savvy college planningimages.horsesmouth.com/gfx/pdf/5_ways_9-27-16.pdf · 2016. 9. 27. · savvy...
TRANSCRIPT
Savvy College
Planning
By Lynn O’Shaughnessy
What You Need to
Know in 2016 &
Beyond
Late Stage College
Planning Definition…
When parents are nearing the end of saving
for college, how do they stretch whatever
they have managed to save as far as
possible when contemplating their college
costs.
Your Gift
① Understand what the financial aid changes in 2016 mean.
② Implications for grandparent giving.
③ Latest college loan changes.
④ Checking a student’s salary potential at a specific school.
What You Need to Know in
2016 & Beyond
Understand what the financial aid
changes in the fall of 2016 mean.
Winning Strategy No. 1
Free Application for Federal Student Aid (FAFSA)
FAFSA is required to qualify for federal and state aid and
usually aid from colleges, too.
CSS/Financial Aid PROFILE
PROFILE, a creation of the College Board, is used by 229
undergrad schools (mostly private) to determine who get their
in-house awards.
Big Change in 2016 for
Aid Application
FAFSA & PROFILE
Students applying for
2017-2018 school year,
can file FAFSA beginning
Oct. 1, 2016
instead of Jan. 1, 2017.
New Filing Deadlines
Families will use two-year-old
tax returns.
Referred to as “prior-prior”
taxes (PPY).
Using Older Tax Returns
For the 2017-2018 school
year, families will use 2015
tax returns.
Using Older Tax Returns
Your clients can use IRS data retrieval tool.
Connects client filing out FAFSA to the IRS.
The IRS fills out the relevant financial
information from tax return.
New System = Fewer
Mistakes
Slowing Down the
Aid Clock The MAD DASH to complete forms will
disappear.
No rush = More accurate information.
Families should be able to
get award offers much
earlier and compare offers.
Acceptances and offers can
arrive together.
Awards will be more
accurate.
This change will help
families make better
decisions.
Changes Are a Big Win
for Families
The mechanics are straightforward, but implications aren’t.
Your finances will matter beginning in sophomore year in high
school.
1st base year: 2nd half 10th grade/1st half 11th grade.
Last base year: 2nd half freshmen yr./1st half sophomore
Finances won’t matter after sophomore year in college.
Current assets will still count.
What This Means
Parents will need to think about potential moves earlier.
Selling stock for capital gains.
Taking retirement distributions.
Sink more money into retirement accounts earlier.
Moving money from UGMA/UTMA to custodial 529.
Qualifying for simplified means test.
Maximizing Financial Aid
Harder
Help from Grandparents
Grandparents can help earlier
without hurting aid chances…
Grandparent help with costs is
considered child’s untaxed
income that’s assessed at up
to 50%.
PPY: Grandparent Friendly
Grandparents used to have to hold
back to avoid hurting aid chances…
Grandparents used to need to
wait until the final financial aid
application was filed to help.
PPY: Grandparent Friendly
Grandparents can help a year
earlier…
Grandparents can help with
costs after the aid application
has been filed in 2nd semester
sophomore year.
PPY: Grandparent Friendly
For parents taking a hit with prior-
prior tax returns…
They can ask for a
professional judgment
from colleges.
Families Can Appeal
Know changes in college loan
landscape.
Winning Strategy No. 2
.
These are loans for students only. These
are best loans because of the federal
safety net.
Federal Direct Loans
No credit requirement for
college students.
Must be enrolled at least half
time.
Subsidized loan: government covers
interest while student in school, 6-month
grace period after graduation and
deferments.
Subsidized vs.
Unsubsidized Loans
FAFSA formula determines
who qualifies for the
subsidized Direct Loan.
Unsubsidized loan: students are
responsible for all the accrued interest
beginning when money borrowed.
Subsidized vs.
Unsubsidized Loans
Students of any income can
qualify for the unsubsidized
Direct Loan.
Unsubsidized loan: are the only Direct
Loan option for graduate students.
Subsidized vs.
Unsubsidized Loans
Graduate and professional
students have another federal
loan option.
.
.
Parent Loan Options
This federal loan allows parents to
borrow up to the amount not covered by
child’s financial aid.
Parent PLUS Loan
Can’t have certain adverse
black marks on credit history.
All qualified parents get the same rate.
