P E R S O N A L F I N A N C I A L M A N A G E M E N T P R O G R A M Paying for College 1

P A Y I N G F O R C O L L E G E2 Cost of College Four-year college education including Room and Board: Public Private 2007:$71,743$144, :$114,348$230, :$171,937$345,972 Rate of increase 5-8% annually Four-year college education including Room and Board: Public Private 2007:$71,743$144, :$114,348$230, :$171,937$345,972 Rate of increase 5-8% annually

P A Y I N G F O R C O L L E G E3 Is college worth the investment? The lifetime earnings gap is over $1 million ! Does that sound better? The lifetime earnings gap is over $1 million ! Does that sound better?

P A Y I N G F O R C O L L E G E4 Education Benefits in the Military Montgomery G.I. Bill Montgomery G.I. Bill Tuition assistance (TA) program Tuition assistance (TA) program “MGIB Top Up” “MGIB Top Up” Loan Repayment Program (LRP) Loan Repayment Program (LRP) Veterans Educational Assistance Program (VEAP) Veterans Educational Assistance Program (VEAP) Reserve Educational Assistance Program (REAP) Reserve Educational Assistance Program (REAP) Work-Study Program Work-Study Program ( ( Montgomery G.I. Bill Montgomery G.I. Bill Tuition assistance (TA) program Tuition assistance (TA) program “MGIB Top Up” “MGIB Top Up” Loan Repayment Program (LRP) Loan Repayment Program (LRP) Veterans Educational Assistance Program (VEAP) Veterans Educational Assistance Program (VEAP) Reserve Educational Assistance Program (REAP) Reserve Educational Assistance Program (REAP) Work-Study Program Work-Study Program ( (

P A Y I N G F O R C O L L E G E5 Financial Aid Start your search in the Sophomore year Start your search in the Sophomore year – Grants – Work-Study – Loans – Scholarships Start your search in the Sophomore year Start your search in the Sophomore year – Grants – Work-Study – Loans – Scholarships

P A Y I N G F O R C O L L E G E6 GrantsGrants Federal Pell Grant Federal Pell Grant – Undergraduates only – Up to $4,050/year – Income requirements determine eligibility Academic Competiveness Grant (ACG) Academic Competiveness Grant (ACG) National Science and Mathematics Access to Retain Talent Grant (National SMART Grant) National Science and Mathematics Access to Retain Talent Grant (National SMART Grant) Federal Pell Grant Federal Pell Grant – Undergraduates only – Up to $4,050/year – Income requirements determine eligibility Academic Competiveness Grant (ACG) Academic Competiveness Grant (ACG) National Science and Mathematics Access to Retain Talent Grant (National SMART Grant) National Science and Mathematics Access to Retain Talent Grant (National SMART Grant)

P A Y I N G F O R C O L L E G E7 LoansLoans Low Interest Loans Low Interest Loans – Stafford – Plus (Parent loan) – Consolidation – Perkins Federal SEO Grant Federal SEO Grant – Up to $4000/yr – Exceptional need Work Study Programs Work Study Programs – Federal Program based on need – School Programs may not be need based Low Interest Loans Low Interest Loans – Stafford – Plus (Parent loan) – Consolidation – Perkins Federal SEO Grant Federal SEO Grant – Up to $4000/yr – Exceptional need Work Study Programs Work Study Programs – Federal Program based on need – School Programs may not be need based

P A Y I N G F O R C O L L E G E8 How To Apply free online application free online application No sooner than January 1 No sooner than January 1 Check school deadlines – they differ Check school deadlines – they differ Apply every year Apply every year Institutional Grants Institutional Grants free online application free online application No sooner than January 1 No sooner than January 1 Check school deadlines – they differ Check school deadlines – they differ Apply every year Apply every year Institutional Grants Institutional Grants

P A Y I N G F O R C O L L E G E9 Financial Aid Calendar Financial Aid Calendar Handout

P A Y I N G F O R C O L L E G E10 ScholarshipsScholarships Millions of dollars available Millions of dollars available – Many are unused because no one applies Many military-specific opportunities Many military-specific opportunities Check with organizations where you are a member Check with organizations where you are a member Apply for as many as possible Apply for as many as possible Search engines are great tools! Millions of dollars available Millions of dollars available – Many are unused because no one applies Many military-specific opportunities Many military-specific opportunities Check with organizations where you are a member Check with organizations where you are a member Apply for as many as possible Apply for as many as possible Search engines are great tools!

