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College Bound Personal Finance for College

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College Bound Personal Finance for College. Take Stock. Where are you now? How long before college? How much have you saved? What is your current plan? What resources are available?. Set Goals. Characteristics of goals Specific, measurable, reasonable and realistic Time-frame - PowerPoint PPT Presentation

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Page 1: College Bound Personal Finance for College

College BoundPersonal Finance for College

Page 2: College Bound Personal Finance for College

Take Stock

• Where are you now?– How long before college?– How much have you saved?– What is your current plan?– What resources are available?

Page 3: College Bound Personal Finance for College

Set Goals• Characteristics of goals

– Specific, measurable, reasonable and realistic• Time-frame

– Short-, medium-, long-term• Examples for this life stage

– Save “x” dollars– Get a summer job– Design a budget– Fill out FAFSA

Page 4: College Bound Personal Finance for College

Create a Budget - Income

• Allowance• My job or business• Odd jobs• Grants• Scholarships• Gifts• Loans

Page 5: College Bound Personal Finance for College

Create a Budget - Expenses

• Money I owe• Savings• College savings• Giving• Gifts• Transportation• Food

• Clothing• Personal care• School supplies• Telephone• Recreation• Vacations

Page 6: College Bound Personal Finance for College

College Costs Continue to Rise

• In 2008-09, total expenses for private 4-year college– $33,301– 439 percent increase from 1982 to 2007

• In 2008-09, total expenses for public 4-year college– $16,357 – In-State– $26,304 – Out of State

Page 7: College Bound Personal Finance for College

Choices Impacting College Costs

• In-state vs. out of state school• Resident vs. commuter student• Part-time vs. full-time enrollment• 2 year vs. 4 year college• Private vs. public school• Dependent vs. independent status

Page 8: College Bound Personal Finance for College

Options to Pay for College

• Grants• Loans• Campus based aid programs• Scholarships

• 529 plans• Pre-paid tuition plans• Coverdell plans• Roth IRA• Military coverage

Page 9: College Bound Personal Finance for College

You Are Dependent Unless You:

• Were born before 1/1/85• Are married• Graduate or doctoral student• Have children that you pay more than ½

support for

• Have dependents other than children• Are an orphan or ward of the court till age 18• Are a military veteran

Page 10: College Bound Personal Finance for College

Fill Out Your FAFSA

• Determine if you are a dependent• Get your PIN• Gather tax, income and asset information• Keep copies of everything

Page 11: College Bound Personal Finance for College

Expected Family Contribution

• Your EFC is calculated according to a formula based on income and some of the family’s assets

• This amount is what your family is expected to pay

• Any changes in income or assets can be discussed with the Financial Aid office at your school of choice

Page 12: College Bound Personal Finance for College

Federal Pell Grant

• Does not need to be repaid• Maximum award for 2008-2009 is $4,731• Grants depend on need, school costs and full-

vs. part-time status• For undergraduates only

Page 13: College Bound Personal Finance for College

Federal Stafford Loans

• Subsidized– Based on financial need– Government pays interest until student is out of

school for 6 months• Unsubsidized

– Not need based– Interest can be paid or capitalized while borrower

is in school

Page 14: College Bound Personal Finance for College

Stafford Loan Limits

• Dependent full-time students can borrow:– $5,500 first year– $6,500 second year– $7,500 thereafter

• Independent full-time students can borrow:– $9,500 first year– $10,500 second year– $12,500 thereafter

Page 15: College Bound Personal Finance for College

Parent Loans to Undergraduate Students (PLUS)

• Parents can borrow for child’s education• Eligibility determined by credit check• Limit is costs minus other aid sources

