Download - Vuefolio Seminar at SAP June 23/24 2015
www.vuefolio.com
www.vuefolio.com
TACKLING COLLEGE COSTS
SAP, Palo Alto & Dublin June 23 & 24, 2015
Oindrila Ray [email protected]
Vuefolio is a SEC Registered Investment Adviser
Do not distribute without permission
www.vuefolio.com
Disclaimers
Do not distribute without permission
• All materials, graphs and analysis are solely for educational purposes.
• This is not a pitch for any investment product.
• Please do not consider this as financial or investment advice.
• We are not tax lawyers or accountants.
• We do not represent nor endorse any college, educational institution or any funds that may be mentioned in the presentation.
www.vuefolio.com Do not distribute without permission
The Journey
www.vuefolio.com Do not distribute without permission
University of California Berkeley
www.vuefolio.com
College Desirability, Aspiration and Expense
Do not distribute without permission
College Rankings Acceptance Rates
Need Sensitivity Need/Merit Aid
Elite
Private
Private Colleges
Public Colleges/Community College
Flagship Public
Colleges
www.vuefolio.com
College Profile
Do not distribute without permission
Elite Private Colleges: Expensive. Similar academic profiles. Low acceptance rates. Need Blind.
Private Colleges: Wide spectrum of academic, fit & financials. Mostly Need Aware.
Flagship Public Colleges: Instate and Out of State tuition. Wide range of acceptance rates. Need Blind for residents.
Public Colleges: Instate and Out of State Tuition. Wide range of academics and acceptance rates. Mostly residents attend.
www.vuefolio.com
Average Cost of Attending College
Do not distribute without permission
Excludes books/supplies/transportation costs. Includes room and board. Source: Data from College Board
www.vuefolio.com
Cost of Attending College in CA
Do not distribute without permission
Source: Data from UCOP
www.vuefolio.com
Public
Flagship Public
Private
Elite Private
20,000 30,000 40,000 50,000 60,000 70,000 80,000
Out-of-State …
Current Annual Cost of Attendance
Do not distribute without permission
UCs $34,000
Cal States $22,000
www.vuefolio.com Do not distribute without permission
NET PRICE “personalized prices”
Families pay
www.vuefolio.com
Your Price Tag for College
Do not distribute without permission
Family Income # of kids
attending college
Non Retirement Assets
Financial Aid available
Your “Actual Cost of College” or NET PRICE depends on:
www.vuefolio.com
Paying for NET PRICE
Do not distribute without permission
Source: Sallie Mae “How America pays for College 2014
PARENTS
FINANCIAL AID
STUDENT LOANS
www.vuefolio.com Do not distribute without permission
FINANCIAL AID: NEED and MERIT
www.vuefolio.com
Financial Aid
Do not distribute without permission
Need based Aid
• Income • Assets
(non retirement assets)
• Family profile • Home equity
(most private colleges)
Merit Aid
• GPA • Leadership • Sports • Extracurricula
r • Diversity • Others…
Athletic Scholarships
• NCAA Div I & II
• Few sports • Low Odds:
2% of HS seniors
www.vuefolio.com
Financial Aid
Do not distribute without permission
Federal Grants: Pell Grants
State Grants: Cal Grants
Institutional Aid
Federal Student Loans
Sources of Need based Aid
www.vuefolio.com Do not distribute without permission
College vs Financial Aid
Source: College Board “Trends in Student Aid” 2014
www.vuefolio.com
Ex: Harvard vs. UC Berkeley estimated 2014-15 cost
Do not distribute without permission
Net Cost: Harvard
Aid: Harvard
Net Cost: UC Berkeley
Aid: UC Berkeley
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000 Es
tim
ated
Cos
t/A
id
Family Annual Income
Typical California family with one child in college. Besides income, the cost of attendance will also depend upon the asset level of the family.
www.vuefolio.com
Elite Private Colleges: What They Say
Do not distribute without permission
High Cost/High Aid/Need Blind
“Our scholarships are based entirely on need, not merit”
“Our financial aid program is need-based, meaning that all aid eligibility is determined by your family’s financial circumstances.” “Families with incomes at higher levels (typically up to $200,000) may also qualify for assistance, especially if more than one family member is enrolled in college”
“Financial aid is awarded based on need only”
… the Aid is Need Based only
www.vuefolio.com
Bay Area Parents
Do not distribute without permission
Source: Sallie Mae “How America pays for College 2014
Merit Aid Institutional Aid
Scholarships Federal/State Aid
www.vuefolio.com
First Year Merit Aid: Private Colleges
Do not distribute without permission
Carnegie-Mellon, 40% Boston College, 32%
NYU, 32% Wellesley, 29%
USC, 20% Harvey Mudd, 19%
Johns Hopkins, 17% Rice, 17%
Georgetown, 17% Northwestern, 15%
Vanderbilt, 13% Average Merit Aid Cost of Attendance College, Admission Rate
MERIT AID: Only 10-20% of student population
www.vuefolio.com
Merit Aid : Private Colleges
Do not distribute without permission
Source: College Board “Trends in Student Aid” 2014
www.vuefolio.com
Parents and College
Do not distribute without permission
Source: Sallie Mae “How America pays for College 2014
Low Income: 0 - 20% Middle Income: 25 – 50% High Income: 50 -100 %
PARENT’S SHARE + =
www.vuefolio.com Do not distribute without permission
PAYING/ SAVING
for COLLEGE
www.vuefolio.com Do not distribute without permission
SAVING FOR COLLEGE: LONG TERM STRATEGY
PAYING FOR COLLEGE:
CURRENT STRATEGY
www.vuefolio.com
The strategic way to pay for college
Do not distribute without permission
Financial Aid Eligibility
Aid beyond first year
Tax efficient Investments
Sufficient Income
Student Loans
Siblings Retirement Savings status
Home Equity
Parental Loan Impact
www.vuefolio.com
Paying for College
Do not distribute without permission
529 Plans Investment/
Savings Accounts
Custodial Accounts ESPP
Roth IRA
Federal Student Loans Parent Plus Loans
Home Equity Loan/ Line of Credit
Private Education Loans
Loans against 401k accounts
www.vuefolio.com
Federal Student Loans
Do not distribute without permission
Subsidized
• Need based • Interest accrues after
graduation • Annual Limit
Unsubsidized
• Any student can borrow
• Interest starts accruing immediately
• Annual Limit
www.vuefolio.com
Paying for College: Federal Student Loan
Do not distribute without permission
Pros Student
responsibility
Income based repayment of loans
Does not affect credit score Does not put parent on the hook
Cons
It’s a loan.
