Understanding and Planning for Your Child’s College Education Tips for Smart Borrowing Understanding and Planning for Your Child’s College Education Presented by Danisha Dumornay of the ASA College Planning Center to the Cambridge Housing Authority Families

The Rising Cost of College Saving for College Financial Aid Overview Minimizing Debt Borrowing Basics Managing Debt 01 07 10 24 28 32 Agenda

ASA College Planning Center About Us ASA College Planning Center

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Main location: Boston Public Library, Copley Square Come visit us! Main location: Boston Public Library, Copley Square 700 Boylston St. Boston, MA 02116 (617) 536-0200 or Toll-free: (877) 332-4348 Mon-Thurs. 9AM-7:30PM Friday-Saturday 9AM-5PM Satellite Location: Bunker Hill Community College – Chelsea 70 Everett Ave. Chelsea, MA 02150 Every Monday, 11AM-5PM Satellite Location: Asian American Civic Association 87 Tyler St. Boston, MA 02111 Every Wednesday 9AM-12PM and 1PM-5PM ASA College Planning Center

Financial Aid Overview: The Relationship Between College Savings & Financial Aid Title

Financial Aid What is financial aid? Money and resources that help to meet total college costs which includes: Federal and State Grants Institutional and Private Scholarships Student Loans Federal Tax Credits Federal Work Study Self-Help ASA College Planning Center

ASA College Planning Center Affording College Apply to colleges strategically keeping in mind varying cost of attendance Make a diverse list of schools including two year and four year programs, be flexible- there is no one path to getting a degree Ask yourself: “Is the school a financial fit?” Look into scholarships Families should plan in before school starts Be clear about what parents will pay for and what students will pay ASA College Planning Center

ASA College Planning Center Words to Know FAFSA Expected Family Contribution Federal Pell Grant Federal Loans Self-Help Gift Aid Merit Aid Need Based Aid ASA College Planning Center

Balance of $9,700 after financial aid is provided This amount is based off of EFC (expected family contribution on FAFSA) What “Self-help” options remain? Case study

Saving vs. Borrowing Title

Tuition expenses are rising faster than inflation. Why Save for College? Tuition expenses are rising faster than inflation. Presentation Title

Why Save for College? Going away to college? Average tuition and fee growth by region from 2002–2003 through 2012–2013 Midwest Four-year public 49% Four-year private 24% New England Four-year public 62% Four-year private 22% West (includes Alaska and Hawaii) Four-year public 126% Four-year private 22% Middle states Four-year public 30% Four-year private 18% Southwest Four-year public 78% Four-year private 44% South Four-year public 77% Four-year private 26% Source: Trends in College Pricing, ©2012 The College Board, collegeboard.com

Tuition increases in relation to income and aid Why Save For College? Tuition increases in relation to income and aid Inflation-adjusted changes in tuition, fees, household income and student aid over the last decade As you can see, the most significant implications are realized when we compare tuition increases to another growth rate — that of median family income. Adjusting for inflation, tuition at private four-year institutions between 2002–2003 and 2012–2013 grew 26%, and tuition at public four-year institutions grew 66%. However, median household income for the 45-54 age bracket during this decade decreased by 13%. This large gap in growth rates means that, although tuition costs are increasing, families’ ability to fund the increases through wage growth is not keeping up. Let me emphasize the significance of this. Currently, increases in Social Security benefits are indexed to the increase in wages. Economists have suggested that one way to reduce the burden of Social Security benefits in the future is to change the index to prices (CPI) since wages tend to increase faster than prices. But as we can see, this is not the case when looking at college prices. The result? Financial aid per undergraduate student during this same period closed the gap by rising 114%. The question: Is this increase in aid a good thing? Median household income (age 45–54) Public four-year tuition and fees Total aid per full-time undergraduate student Private four-year tuition and fees Sources: Trends in Student Aid and Trends in College Pricing, ©2012 The College Board, collegeboard.com; U.S. Census Bureau, Current Population Survey, historical table H-10AR (in 2011 dollars)

How Can You Prepare? Title

Traditional savings account 529 Plans Saving Options Traditional savings account 529 Plans Savings grow tax free, and distributions for qualified expenses are also tax free 529 Prepaid Tuition Plans 529 College Savings Accounts CHA Matched Savings Account Presentation Title

Saving Options: CHA Matched Savings Program The Matched College Savings Initiative helps Work Force participants to save up to $3,000 for post-secondary expenses in the following steps: 1. Participants open a deposit only savings account with Cambridge Savings Bank in fall of their 10th grade year; 2. They make direct deposits from their class pay or Exploratory jobs pay on a bi-weekly basis; 3. Participants can earn additional money by meeting certain monetized incentives (see below); 4. We encourage parents and participants to deposit additional money during the three years before high school graduation; 5. CHA matches dollar for dollar all deposits between $500 and $1500 in each participant’s Matched College Savings Account, for a maximum total of $3000 for the participant to put towards post-secondary expenses. Presentation Title

