Financing Higher Financing Higher EducationEducation

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ObjectivesObjectives

Students will:Students will: Define Higher EducationDefine Higher Education Discuss Higher Education as an InvestmentDiscuss Higher Education as an Investment Discuss the purpose of Higher EducationDiscuss the purpose of Higher Education Review the steps to financing Higher Review the steps to financing Higher

EducationEducation Discuss Methods of Financing Higher Discuss Methods of Financing Higher

EducationEducation Review Key terms associated with financing Review Key terms associated with financing

higher educationhigher education

What is Higher Education?What is Higher Education? Higher education is the stage of learning that Higher education is the stage of learning that

occurs at universities, academies, colleges, occurs at universities, academies, colleges, seminaries, and institutes of technology. Higher seminaries, and institutes of technology. Higher education also includes certain college-level education also includes certain college-level institutions, such as vocational schools, trade institutions, such as vocational schools, trade schools, and career colleges, that award schools, and career colleges, that award academic degrees or professional certifications. academic degrees or professional certifications. – it is viewed as post-secondary school education it is viewed as post-secondary school education

undertaken on a voluntary basis. undertaken on a voluntary basis. – ““Education is the most powerful tool you can Education is the most powerful tool you can

use to change the world –Nelson Mandela”use to change the world –Nelson Mandela”

Higher Education as an Higher Education as an InvestmentInvestment

Higher education can be an investment because it Higher education can be an investment because it may be worth buying because it may be profitable or may be worth buying because it may be profitable or useful in the futureuseful in the future. .

After carefully weighing all the options and After carefully weighing all the options and doing your research you and your family will doing your research you and your family will decide if higher education is a good decide if higher education is a good investment for you and how you will pay for investment for you and how you will pay for it.it.– 529 Savings Plans 529 Savings Plans State-sponsored investment State-sponsored investment

plans — officially called qualified tuition programs plans — officially called qualified tuition programs (QTP) — that help families save money for college. (QTP) — that help families save money for college. The plans have tax benefits so your savings can The plans have tax benefits so your savings can grow faster. The money in the accounts can be grow faster. The money in the accounts can be used only for education expenses. used only for education expenses. 

What’s the Purpose of Higher What’s the Purpose of Higher EducationEducation

Higher Education has become an Higher Education has become an increasingly important avenue for increasingly important avenue for career and salary advancement.career and salary advancement.– A highly educated workforce supports a A highly educated workforce supports a

healthy economy.healthy economy.– College graduates have the potential for College graduates have the potential for

greater annual and lifetime earnings greater annual and lifetime earnings than high school graduates, and those than high school graduates, and those benefits tend to increase over time.benefits tend to increase over time.

What are the Steps to What are the Steps to Financing Higher EducationFinancing Higher Education

Research SchoolsResearch Schools Apply for CollegeApply for College Fill out a Free Application for Federal Student Aid Fill out a Free Application for Federal Student Aid

(FAFSA)-The free application form you submit to apply (FAFSA)-The free application form you submit to apply for federal financial aid. It is required for all students for federal financial aid. It is required for all students seeking federal student grants, work-study programs seeking federal student grants, work-study programs and loans. Most colleges require it as well. The FAFSA and loans. Most colleges require it as well. The FAFSA may also qualify you for state-sponsored financial aid. may also qualify you for state-sponsored financial aid.

Find financial aidFind financial aid Apply for scholarships/choose a loanApply for scholarships/choose a loan Compare cost of schools and choose a schoolCompare cost of schools and choose a school Attend College/Manage Your MoneyAttend College/Manage Your Money GraduateGraduate Pay back loans if you have anyPay back loans if you have any

Scholarships and GrantsScholarships and Grants A A scholarship scholarship is an award of financial aid (money given or loaned to you to

help pay for college) for a student to further their education.– Scholarships are awarded based upon various criteria, which usually reflect

the values and purposes of the donor or founder of the award. You don’t have to repay scholarship money.

