Appealing the FA Proposal A financial aid officer will typically not change a proposal simply because another college is offering more or asking for a lesser contribution ▫Nothing wrong with asking, but should do so tactfully Every college can use institutional judgment based on extenuating circumstances or upcoming changes to the family financial picture ▫Make a phone call or send an ▫Don’t assume the extenuating circumstances you listed on the FA forms was already factored in

Paying the Balance Find out what the payment options are and if there are any additional fees for different plans You may be able to benefit from using a credit card with a rewards program, but ask about additional fees and pay your credit card balance every month! If there is a gap between what you feel you can pay on a monthly basis and what you actually owe, investigate ways to bridge that gap that make sense ▫Outside scholarships ▫PLUS loan ▫Home Equity Loan ▫Additional Student Loan

Final Word Students who attend their “best fit” school are more likely to graduate on-time, have a higher GPA, and experience greater post-graduate success Nothing wrong with setting performance expectations for the student if he or she is attending a college that requires a “stretch” investment Students who play an active role in helping finance their own education are more likely to put forth greater effort in making the most of the opportunity