vuefolio seminar at sap june 23/24 2015

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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

mailto:[email protected]

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Disclaimers


• 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.

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The Journey


University of California Berkeley

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College Desirability, Aspiration and Expense


College Rankings Acceptance Rates

Need Sensitivity Need/Merit Aid

Elite

Private

Private Colleges

Public Colleges/Community College

Flagship Public

Colleges

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College Profile


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.

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Average Cost of Attending College


Excludes books/supplies/transportation costs. Includes room and board. Source: Data from College Board

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Cost of Attending College in CA


Source: Data from UCOP

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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


UCs $34,000

Cal States $22,000


NET PRICE “personalized prices”

Families pay

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Your Price Tag for College


Family Income # of kids

attending college

Non Retirement Assets

Financial Aid available

Your “Actual Cost of College” or NET PRICE depends on:

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Paying for NET PRICE


Source: Sallie Mae “How America pays for College 2014

PARENTS

FINANCIAL AID

STUDENT LOANS


FINANCIAL AID: NEED and MERIT

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Financial Aid


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

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Financial Aid


Federal Grants: Pell Grants

State Grants: Cal Grants

Institutional Aid

Federal Student Loans

Sources of Need based Aid


College vs Financial Aid

Source: College Board “Trends in Student Aid” 2014

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Ex: Harvard vs. UC Berkeley estimated 2014-15 cost


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.

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Elite Private Colleges: What They Say


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

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Bay Area Parents



Merit Aid Institutional Aid

Scholarships Federal/State Aid

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First Year Merit Aid: Private Colleges


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

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Merit Aid : Private Colleges


Source: College Board “Trends in Student Aid” 2014

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Parents and College



Low Income: 0 - 20% Middle Income: 25 – 50% High Income: 50 -100 %

PARENT’S SHARE + =


PAYING/ SAVING

for COLLEGE


SAVING FOR COLLEGE: LONG TERM STRATEGY

PAYING FOR COLLEGE:

CURRENT STRATEGY

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The strategic way to pay for college


Financial Aid Eligibility

Aid beyond first year

Tax efficient Investments

Sufficient Income

Student Loans

Siblings Retirement Savings status

Home Equity

Parental Loan Impact

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Paying for College


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

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Federal Student Loans


Subsidized

• Need based • Interest accrues after

graduation • Annual Limit

Unsubsidized

• Any student can borrow

• Interest starts accruing immediately

• Annual Limit

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Paying for College: Federal Student Loan


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


SAVE FOR COLLEGE WITHOUT GETTING

UNEXPECTED SURPRISES DURING HIGH SCHOOL /ACCEPTANCE TIMES

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Paying for College: 529 Plans


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!

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529 State Plans: A Primer


Direct Sold 529 Plan

48 states Direct transaction

Advisor Sold 529 Plan

Only through an

advisor

Rarely beats a good

direct sold plan

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529 Plan Portfolios


Age Based

Preset Funds

Preset Glide Path

Most Popular

Individual

Flexibility

Self Managed

Maybe more expensive than age based

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529 State Plans: Metrics


Fees/Loads Expense Ratios

Asset Allocation

Diversification

Number of options in the plan

Underlying

fund quality


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

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529 Plans : Savings Strategy

Alma Mater Public University: UC

Private Elite/Private (can fund without stress)



Popular Strategy

• 529 Plans or

• Taxable Accounts

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Late to the game?


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

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The Plan


Smart Financial Planning for College +

Hyper Local Placements

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Why HS placements matter


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Why HS placements matter


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

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Average Profile UCB 2014


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

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Rise in Migration of California Students


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HS Placements: Elite Private College



http://www.thecrimson.com/article/2013/12/13/making-harvard-feeder-schools/

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Smart Financial Planning for College



Family College Savings


THINK AHEAD BE INFORMED

FOR DIFFERENT TYPES OF COLLEGES


Vuefolio Smart Strategy

• InState: 529 Plans only

• Private: 529 Plans + Taxable Accounts

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Online Resources


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/


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.

vuefolio seminar at sap june 23/24 2015

Economy & Finance

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