1 How to Pay for College ©2015 Legg Mason Investor Services, LLC, a Legg Mason Inc. Subsidiary. Member FINRA, SIPC What You Need to Know About Savings & Federal Student Aid

2 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID Challenge

3 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID Challenge  The cost of college continues to climb  More and more parents can’t save the entire amount 1 Source: College Savings Plan Network 529 Report.

4 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID Solution

5 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID Solution

6 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 1.How do we set a savings goal? Solution: What You Need to Know

7 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 1. How do we set a savings goal? Put our five-step savings plan in place: 1. Determine the cost of college 2. Identify your savings profile 3. Set your savings goal (may be less than total cost) 4. Choose a savings vehicle 5. Establish a savings schedule

8 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 2.What advantages do 529 College Savings Plans offer? Solution: What You Need to Know

9 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 2. What advantages do 529 plans offer?  529s offer three primary advantages: 1. Tax benefits 2. Professional money management 3. Control by account owner  To remember them easily, think “The Preferred Choice”

10 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID Solution: What You Need to Know 3.If we can’t save the entire cost of college, what sources of federal student aid are available?

11 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 3. What sources of federal student aid are available?  Available at no cost to students:  Scholarships  Grants  Work-study  Comes at a price:  Student loans (federal and private) For links to student aid resources, please see page 27.

12 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 4.How do we apply for federal aid? Do we complete the FAFSA SM ? Solution: What You Need to Know

13 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 4. How do we apply for federal aid? Do we complete the FAFSA?  Completing the “Free Application for Federal Student Aid” form (“FAFSA”) is the first step:  Most college students and families are expected to contribute  How much, depends upon the Expected Family Contribution = EFC  FAFSA looks at assets, income, other information to determine EFC  Fastest and easiest way to apply is online at FAFSA on the Web SM 

14 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 5.What are the most important factors in calculating the EFC? Solution: What You Need to Know

15 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 5. What are the most important factors in calculating the EFC? Summary  Assets & Income Source of data: savingforcollege.com  Additional considerations  How many children in the family?  How many children in college? OwnerAssets 3 Income 4 Student20%50% ParentsUp to 5.6%22% - 47% 2 Total current balance of cash, savings and checking accounts; net worth of investments, including real estate, excluding the home in which parents and student live; net worth of parent and student current businesses and/or investment farms, excluding family farms or businesses with 100 or fewer full-time or full-time equivalent employees. Net worth means current value minus debt. Source: FAFSA 7/1/14 - 6/30/15. 3 Income includes the adjusted gross income from the parents‘ and students’ Forms 1040 along with certain other items representing untaxed income and benefits, e.g., untaxed portions of IRA distributions and veterans non-education benefits, such as disability. Source: FAFSA 7/1/14 - 6/30/15.

16 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 6.How, exactly, are 529 plan assets and distributions counted in the EFC? Solution: What You Need to Know

17 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 6. How, exactly, are 529 plan assets and distributions counted in the EFC? Summary  529 plan owned by a parent treated as parental assets  Distributions from a parent-owned plan are considered income  Third-party-owned plans, e.g., grandparents, are treated differently 4 Total current balance of cash, savings and checking accounts; net worth of investments, including real estate, excluding the home in which parents and student live; net worth of parent and student current businesses and/or investment farms, excluding family farms or businesses with 100 or fewer full-time or full-time equivalent employees. Net worth means current value minus debt. Source: FAFSA 7/1/14 - 6/30/15. 5 Income includes the adjusted gross income from the parents‘ and students’ Forms 1040 along with certain other items representing untaxed income and benefits, e.g., untaxed portions of IRA distributions and veterans non-education benefits, such as disability. Source: FAFSA 7/1/14 - 6/30/15. Owner Assets 3 Income 4 ParentUp to 5.6%0% Third Party0%50% Source of data: savingforcollege.com

18 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 7.Is it true that it’s better to use a Roth IRA to save for college because it doesn’t affect the EFC calculation on the FAFSA? Solution: What You Need to Know

19 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 7. Is it true that it’s better to use a Roth IRA to save for college?  Not necessarily  The value of a Roth IRA is not reported as assets on the FAFSA  However, tax-free distributions must be reported as untaxed income  Appears on following year’s FAFSA  Will be counted % in the following year’s EFC calculation

20 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 8.College is years away. Can we estimate how much federal financial student aid our child may qualify for without filling out the FAFSA? Solution: What You Need to Know