Saving Options: CHA Matched Savings Program Work Force participants have a variety of ways to save into their Matched Savings Accounts. When participants sign up for a Matched Savings Accounts, they automatically enroll into a $5/paycheck direct deposit into their account. At any point, participants can increase or decrease their direct deposit amount by filling out a CHA direct deposit form. Participants also receive a Work Force Matched Savings Card with their bank account number on it so they or their family can easily make additional deposits at their local Cambridge Savings Bank branch. Presentation Title

Saving Options: CHA Matched Savings Program Presentation Title

Saving Options: CHA Matched Savings Program Presentation Title

Saving Options: CHA Matched Savings Program

Saving Options: CHA Matched Savings Program

Saving Options: CHA Matched Savings Program

Borrowing Basics

Exhaust ALL financial aid options before borrowing student loans Borrowing Basics Exhaust ALL financial aid options before borrowing student loans Borrow ONLY what you need! Before thinking about borrowing, exhaust all other aid options. Grants and scholarships are the most attractive aid options since they are “free money” and never have to be repaid. Work-study is an option for you to earn money toward your education by working in an on campu s student work position. Take advantage of tuition reimbursement and assistantships and fellowships as well if they are available. Once you’ve exhausted all other aid options, then look into borrowing. The yearly loan maximums are very generous and are often much more than you need. Don’t borrow this full amount unless you absolutely need it. Before applying, determine your remaining expenses and then borrow only the amount you need. By limiting the amount you borrow, you will have a positive impact on your financial future. Many students need to borrow money to pay for college. Whether you’ve already borrowed, filled out an application for a loan, or are planning to, it’s critical that you know the basics of borrowing money.

Loans are a responsibility Borrowing Basics Loans can provide help Education loans are a resource to help you meet college expenses, establish credit in your name, and become financially responsible. Loans are a promise You promise to repay the principal plus the interest Loans are a responsibility You must repay your loan whether or not you find employment, complete your degree, or achieve your salary goal. Before thinking about borrowing, exhaust all other aid options. Grants and scholarships are the most attractive aid options since they are “free money” and never have to be repaid. Work-study is an option for you to earn money toward your education by working in an on campu s student work position. Take advantage of tuition reimbursement and assistantships and fellowships as well if they are available. Once you’ve exhausted all other aid options, then look into borrowing. The yearly loan maximums are very generous and are often much more than you need. Don’t borrow this full amount unless you absolutely need it. Before applying, determine your remaining expenses and then borrow only the amount you need. By limiting the amount you borrow, you will have a positive impact on your financial future. Many students need to borrow money to pay for college. Whether you’ve already borrowed, filled out an application for a loan, or are planning to, it’s critical that you know the basics of borrowing money.

The Benefits of Federal Loans No credit check Annual limits 3.76% fixed interest rate for 2016-17 (Undergrad) 5.31% fixed interest rate for 2016-17 (Graduate) Repayment, Deferment and Forbearance Options Parents can also borrow Federal Loans, known as the Parent PLUS Loan

Private or Alternative Loans Loans made by banks or other lending institutions. Each private loan product offers its own terms and conditions—so do your research. Exhaust your federal loan eligibility before you consider a private loan.

Private Loan Considerations Consider the following: Interest rate Fees Repayment options Application of extra payments toward principal Frequency of changes to monthly payment Also important: Cancellation policies, grace period, deferment & forbearance options, benefits, and default

Know What You Owe You are responsible for keeping track of your loans. Did you borrow through more than one lender? How much have you borrowed? Has your loan been sold? Are your loans being serviced with different servicers? Resources exist to help you keep track of your loans. www.nslds.ed.gov

Make on-time, monthly payments Read correspondence from lender Repay your loan(s) Make on-time, monthly payments Read correspondence from lender Notify lender of changes within 10 days School & enrollment status Name, address & telephone number Ask your lender for help Your Responsibilities Speaker notes Accepting a loan means you accept legal and financial responsibilities until your loan is repaid in full. A student loan must be repaid regardless of whether you complete your program or get a job after graduation. You are also obligated to make on-time, monthly payments—even without notice from your lender—and read all correspondence regarding your student loan. In addition, you must notify your lender within 10 days if you reduce your status to less than half time, withdraw from school, stop attending classes, fail to re-enroll for any term, change your expected graduation date, or change your name, address or telephone number. Finally, shortly before leaving school, you are required to attend exit counseling. Key Summarizes Stafford loan borrowers’ responsibilities.