P A Y I N G F O R C O L L E G E11 ScamsScams Avoiding Scams and Identity Theft Handout

P A Y I N G F O R C O L L E G E12 Saving for College To cover four years at a public school costing $12,500 annually AgeMonthly Yearly Birth$270$3,242 7$437$5,248 14$1,162$13,949 8% annual return rate and 5% annual college inflation To cover four years at a public school costing $12,500 annually AgeMonthly Yearly Birth$270$3,242 7$437$5,248 14$1,162$13,949 8% annual return rate and 5% annual college inflation

P A Y I N G F O R C O L L E G E13 Section 529 Plans Two general types Two general types – Prepaid Tuition Plan - today’s rates for future college needs – College Savings Plan - invest in account you can control Each State has their own plan and others are available through investment companies Each State has their own plan and others are available through investment companies Contributions grow tax-deferred Contributions grow tax-deferred Withdrawals tax-free if used for college Withdrawals tax-free if used for college Many states offer tax-deduction for contributions Many states offer tax-deduction for contributions Two general types Two general types – Prepaid Tuition Plan - today’s rates for future college needs – College Savings Plan - invest in account you can control Each State has their own plan and others are available through investment companies Each State has their own plan and others are available through investment companies Contributions grow tax-deferred Contributions grow tax-deferred Withdrawals tax-free if used for college Withdrawals tax-free if used for college Many states offer tax-deduction for contributions Many states offer tax-deduction for contributions

P A Y I N G F O R C O L L E G E Plans Transferable to family members Transferable to family members No income restrictions No income restrictions Portable to other states Portable to other states No residency requirement No residency requirement No guarantee on college acceptance No guarantee on college acceptance No guarantee on rates of return No guarantee on rates of return 10% penalty and taxes if not used for qualified expenses 10% penalty and taxes if not used for qualified expenses Transferable to family members Transferable to family members No income restrictions No income restrictions Portable to other states Portable to other states No residency requirement No residency requirement No guarantee on college acceptance No guarantee on college acceptance No guarantee on rates of return No guarantee on rates of return 10% penalty and taxes if not used for qualified expenses 10% penalty and taxes if not used for qualified expenses

P A Y I N G F O R C O L L E G E15 Coverdell ESA Maximum $2000 per child per year Maximum $2000 per child per year Contributions not tax-deductible Contributions not tax-deductible Grows Tax-deferred Grows Tax-deferred Withdrawals tax-free if used for college Withdrawals tax-free if used for college Transferable to family member Transferable to family member Income limitations Income limitations Must use by age 30 Must use by age 30 10% penalty and taxes if not used for qualified expenses 10% penalty and taxes if not used for qualified expenses Maximum $2000 per child per year Maximum $2000 per child per year Contributions not tax-deductible Contributions not tax-deductible Grows Tax-deferred Grows Tax-deferred Withdrawals tax-free if used for college Withdrawals tax-free if used for college Transferable to family member Transferable to family member Income limitations Income limitations Must use by age 30 Must use by age 30 10% penalty and taxes if not used for qualified expenses 10% penalty and taxes if not used for qualified expenses

P A Y I N G F O R C O L L E G E16 Qualified Expenses Section College Savings Plan Section College Savings Plan – Tuition, fees, books, room, board, supplies Coverdell ESA Coverdell ESA – Above plus equipment – Plus certain elementary and secondary education expenses (like tuition and computers) Can use both in same year for different expenses Can use both in same year for different expenses Can contribute to both in same year Can contribute to both in same year Section College Savings Plan Section College Savings Plan – Tuition, fees, books, room, board, supplies Coverdell ESA Coverdell ESA – Above plus equipment – Plus certain elementary and secondary education expenses (like tuition and computers) Can use both in same year for different expenses Can use both in same year for different expenses Can contribute to both in same year Can contribute to both in same year

P A Y I N G F O R C O L L E G E17 U.S. Savings Bonds Education Bond Program Education Bond Program – – Series EE and I bonds tax-free within income limitations – Qualified expenses are tuition and fees only – Can rollover to 529 Plan – Bonds for children must be in the parents name – $30,000 annual purchase limit Education Bond Program Education Bond Program – – Series EE and I bonds tax-free within income limitations – Qualified expenses are tuition and fees only – Can rollover to 529 Plan – Bonds for children must be in the parents name – $30,000 annual purchase limit