• Interest is variable, can’t exceed 9%• Repayment begins 60 days after funds

disbursed• Any remaining money must be used for

education

Page 16: College Bound Personal Finance for College

Campus Based Aid Programs

• Supplemental Educational Opportunity Grant• Work-study• Perkins Loans

• Administered by each campus, not the government

• School receives flat amount of funds• When they run out, they are out, so apply

early

Page 17: College Bound Personal Finance for College

Supplemental Educational Opportunity Grants

• Pell grant recipients with lowest EFCs will be first recipients

• No repayment of grants• $100 - $4,000 per year based on need,

application date and funds available• For undergraduates only

Page 18: College Bound Personal Finance for College

Work-Study

• Provides part-time jobs to students with financial need, allowing them to earn money to pay educational expenses

• Can provide work experience in community service or course of study, as well as other types of jobs

Page 19: College Bound Personal Finance for College

Perkins Loans

• Low interest (can’t exceed 5%) for exceptional need

• $4,000 per year limits• Repayment begins 9 months after student is

no longer full-time student• Loan can be forgiven in some post-college

work programs

Page 20: College Bound Personal Finance for College

Scholarships

• Apply through your high school or college offices

• Use library references• Be wary of internet sites that charge fees to

search for you

Page 21: College Bound Personal Finance for College

529 College Savings Plans

• Offered through all states• Some states allow you to deduct all or part of your

contribution from state taxes• Contributions are not deductible from your federal

taxes• Earnings grow tax-free, and withdrawals are tax-free

if used for college

Page 22: College Bound Personal Finance for College

529 College Savings Plans

• You have control – beneficiary has no right to funds without your authorization

• Plan assets are managed, and you can auto-debit your contributions

• Anyone eligible and contribution limits are very high ($300,000) in some states

Page 23: College Bound Personal Finance for College

Pre-Paid Tuition Plans

• Vary state to state• Allow you to contribute a flat amount now to

cover tomorrow’s tuition costs• Gains are tax-free, and some are state-

deductible• Most plans limited to state residents and

offered for state colleges and universities, not private schools

Page 24: College Bound Personal Finance for College

Coverdell Education Savings Account

• Contributions aren’t deductible• Earnings and distribution are tax-free if used for

education expenses• Contribution limits of $2,000 per year per student• Money can be used for primary and secondary

private school tuition and college expenses• Some high-income families ineligible to contribute

Page 25: College Bound Personal Finance for College

Roth IRA

• You can decide how to invest the money• If your child doesn’t need the money, you can

save it for retirement• No IRS penalty if withdraw used for education

Page 26: College Bound Personal Finance for College

Military Options for Aid

• Montgomery GI Bill– 36 months education benefits to eligible service

people• Veterans Educational Assistance Program

– Government matches 2/1 per dollar contributed to this program

Page 27: College Bound Personal Finance for College

Military Options for Aid

• Survivors and Dependents Educational Assistance Program– Benefits for children of veterans who have died or become

disabled during service

• ROTC– Provides scholarships for tuition in exchange for military

service after graduation– Provides living stipend and book allowance

Page 28: College Bound Personal Finance for College

Strategies for Getting More Aid

• Limit savings in the student’s name– Will assume 35% available for education

• Avoid lump sum income in student’s junior year of high school

• Shift assets– 401(k), IRAs, cash value life insurance, home

equity

Page 29: College Bound Personal Finance for College

Reduce the Costs of College

• Tax credits• Community college for 2 years• Choose in-state school• Live at home during college

• AmeriCorps programs• Military options• Tuition remission for full-time school staff and

dependents• Resident Assistant jobs for housing

Page 30: College Bound Personal Finance for College

Be Credit Wise• Over 75% of college students have credit cards• Over 30% of college students have 4 or more

credit cards• 3 out of 5 students with credit cards maxed

them out in their freshman year• Over 60% of college students don’t have a

budget

Page 31: College Bound Personal Finance for College

Be Credit Wise

• How to establish credit• The “C’s” of credit• The costs of credit• Your credit report• From SAT to credit score

Page 32: College Bound Personal Finance for College

College Bound