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 – Short-, medium-, long-term Examples for this life stage – Save “x” dollars – Get a summer job – Design a budget – Fill out FAFSA

Create a Budget - Income Allowance My job or business Odd jobs Grants Scholarships Gifts Loans

Create a Budget - Expenses Money I owe Savings College savings Giving Gifts Transportation Food Clothing Personal care School supplies Telephone Recreation Vacations

College Costs Continue to Rise In , total expenses for private 4-year college – $33,301 – 439 percent increase from 1982 to 2007 In , total expenses for public 4-year college – $16,357 – In-State – $26,304 – Out of State

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

Options to Pay for College Grants Loans Campus based aid programs Scholarships 529 plans Pre-paid tuition plans Coverdell plans Roth IRA Military coverage

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

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

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

Federal Pell Grant Does not need to be repaid Maximum award for is $4,731 Grants depend on need, school costs and full- vs. part-time status For undergraduates only

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

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

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

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

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

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

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

Scholarships Apply through your high school or college offices Use library references Be wary of internet sites that charge fees to search for you

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

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

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

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

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

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

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

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

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

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

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

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