The most common scholarships may be classified as: The most common scholarships may be classified as: – Merit-based-based on a student's academic, artistic, athletic or other Merit-based-based on a student's academic, artistic, athletic or other

abilities abilities – Need-based-based on the student and family's financial record Need-based-based on the student and family's financial record – Student- specific-based upon gender, race, religion, family and medical Student- specific-based upon gender, race, religion, family and medical

history, or many other student-specific factors. history, or many other student-specific factors. – Career-specific- for students who plan to pursue a specific field of study or Career-specific- for students who plan to pursue a specific field of study or

career path.career path.– College-specific-offered by individual colleges and universities to highly College-specific-offered by individual colleges and universities to highly

qualified applicants.qualified applicants. GrantsGrants are a type of financial aid that does not have to be repaid. Generally, are a type of financial aid that does not have to be repaid. Generally,

grants are for undergraduate students, and the grant amount is based on grants are for undergraduate students, and the grant amount is based on need, cost of attendance, and enrollment status. Students must meet need, cost of attendance, and enrollment status. Students must meet eligibility requirements to qualify, and this type of aid can come from multiple eligibility requirements to qualify, and this type of aid can come from multiple sources which include federal government, state government and the college sources which include federal government, state government and the college of your choice.of your choice.

Educational LoansEducational Loans For many students, borrowing money — also known as taking out a For many students, borrowing money — also known as taking out a

loan — is a way to make their college dreams come true. But unlike loan — is a way to make their college dreams come true. But unlike other types of financial aid, loans have to be repaid with interest — other types of financial aid, loans have to be repaid with interest — the fee you’re charged for borrowing the money. the fee you’re charged for borrowing the money.

The federal government, state governments, colleges and private The federal government, state governments, colleges and private organizations all provide college loans to students and parents. organizations all provide college loans to students and parents. – Need-Based LoansNeed-Based Loans

Federal Perkins LoansFederal Perkins Loans are awarded by colleges to students are awarded by colleges to students with the highest need. with the highest need.

Federal Direct Subsidized LoansFederal Direct Subsidized Loans have a borrowing limit have a borrowing limit that increases for each year of school you complete. that increases for each year of school you complete.

– Non-Need-Based LoansNon-Need-Based Loans Federal Direct Unsubsidized LoansFederal Direct Unsubsidized Loans allow you to add the allow you to add the

interest fees to the amount you borrowed until after interest fees to the amount you borrowed until after graduation. But this means you’ll actually end up owing more. graduation. But this means you’ll actually end up owing more.

Federal parent PLUS LoansFederal parent PLUS Loans allow parents to borrow the allow parents to borrow the total cost of college, minus any financial aid received. total cost of college, minus any financial aid received.

Educational Loans Educational Loans ContinuedContinued

State Loans-State Loans-The U.S. Department of Education's The U.S. Department of Education's list of state higher-education agencies shows what list of state higher-education agencies shows what state loans are available. These are not need-based state loans are available. These are not need-based or subsidized.or subsidized.

Private LoansPrivate Loans– In general, private loans are not subsidized or need-based. In general, private loans are not subsidized or need-based.

They also often require a parent to commit to repay the They also often require a parent to commit to repay the money if the student fails to. The interest rates of private money if the student fails to. The interest rates of private loans vary:loans vary:

– Banks and other financial institutions usually have the Banks and other financial institutions usually have the highest interest rates. highest interest rates.

– Some private organizations and foundations offer lower Some private organizations and foundations offer lower interest rates. interest rates.

– Some colleges offer loans with interest rates that are lower Some colleges offer loans with interest rates that are lower than those for federal loans. than those for federal loans.

Important DefinitionsImportant Definitions You may come across some unfamiliar terms as you You may come across some unfamiliar terms as you

start looking into and applying for financial aid.start looking into and applying for financial aid. The The terms below can help you.terms below can help you.

DeferDefer: Some federal loans let you defer — or put off — : Some federal loans let you defer — or put off — paying the loan back until after you graduate.paying the loan back until after you graduate.

Interest rateInterest rate: Interest is a fee you pay for borrowing : Interest is a fee you pay for borrowing money. Interest is charged regularly — usually once a money. Interest is charged regularly — usually once a month. This fee is equal to a percentage of the amount you month. This fee is equal to a percentage of the amount you borrowed. This percentage is called the interest rate. The borrowed. This percentage is called the interest rate. The higher your interest rate, the more you’ll owe over time.higher your interest rate, the more you’ll owe over time.