21 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID 8. Can we estimate federal student aid our children may qualify for without filling out the FAFSA ?  Parents not ready to apply for federal student aid but who are seeking an estimate can use a free financial aid calculator: FAFSA4caster  It provides an early estimate of eligibility  The calculator is offered at the website of Federal Student Aid, an office of The U.S. Department of Education

22 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID Get the Fundamentals of Funding

23 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID Get the Fundamentals of Funding 1.Read our new brochure 2.Ask us questions 3.Know Scholars Choice ® is a strong-performing plan

24 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID Why Scholars Choice? 1. A leading plan  One of the largest advisor-sold plans nationwide 2. Portfolio management expertise  QS Legg Mason Global Asset Allocation  Disciplined. Thoughtful. Experienced. 3. Multi-manager portfolios  ClearBridge, Western Asset, QS Batterymarch, Brandywine, Royce  Thornburg, Templeton* *Thornburg and Templeton are not affiliates of Legg Mason.

25 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID Why Scholars Choice? 4.Broad range of portfolio options  Age-based or static allocations  Individual portfolio options  Cash Reserve portfolio 5. Competitive pricing structure  Unit Class A sales charge = 3.5%  Unit Class C = no up-front sales charge or back-end CDSC An investment in the Cash Reserve Portfolio is not a bank deposit and is not insured or guaranteed by the FDIC or any other governmental agency. There is no assurance that the Cash Reserve Portfolio will be able to maintain the value of its units at $1 per unit. It is possible to lose money by investing in this option. The Cash Reserve Portfolio will not seek capital appreciation and may underperform other investment options. While the Cash Reserve Portfolio will invest all of its assets in a money market mutual fund and will value its units based on the underlying money market fund share value, the Cash Reserve Portfolio itself is not a money market mutual fund.

26 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID Student Aid Primary Sources  Scholarships  Private database of > 2,700,000 scholarship opportunities  U.S. Dept. of Labor database of >5,000 scholarship opportunities  Grants   Also see the two websites listed under the scholarships  Work-Study  Resources

27 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID Student Aid Primary Sources  Federal student loans   Perkins Loan  Direct Subsidized Loan  Direct Unsubsidized Loan  Direct Plus Loan: Student’s Cost of Attendance (COA) minus any other financial aid (for parent of dependent undergraduate students and for graduate or professional students)  Private student loans  If student does not have sufficient funds  Consult with school’s Financial Aid Office or parent’s bank Resources

28 HOW TO PAY FOR COLLEGE: WHAT YOU NEED TO KNOW ABOUT SAVING & FEDERAL STUDENT AID Disclosure An investor should consider the Program’s investment objectives, risks, charges and expenses before investing. The Program Disclosure Statement at scholars-choice.com, which contains more information, should be read carefully before investing. If an investor and/or an investor’s beneficiary are not Colorado taxpayers, they should consider before investing whether their home states offer 529 plans that provide state tax and other benefits only available to state taxpayers investing in such plans. Investments in the Scholars Choice College Savings Program are not insured by the FDIC or any other government agency and are not deposits or other obligations of any depository institution. Investments are not guaranteed by the State of Colorado, CollegeInvest, QS Legg Mason Global Asset Allocation, LLC, Legg Mason Investor Services, LLC, or Legg Mason, Inc. or its affiliates and are subject to investment risks, including loss of principal amount invested. Legg Mason, Inc., its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax- related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. Scholars Choice is a registered service mark of CollegeInvest. CollegeInvest and the CollegeInvest logo are registered trademarks. Administered and issued by CollegeInvest, State of Colorado. QS Legg Mason Global Asset Allocation, LLC is the Investment Manager and Legg Mason Investor Services, LLC is the primary distributor of interests in the Program; together they serve as Manager of the Program. QS Legg Mason Global Asset Allocation, LLC, ClearBridge Investments, LLC, Brandywine Global Investment Management, LLC, QS Batterymarch Financial Management, Inc., Royce & Associates, LLC, Western Asset Management Company and Western Asset Management Company Limited, and Legg Mason Investor Services, LLC are Legg Mason, Inc. affiliates. Thornburg Investment Management and Templeton Global Advisors Limited are not affiliated with Legg Mason, Inc. and its affiliates. QS Legg Mason Global Asset Allocation (QS LMGAA) is part of the combined QS Investors investment platform, which is comprised of QS Investors, LLC, QS Batterymarch Financial Management, Inc. and QS LMGAA. scholars-choice.com ©2014 Legg Mason Investor Services, LLC, a Legg Mason Inc subsidiary. Member FINRA, SIPC 10/14 FN