P A Y I N G F O R C O L L E G E18 Custodial Accounts UGMA or UTMA Money belongs to the child Money belongs to the child Gifts/donations are irrevocable Gifts/donations are irrevocable No restriction on use of money allowed No restriction on use of money allowed Income taxed at child’s rate Income taxed at child’s rate Not transferable to others Not transferable to others Use for any expense or purpose child chooses Use for any expense or purpose child chooses High impact on financial aid – considered an asset of the student High impact on financial aid – considered an asset of the student UGMA or UTMA Money belongs to the child Money belongs to the child Gifts/donations are irrevocable Gifts/donations are irrevocable No restriction on use of money allowed No restriction on use of money allowed Income taxed at child’s rate Income taxed at child’s rate Not transferable to others Not transferable to others Use for any expense or purpose child chooses Use for any expense or purpose child chooses High impact on financial aid – considered an asset of the student High impact on financial aid – considered an asset of the student

P A Y I N G F O R C O L L E G E19 Parental Accounts Parent has control Parent has control Low impact on financial aid Low impact on financial aid Flexible investment choices Flexible investment choices Money available for other uses Money available for other uses No investment limits No investment limits No tax breaks No tax breaks Temptation to Spend! Parent has control Parent has control Low impact on financial aid Low impact on financial aid Flexible investment choices Flexible investment choices Money available for other uses Money available for other uses No investment limits No investment limits No tax breaks No tax breaks Temptation to Spend!

P A Y I N G F O R C O L L E G E20 Your IRA Qualified Expenses: Qualified Expenses: – Tuition, fees, books, supplies, equipment, room and board Avoid 10% penalty but pay income tax Avoid 10% penalty but pay income tax Expenses must be for you, spouse, child or grandchild Expenses must be for you, spouse, child or grandchild Be Careful! Look for other options Be Careful! Look for other options You can’t get a loan for retirement! Qualified Expenses: Qualified Expenses: – Tuition, fees, books, supplies, equipment, room and board Avoid 10% penalty but pay income tax Avoid 10% penalty but pay income tax Expenses must be for you, spouse, child or grandchild Expenses must be for you, spouse, child or grandchild Be Careful! Look for other options Be Careful! Look for other options You can’t get a loan for retirement!

P A Y I N G F O R C O L L E G E21 Impact on Financial Aid Better to have assets in parents name Better to have assets in parents name 529 and Coverdell money does not belong to the child 529 and Coverdell money does not belong to the child Custodial accounts belong to the child Custodial accounts belong to the child Current formula is 5.5% of parental assets and 35% of child’s assets are available for paying college bills Current formula is 5.5% of parental assets and 35% of child’s assets are available for paying college bills Better to have assets in parents name Better to have assets in parents name 529 and Coverdell money does not belong to the child 529 and Coverdell money does not belong to the child Custodial accounts belong to the child Custodial accounts belong to the child Current formula is 5.5% of parental assets and 35% of child’s assets are available for paying college bills Current formula is 5.5% of parental assets and 35% of child’s assets are available for paying college bills

P A Y I N G F O R C O L L E G E22 Strategies to minimize college costs Learn Faster Learn Faster Start Small Start Small Get Help Get Help Watch Your Bill Watch Your Bill Live Off Campus Live Off Campus Choose Meal Plans Carefully Choose Meal Plans Carefully Learn Faster Learn Faster Start Small Start Small Get Help Get Help Watch Your Bill Watch Your Bill Live Off Campus Live Off Campus Choose Meal Plans Carefully Choose Meal Plans Carefully Shop for Textbooks, Buy Used Shop for Textbooks, Buy Used Sell Old Textbooks Sell Old Textbooks Get a Job Get a Job Talk to Counselor Talk to Counselor