Need-basedNeed-based: The federal government offers need-based : The federal government offers need-based loans to students who cannot afford the cost of college. loans to students who cannot afford the cost of college. Eligibility for these loans is determined by the FAFSA.Eligibility for these loans is determined by the FAFSA.

SubsidizedSubsidized: The federal government offers some : The federal government offers some subsidized loans. That means the government pays the subsidized loans. That means the government pays the interest on the loan while you’re in college.interest on the loan while you’re in college.

Important Definitions Cont.Important Definitions Cont. Award Letter-Award Letter-The document you receive from a The document you receive from a

college that explains the terms of the financial aid college that explains the terms of the financial aid that the college is offering you. The information that the college is offering you. The information includes the types and amounts of financial aid includes the types and amounts of financial aid offered, what you’re expected to do to keep the offered, what you’re expected to do to keep the award and a deadline for accepting the award.award and a deadline for accepting the award.

Bursar-Bursar-The college official responsible for The college official responsible for handling billing and payments for tuition, fees, handling billing and payments for tuition, fees, housing and other related expenses.housing and other related expenses.

Cost of Attendance-Cost of Attendance-The total amount of college The total amount of college expenses before financial aid. Cost of attendance expenses before financial aid. Cost of attendance includes money spent on tuition and fees, room includes money spent on tuition and fees, room and board, books and supplies, and living and board, books and supplies, and living expenses.expenses.

Important Definitions Cont.Important Definitions Cont. Demonstrated Need-Demonstrated Need-The difference between your expected family The difference between your expected family

contribution (EFC) and the total cost of attendance for a particular contribution (EFC) and the total cost of attendance for a particular college.college.

Expected Family Contribution (EFC)-Expected Family Contribution (EFC)-A measure of your family’s A measure of your family’s financial strength. States and colleges use this number to help financial strength. States and colleges use this number to help determine your financial aid award. The EFC is calculated using determine your financial aid award. The EFC is calculated using information you supply about your family’s financial circumstances. information you supply about your family’s financial circumstances. – Student Aid Report (SAR)-Student Aid Report (SAR)-The report sent to your family after The report sent to your family after

you submit the Free Application for Federal Student Aid (FAFSA) you submit the Free Application for Federal Student Aid (FAFSA) that tells you what your expected family contribution (EFC) is.that tells you what your expected family contribution (EFC) is.

Net Net Price-The full cost of attendance at a college minus the amount Price-The full cost of attendance at a college minus the amount of gift aid a student receives. This is the true amount of money a of gift aid a student receives. This is the true amount of money a student will pay to attend a college.student will pay to attend a college.

Work-Study-A Work-Study-A program that allows students to take a part-time program that allows students to take a part-time campus job as part of their financial aid package. To qualify for the campus job as part of their financial aid package. To qualify for the Federal Work-Study Program, which is funded by the government, you Federal Work-Study Program, which is funded by the government, you must complete the Free Application for Federal Student Aid (FAFSA). must complete the Free Application for Federal Student Aid (FAFSA). Some colleges have their own work-study programs.Some colleges have their own work-study programs.

ClosureClosure What is higher education?What is higher education? Explain why you think higher education is an investment. Explain why you think higher education is an investment. What is the purpose of higher education?What is the purpose of higher education? What are the steps to financing higher education? What is a What are the steps to financing higher education? What is a

FAFSA?FAFSA? Fully explain what a scholarships and grants are. Fully explain what a scholarships and grants are. What are the different types of scholarships available?What are the different types of scholarships available? What are the different entities that make loans available to What are the different entities that make loans available to

students? Explain the different types of need-based loans students? Explain the different types of need-based loans and non-need-based loans.and non-need-based loans.

What are some characteristics of private educational loans?What are some characteristics of private educational loans? What does it mean to defer a loan payment? What is a What does it mean to defer a loan payment? What is a

subsidized college loan? What is an award letter?subsidized college loan? What is an award letter? How is your EFC, Cost of Attendance, demonstrated need How is your EFC, Cost of Attendance, demonstrated need

and net price related? and net price related?