Keys to Successful Repayment Keep school and lender informed about changes Keep copies of all documents in one place Open all mail The longer it takes to repay your loans, the more interest you will pay Build good credit with timely payments Always ask for help Speaker notes The keys to responsible repayment are simple. (Review bullets.) Activity Ask students to verbally give you a number between one and 10. When someone in the group has stated a number (seven, for example), then say, “We need seven ways you can avoid default.” Begin by stating the first way. As students give their answers, you keep track of the number and add any information that students miss. Key Provides the keys for successful repayment.

Avoid Delinquency and Default A loan is considered in default after 270 days of missed and/or late payments A payment received one day late is considered delinquent Delinquent payments are reported to the credit bureaus Always call your lender or ASA for help

Consequences of Default Subject to federal and state offsets Wages and tax refund may be garnished Credit will be negatively affected. Loss of deferment and forbearance options Loss of eligibility for future financial aid May lose eligibility for certain federal or state jobs May lose professional license

Consider the long-term implications Borrowing Basics Do your homework Ask for reduction or elimination of your loan amount if you don’t really need it Consider the long-term implications Before thinking about borrowing, exhaust all other aid options. Grants and scholarships are the most attractive aid options since they are “free money” and never have to be repaid. Work-study is an option for you to earn money toward your education by working in an on campu s student work position. Take advantage of tuition reimbursement and assistantships and fellowships as well if they are available. Once you’ve exhausted all other aid options, then look into borrowing. The yearly loan maximums are very generous and are often much more than you need. Don’t borrow this full amount unless you absolutely need it. Before applying, determine your remaining expenses and then borrow only the amount you need. By limiting the amount you borrow, you will have a positive impact on your financial future. Many students need to borrow money to pay for college. Whether you’ve already borrowed, filled out an application for a loan, or are planning to, it’s critical that you know the basics of borrowing money.

Strategies to Minimize Debt

Strategies to Minimize Debt Use a variety of options to cover your balance. The goal is to MINIMIZE borrowing! Student Savings Loan Programs 529 Plans Student Salary Parent Salary Resident Assistant Outside Scholarships Payment Plans Parent Savings Employer Benefits Work Study Orientation Leader Gap Programs Education Tax Credits There is no ONE way to cover the balance, and in fact multiple methods are usually best with the main goal of lowering your balance as much as possible before borrowing.

Strategies to Minimize Debt Options to pay college costs not covered by aid, grants, or scholarships: Tuition payment plan—spreads the cost out over 12 months Loans– Federal and private options Live at home if possible Try to graduate in 3 years instead of 4 Presentation Title

Money Management & Planning Ahead

How can you minimize your debt load to lessen your financial burden? What should I be doing today? Where should I be heading tomorrow? For your future: Have you truly considered what you want to do and where you want to go? How much debt should you realistically take on based on your intended career? How can you minimize your debt load to lessen your financial burden? Should you revisit any of your decisions? For today: How can you change your spending patterns (or creatively increase your income) to reduce your future debt load

Managing Debt with Financial Planning Tools Develop good money strategies Savings accounts, budgeting, investing, etc. Create a college spending plan Create a post-college spending plan Compare salaries Compare repayment options Federal loans offer income-based repayment if you are eligible

Managing Debt with Financial Planning Tools Good money strategies: Do you know where your money goes? Dinner in Boston Every Saturday $30/week $1,400/year One Grande Latte Every Weekday $3.80/drink $988/year Fast food meal Twice a week $5.64/combo $687/year

Managing Debt with Financial Planning Tools FAFSA – fafsa.ed.gov NSLDS – nslds.ed.gov

Resources

Saving Saving Local bank CHA Matched Savings Program Financial Advisor

Loan Forgiveness Volunteer work Military service Loans Loan Forgiveness Volunteer work Military service Teach or practice medicine in certain communities Other loan forgiveness resources www.studentaid.ed.gov https://studentaid.ed.gov/sa/resources#loans AmeriCorps—www.americorps.gov Peace Corps—www.peacecorps.com

Contact our Borrower Services Team! Do you have questions about a loan you are repaying or about to begin repaying?   Counseling Services 866.493.5563 specialist@asa.org Mon - Thu: 8:00 a.m. - 10:00 p.m. Fri: 8:00 a.m. - 5:00 p.m. Sat. 9:00 a.m. - 6:00 p.m. Sun: 11:00 a.m. - 8:00 p.m. Have you fallen behind on your loan payments or are you experiencing financial difficulties? 800.343.8883 repaymentcounselor@asa.org Have you received a Notice of Default? Agency Relations 800.343.2120 information@asa.org Mon – Thu: 8:00 a.m. – 8:00 p.m. Sat: 8:00 a.m. - 12:00 p.m. Additional Contact Information For FFELP lenders and servicers: 800.999.9080 , option 4 lendersupport@asa.org For all other inquiries: 800.999.9080

For Free Education Advising Visit us at the ASA College Planning Center Located at the Boston Public Library 700 Boylston Street Boston, MA 02116 (The lower level of the Johnson Building) Phone: 617-536-0200

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