Cannot discharge loan in bankruptcy
Annual and maximum limits. Max limit covers
just 1 yr at a UC!
Have to file the FAFSA every year to get loans
www.vuefolio.com Do not distribute without permission
SAVE FOR COLLEGE WITHOUT GETTING
UNEXPECTED SURPRISES DURING HIGH SCHOOL /ACCEPTANCE TIMES
www.vuefolio.com
Paying for College: 529 Plans
Do not distribute without permission
Pros
Earnings grow tax free
Only 5.64% of assets are assessed towards
aid
Withdrawal does not affect next years aid
Cons
Non education withdrawals: 10% penalty
and tax on earnings
Not all plans are the same!
www.vuefolio.com
529 State Plans: A Primer
Do not distribute without permission
Direct Sold 529 Plan
48 states Direct transaction
Advisor Sold 529 Plan
Only through an
advisor
Rarely beats a good
direct sold plan
www.vuefolio.com
529 Plan Portfolios
Do not distribute without permission
Age Based
Preset Funds
Preset Glide Path
Most Popular
Individual
Flexibility
Self Managed
Maybe more expensive than age based
www.vuefolio.com
529 State Plans: Metrics
Do not distribute without permission
Fees/Loads Expense Ratios
Asset Allocation
Diversification
Number of options in the plan
Underlying
fund quality
www.vuefolio.com Do not distribute without permission
529 Plan
Good 529 plan Bad 529 plan
• Low fees: ~ 0.13 - 0.25% • Smooth Glide paths • Does not give equity upside early on
Source: Vuefolio analysis of individual 529 plans.
• High fees: ~ 0.5% - 1.28% • Jerky Glide paths • Gets conservative too quickly
www.vuefolio.com
529 Plans : Savings Strategy
Alma Mater Public University: UC
Private Elite/Private (can fund without stress)
Do not distribute without permission
www.vuefolio.com Do not distribute without permission
Popular Strategy
• 529 Plans or
• Taxable Accounts
www.vuefolio.com
Late to the game?
Do not distribute without permission
How much college will cost you: NET PRICE/ FINANCIAL
AID?
Grade of your student
529 plan tax break or capital gains tax hit?
Loans vs. Choice of College
www.vuefolio.com
The Plan
Do not distribute without permission
Smart Financial Planning for College +
Hyper Local Placements
www.vuefolio.com
Why HS placements matter
Do not distribute without permission
www.vuefolio.com
Why HS placements matter
Do not distribute without permission
College Metrics + Statistics
Between 2007 and 2014, … admission rates for
California residents fell significantly, from 87
percent in 2007 to just 62 percent in 2014.
Rates were even lower at the UC’s flagship
campuses in Berkeley, Los Angeles and San
Diego.
http://www.sacbee.com/opinion/op-ed/soapbox/article19963500.html#storylink=cpy
www.vuefolio.com
Average Profile UCB 2014
Do not distribute without permission
Admit rate — Overall 17.3%
Admits 12,795 Applicants 73,771 California Residents (% of admits) 65.6%
Averages High School GPA 4.18
ACT Composite Score 31
SAT Critical Reading 677
SAT Mathematics 703 SAT Writing 691
www.vuefolio.com
Rise in Migration of California Students
Do not distribute without permission
www.vuefolio.com
HS Placements: Elite Private College
Do not distribute without permission
College Metrics + Statistics
http://www.thecrimson.com/article/2013/12/13/making-harvard-feeder-schools/
www.vuefolio.com
Smart Financial Planning for College
Do not distribute without permission
College Metrics + Statistics
Family College Savings
www.vuefolio.com Do not distribute without permission
THINK AHEAD BE INFORMED
FOR DIFFERENT TYPES OF COLLEGES
www.vuefolio.com Do not distribute without permission
Vuefolio Smart Strategy
• InState: 529 Plans only
• Private: 529 Plans + Taxable Accounts
www.vuefolio.com
Online Resources
Do not distribute without permission
Information on saving and paying:
https://www.vuefolio.com/ https://www.edvisors.com/ Information on private loans:
https://www.sofi.com/ https://www.tuition.io/ https://www.edvisors.com/
Information on net price/aid/loans:
http://www.ed.gov/ https://fafsa.ed.gov/ https://studentaid.ed.gov/ http://www.cde.ca.gov/ https://www.collegeboard.org/ https://collegeabacus.org/ https://www.meritaid.com/ https://www.scholarships.com/
www.vuefolio.com Do not distribute without permission
Thank you for your time.
To learn more, check out our website
https://www.vuefolio.com
Disclaimer: Vuefolio does not render legal, accounting, or tax advice. This presentation is solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Vuefolio is not responsible for any college costs, financial aid, student or any other kinds of loans, investment performance of the 529 state plans. Any data quoted represents historical information. Any past performance quoted is no guarantee of future results. Vuefolio is a SEC registered Investment Adviser.