lessons it’s all about the money, money, money deciding on a college 101 you want me to go where?
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Lessons It’s All About the Money, Money, Money Deciding On A College 101 You Want Me To Go Where? Some More About the Money Where’s the Free Money?. Lessons It’s All About the Money, Money, Money Deciding On A College 101 Deciding On A College 202 You Want Me To Go Where? - PowerPoint PPT PresentationTRANSCRIPT
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Lessons
I. It’s All About the Money, Money, MoneyII. Deciding On A College 101III. You Want Me To Go Where?IV. Some More About the MoneyV. Where’s the Free Money?
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Lessons
I. It’s All About the Money, Money, MoneyII. Deciding On A College 101III. Deciding On A College 202IV. You Want Me To Go Where?V. Some More About the Money
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The New Normal
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Save for your retirement before you ever consider saving for your kids’ college
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There are several options for parents to borrow for their kids’ college: Don’t do it!
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There are other options for parents to pay other than borrowing that still aren’t good ideas!
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The best way to contribute to your kids college is by cutting your spending way back while they are in school
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Two other ideas are to get an extra job/ work overtime or sell stuff!
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It will ask all kinds of info about you and your kid’s financial situation.
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They then put all of that info into a formula that spits out your EFC
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The formula basically takes into account the parents’ income, savings and other assets, and age, along with the student’s incomes and assets.
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For most families, the EFC is completely out of touch and arbitrary
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The FAFSA spits out an EFC that has nothing to do with what you can actually afford to contribute
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It does not take into account retirement savings
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Beware of things that will artificially pump up your income such as selling $10,000 worth of stock: this will be counted as income for that year
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Your student will be penalized for working and saving for college
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The formula does not take credit card debt into account
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Financial aid directors will often state that parents are only expected to contribute 5% of their savings to their kid’s college which is technically true, but that is per year
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Remember that people in the financial aid office work for the college, not you!
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Bottom line is to take a look at your situation and determine how much you can afford, not what the federal government tells you you can afford
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There is a FAFSA loophole, pay down on your house
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College scholarships are great, but be careful.
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The average financial aid package in America today comprises 60% loans: which isn’t aid!
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According to the US Department of Education’s National Postsecondary Student Aid Study, of families with income between $40,000 and $59,999, only 31 percent received federal grant aid and families with incomes between $60,000 and $79,999, only 2.3% received federal grant aid
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If financial aid was so great, student loan debt would not constitute 25% of all consumer debt in this country
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Remember: student loans are different from grants!
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Some schools even give a great financial aid package the first year and then significantly drop it the second year
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It’s basically pointless to negotiate for more financial aid because it is very formulaic
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Make sure to compare the bottom line price out of pocket (without loans!) of a private school vs public even with “more financial aid”.
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With all things being equal, you are much better off paying for your school with little or no financial aid
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It is possible to get a bachelor’s degree with no savings, no loans, and no financial aid.
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Year 1 at a Community CollegeAverage tuition and fees: $2,360Books and supplies: $500Room and board (at home), transportation, etc:
$4,000
Year 1 total cost: $6,860
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Year 1 at a Community CollegeHow you pay for it:Parents spend $15 per week less in budget: $780Student works 30 hrs/week on average and
saves the equivalent of 20 hrs/week at $9 per hour (after taxes): $9,360
Year 1 intake: $10,140Year 1 surplus: $3,280
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Year 2 at a Community CollegeAverage tuition and fees: $2,360Books and supplies: $500Room and board (at home), transportation, etc:
$4,000
Year 2 total cost: $6,860
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Year 2 at a Community CollegeHow you pay for it:Parents spend $15 per week less in budget: $780Student works 30 hrs/week on average and saves the
equivalent of 20 hrs/week at $9 per hour (after taxes): $9,360
Year 2 intake: $10,140Year 2 surplus: $3,280Year 2 accumulated surplus: $6,560
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Year 3 at a Public UniversityAverage tuition and fees: $6,600Books and supplies: $1,000Room and board (at home), transportation, etc:
$8,000
Year 2 total cost: $15,600
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Year 3 at a Public UniversityHow you pay for it:Parents spend $15 per week less in budget: $780Student works 30 hrs/week on average and saves the
equivalent of 20 hrs/week at $9 per hour (after taxes): $9,360
Year 3 intake: $10,140Year 3 deficit: -$5,460Year 3 accumulated surplus: $1,160
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Year 4 at a Public UniversityAverage tuition and fees: $6,600Books and supplies: $1,000Room and board (at home), transportation, etc:
$8,000
Year 4 total cost: $15,600
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Year 4 at a Public UniversityHow you pay for it:Parents spend $15 per week less in budget: $780Student works 30 hrs/week on average and saves
all earnings at $9 per hour (after taxes): $14,040Year 4 intake: $14,820Year 4 deficit: -$780Year 4 accumulated surplus: $380
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Don’t forget about tax credits.
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Pay for college monthly
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Graduate in three years
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According to the Project on Student Loan Debt, 67 percent of students graduating from four year colleges and universities in 2008 had student loans, averaging $23,200.
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There are horror stories galore about people who have gotten drowned by their student loan debt: that are not bankruptable!
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Many people (including parents) argue that student loans are an investment and that future earnings will more than cover the payments, so they are worth it.
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It’s impossible to know the full impact on student loans on building wealth because it is such a new phenomenon.
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A 2002 Nellie May study found that 21 percent of student loan borrowers put off having children because of their student loan debt.
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High student loans choke off a young person’s ability to leave a job or even move cities (because they can’t quit their job)
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Although it is hard to put a number on it (purposely of course), many estimate 1/3 of student loan borrowers will default.
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Many people say that student loan debt is good (because it increases wages).
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Later in college when everything else has been used and an unpaid internship may cut into time to work should be the only time student loans are even considered.
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Subsidized Stafford loans: federally guaranteed fixed-rate loans that are available based on financial need.
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Unsubsidized Stafford loans: federally guaranteed loans that are available to all students regardless of financial need.
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Federal Perkins Loan: a 5 percent subsidized loans but most people don’t qualify because of parental income
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One in three student loan borrowers are surprised at how large the payment is the first time they receive the bill
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College loans are often sold as a good investment because of the increase in wages versus not going to college
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If you plan on starting a family, do not take out student loans
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The student loan deductible interest argument is basically the same as the mortgage interest argument.
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If your child wants to become a writer, a teacher, or a social worker, student loans are crazy!
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Planning on student loan forgiveness is not a good plan.
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Homework:1) Find $70-$100/month to cut out of your budget2) Fill out the FAFSA if you have not3) Determine how much YOU can afford to
contribute (it may be $0)4) Create your own scenario on how to get
through school with no loans, savings, or scholarships.