Begin payment immediately or wait
until child graduates or leaves school.
Parent PLUS Loan
Interest rate for 2016-2107
school year: 6.31%
Loan amount fee: 4.27%
Private loans have traditionally been
taken out by child and cosigned by
parent or other adult. Now there are
private college loans for parents.
New Parent Private
Loans
Only parent is obligated to pay
the debt.
Private loans can be less expensive
than PLUS Loans for borrowers with
very good or excellent credit scores
(750+).
New Parent Private
Loans
Only parent is obligated to pay
the debt.
Private Student Loans Guru
New Private Lender List
Sources of private loans:
Traditional banks.
Credit unions.
State loan programs.
Online lenders.
Growing Number of
Private Lenders
Sources of private loans:
Credible.com
LendEDU.com
Multi-Lender Platforms
Emphasize Saving
It’s always cheaper to save than to borrow.
Assuming 10 year repayment…
Subsidized Direct Loan: $1.24
Unsubsidized Direct Loan: $1.39
PLUS Loan: $1.71
Cost of $1 Borrowed
Assuming 25-year repayment…
Subsidized Direct Loan: $1.65
Unsubsidized Direct Loan: $1.84
PLUS Loan: $2.58
Cost of $1 Borrowed
Check 4-Year Grad Rates
Winning Strategy No. 3
Check Graduation Rates
Four-year grad rate at
public colleges and
universities 33% Four-year grad rate at
private colleges and
universities 53%
Check Four-Year Grad
Rate
The Chronicle of Higher
Education’s College Completion
University of Texas: Four-
Year Grad Rate
A look at where the college money
is in 2016.
Winning Strategy No. 4
Where the College
Money Is
Don’t Believe the
Sticker Price 58% of students at public colleges and
universities get institutional money.
89% of students at private institutions, get
institutional grants and/or scholarships.
The Typical Price Cut
Average discount at private schools is 54%.
Throw a Wider Net
Don’t just look at
research
universities. Check
out colleges and
master’s level
universities.
Research
universities
provide 66% of
freshmen with
discounts.
Master’s level
universities
provide 94% of
freshmen with a
discount.
Colleges
provide 91% of
freshmen with
a discount.
Merit Aid and
College
Rankings
Schools That Don’t Aid
Wealthy Students Rank
Highest Highest-ranked schools often provide the best financial aid.
SWARTHMORE HAVERFORD POMONA WELLESLEY
REED WILLIAMS CALTECH PRINCETON
DARTMOUTH HARVARD PENN BROWN
$700,000 in merit scholarships for
affluent student from Pennsylvania
CASE STUDY: High-Income
Family
Percentage Receiving
Awards
Percentage Receiving
Awards
Percentage Receiving
Awards
Research schools beyond the
name.
Winning Strategy No. 5
Key is making the most of wherever you attend college.
Schools aren’t monolithic.
Check at the department level.
Only resource with actual
beginning salaries by majors.
Check salaries among similar type
schools.
Colleges are businesses. Their No. 1
priority is themselves. Families are lost
and are desperately looking for
answers.
And they aren’t finding answers.
Why You Should Take
the Course
Here’s How You’d Benefit
From
It will help
you stand out
from the
crowd
Attract Ideal Clients
Affluent parents are the ones most proactive seeking answers.
They are appalled at price of top colleges.
They aren’t finding answers from high school counselors and
college consultants.
Antidote to Robo Advising
Advising is becoming a commodity.
Every advisor can build an asset allocation
plan. That’s not going to set you apart.
College can help get your foot in door.
Understanding college basics will make you referable.
CPAs, Attorneys, College consultants and other professionals
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Become the first person these professionals think of when the
issue of college comes up!
Boost Your Referrals
Understanding college basics can help you cement your
relationship with clients.
College planning can help you reach out to your clients grown
children.
Cement Relationships
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Sampling of What You’ll
Learn Strategies for finding college bargains.
Where affluent students can find merit awards.
How home equity, investments, trusts & more impact
aid.
How grandparents can help with college costs safely.
Maximizing financial aid.
Names of schools the offer the best financial aid.
How divorce/separation impact financial aid.
Boosting admission chances & money.
Best way to use college rankings.
Inside scoop on athletic scholarships
Best ways to borrow for college.
Best ways to repay college debt.
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