P A Y I N G F O R C O L L E G E23 Tax Incentives Hope Scholarship Credit Hope Scholarship Credit – Up to $1650 per student per year in first two years Lifetime Learning Credit Lifetime Learning Credit – Up to $2000 – 50% of first $10,000 paid that do not qualify for HOPE – Available per year, not per student Same income limitations for each Same income limitations for each Both available for use only for expenses paid with money from sources other that 529 or ESA Both available for use only for expenses paid with money from sources other that 529 or ESA Hope Scholarship Credit Hope Scholarship Credit – Up to $1650 per student per year in first two years Lifetime Learning Credit Lifetime Learning Credit – Up to $2000 – 50% of first $10,000 paid that do not qualify for HOPE – Available per year, not per student Same income limitations for each Same income limitations for each Both available for use only for expenses paid with money from sources other that 529 or ESA Both available for use only for expenses paid with money from sources other that 529 or ESA

P A Y I N G F O R C O L L E G E24 Tax Incentives Limited Deduction Limited Deduction – Up to $4000 even if you do not itemize – Income limitations – Cannot be used in conjunction with Hope Student Loan Interest Deduction Student Loan Interest Deduction – Up to $2500 in student loan interest paid – Income limitations – Person obligated on the loan gets the deductions Use only for expenses paid with money from sources other that 529 or ESA Use only for expenses paid with money from sources other that 529 or ESA Limited Deduction Limited Deduction – Up to $4000 even if you do not itemize – Income limitations – Cannot be used in conjunction with Hope Student Loan Interest Deduction Student Loan Interest Deduction – Up to $2500 in student loan interest paid – Income limitations – Person obligated on the loan gets the deductions Use only for expenses paid with money from sources other that 529 or ESA Use only for expenses paid with money from sources other that 529 or ESA

P A Y I N G F O R C O L L E G E25 The Fine Print No double-dipping for tax breaks No double-dipping for tax breaks Hope and Lifetime Learning Hope and Lifetime Learning – Can be used for different educational expenses in same year Money must come from sources other than tax-exempt distributions Money must come from sources other than tax-exempt distributions No double-dipping for tax breaks No double-dipping for tax breaks Hope and Lifetime Learning Hope and Lifetime Learning – Can be used for different educational expenses in same year Money must come from sources other than tax-exempt distributions Money must come from sources other than tax-exempt distributions

P A Y I N G F O R C O L L E G E26 Which Plan is Best? Hope trumps Deductions Hope trumps Deductions Lifetime Trumps Deductions (if MITB is 20% or less) Lifetime Trumps Deductions (if MITB is 20% or less) Deductions reduce AGI, raising eligibility potential for next year Deductions reduce AGI, raising eligibility potential for next year Hope trumps Lifetime Hope trumps Lifetime Hope trumps Deductions Hope trumps Deductions Lifetime Trumps Deductions (if MITB is 20% or less) Lifetime Trumps Deductions (if MITB is 20% or less) Deductions reduce AGI, raising eligibility potential for next year Deductions reduce AGI, raising eligibility potential for next year Hope trumps Lifetime Hope trumps Lifetime

P A Y I N G F O R C O L L E G E27 Which Plan is Best? Factors Tolerance for Risk Tolerance for Risk Current Income Current Income Tax Bracket Tax Bracket Possible Financial Aid Possible Financial Aid Possible Scholarship Possible Scholarship Gifts from Relatives Gifts from Relatives Number of children in college Number of children in college Any Military Benefits Any Military BenefitsFactors Tolerance for Risk Tolerance for Risk Current Income Current Income Tax Bracket Tax Bracket Possible Financial Aid Possible Financial Aid Possible Scholarship Possible Scholarship Gifts from Relatives Gifts from Relatives Number of children in college Number of children in college Any Military Benefits Any Military Benefits

P A Y I N G F O R C O L L E G E28 Take Action! Get online - it’s all there Get online - it’s all there Consider Military Benefits, Financial Aid, Scholarships, and Personal Savings Consider Military Benefits, Financial Aid, Scholarships, and Personal Savings Utilize the Search Engines Utilize the Search Engines Start Planning Early Start Planning Early Saving Even Earlier Saving Even Earlier Do something - Pick one and go! Do something - Pick one and go! Get online - it’s all there Get online - it’s all there Consider Military Benefits, Financial Aid, Scholarships, and Personal Savings Consider Military Benefits, Financial Aid, Scholarships, and Personal Savings Utilize the Search Engines Utilize the Search Engines Start Planning Early Start Planning Early Saving Even Earlier Saving Even Earlier Do something - Pick one and go! Do something - Pick one and go!

P A Y I N G F O R C O L L E G E29 Print Your Certificate Click on the following link to add your name to the certificate and print it: Paying for College