Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Tools for Financing Education Presented by Keri Neidig and Claudine Murphy Sallie Mae

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Cost of a College Education How America Pays for College 1 – 2 – 3 Approach to Funding Education –Free Money –Federal Loans –Gap Funding Options What We Will Cover

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Cost of a College Education 3

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Students Value a College Education Considering the money and time involved in getting a college degree, do you think getting a college degree today is worth it? Source: College Board (by Hart Research Associates): One Year Out, Findings from a National Survey Among Members of the High School Graduating Class of 2010

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Students Value a College Education (Cont) Majority of enrolled undergraduates and Parents strongly agree that, “College is an investment in the student’s future.” In 2011, student Strong agreement rose to 90%. Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2011

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Estimates for academic year 2010/2011 indicate that 20 million students enrolled in higher education and incurred costs of over $410 billion. College Cost Continues to Increase

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Assuming Federal Loans and Grants remain constant – a 4% increase in the cost of education would result in $15 billion incremental funding requirement for students and families. College Cost Continues to Increase (Cont)

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. The biggest challenge faced in transition to college was financial Students’ Challenges Going to College Source: College Board (by Hart Research Associates): One Year Out, Findings from a National Survey Among Members of the High School Graduating Class of 2010

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. How America Pays for College 9

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Families are making decisions to reduce cost: –Lower-cost school choices –Living at home –Reducing personal spending Managing College Costs Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2011

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Average Percent of Total Cost of Attendance Paid from Each Source Academic Year How the Typical Family Pays for College Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2011

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. College savings reach new high in 2011 College Savings Source: College Board 2010 Trends in Student Aid and Financial Research Corp., data as of June 2011 Total Assets in State- Sponsored Section 529 Savings Plans ($ Billions)

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved Approach for Funding Education

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved Approach to Paying for College Step 1. Use Free Money  Grants  Scholarships  Work-study  529 Savings Account  Tuition Payment Plans Step 1. Use Free Money  Grants  Scholarships  Work-study  529 Savings Account  Tuition Payment Plans Step 2. Explore Federal Loans Federal loans – some available regardless of need – offer options for both students and parents  Stafford  PLUS Step 2. Explore Federal Loans Federal loans – some available regardless of need – offer options for both students and parents  Stafford  PLUS Step 3. Fill Any Gaps After free money and federal loans, private education loans may be the best alternative to cover the rest of the education costs. Step 3. Fill Any Gaps After free money and federal loans, private education loans may be the best alternative to cover the rest of the education costs.

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Federal Grants Combined Federal Grant Volume up $15 Billion Source: College Board 2010 Trends in Student Aid

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Sallie Mae’s free scholarship search provides more than 3 million scholarships worth More than $16 billion SallieMae.com/ScholarshipSearch FastWeb.com features over 1.5 million scholarships Fastweb.com/College-Scholarships Scholarship America ScholarshipAmerica.org Scholarship Tools Private Scholarship Resources ► KFC Scholarship ► Coca-Cola Scholarship ► Ronald McDonald Scholarship ► Scholarships for Women ► WalMart Scholarship ► African American Scholarships ► Target Scholarship Application

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. FREE Easy-to-use database Calendar listing scholarships by deadline Filtering capabilities –By name –By deadline –By award amount Rating of scholarships Adjustable settings Scholarship Search - Best Practices

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Most colleges and universities offer tuition payment plans 26% of families report using a tuition payment plan in academic year to pay for undergraduate education Tuition Payment Plans help attract and retain students by giving them an additional funding solution Tuition Payment Plans

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. FAFSA completion is growing Freshman rates continue to increase Reasons for not completing the FAFSA: –Didn’t need aid –Didn’t believe their family would qualify –Weren’t aware of FAFSA Rate of FAFSA Completions, Year-over-Year Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2011

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Student Loans: Federal & Private Loan Originations ($MM) Source: College Board 2010 Trends in Student Aid

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. TRENDS LIKELY TO SHAPE FEDERAL STUDENT AID Rising cost of attendance Decline in availability of nonfederal sources of funding –Decline in family contribution –Decline in state and institutional funding due to budget constraints Increase in enrollment Expanded role of the federal government in student aid As borrowers increase the FSA continues to increase its budget Federal Student Aid: Plan Source: FSA Strategic Plan FY

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Parents are key contributors to college education, paying 37% of the overall cost –75% of parents believe paying for college should be a shared responsibility –13% say parents should be entirely responsible for costs –94% of parents intend to pay some of the costs of college for their child –72% planning to pay half or more of the cost Parents use various sources to fund the gap: –Parent’s current income –529 plans –401k loans and withdrawals –Other savings & investments Parents Want Shared Responsibility Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2011 –PLUS loans –Private loans –Home equity loans –Credit cards

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Commonly Used Gap Financing Tools Financing ToolAdvantages/MotivationDisadvantages 401(k) Withdrawal or Loan No credit check No lengthy application process Parent wants to help pay for college Tax penalties Lost investment growth Can severely reduce retirement income Home Equity Loan/Line of Credit Parent wants to help pay for college and control use of funds Tax benefits Equity may not be available in this economy Closing costs Foreclosure risk in financial emergency Credit Cards Easy, quick access to funds Parent wants to help pay for college Most expensive choice Limited funds (determined by credit limit) Long-term investments (Mutual Funds, Stocks, Bonds…) Not borrowed; does not have to be repaid Parent controls funds Lost investment growth May sell investments at a loss in current economy May involve penalties for withdrawing funds Cosign a Private Student Loan Parents willing to help out Can borrow up to the full cost of attendance Option to defer if needed Pricing lower than PLUS for well-qualified families (See next slide) Loan in student’s name, some parents may want to give the gift of a college Terms and cost can widely vary between Lenders

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. PLUS vs. Cosigning a Private Loan Parents want shared responsibility – and they have the option to take on some of the cost by borrowing a PLUS loan in their own name Cosigning a private student loan is another form of sharing the financial responsibility – most private loans offer cosigner release

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. PLUS vs. Cosigning a Private Loan (Cont) PLUSPrivate Student Loan* Responsibility to repayParent Parent and student on cosigned loan (most students need a cosigner) Can responsibility be transferred? NoYes, with cosigner release Interest rate7.9% fixedLIBOR +2.0% to %; variable Fee 4% - 1.5% is rebated if the first 12 payments are made on time 0% Benefits0.25% ACH 2% Smart Reward Repayment term10 – 25 years5-15 years Enrollment statusAt least half-timeIncludes less than half-time Consumer safeguardsDeath & disability loan forgiveness Tuition insurance

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Fixed interest rates appeal to consumers and seem to convey a sense of stability Consumers should be educated and gain an understanding that while a variable rate can go up, it can also go down. Over time, a customer will see movement in both directions, and the net effect over time may be fairly small Many families view gap funding through private loans as a short- term financing –Fixed rate loans are most beneficial for loans with a long lifetime –Variable rates, especially for well-qualified families, are more beneficial in a low interest rate environment Fixed rate loans can come at a premium to borrowers with good credit. We encourage schools and borrowers to evaluate both fixed and variable rate loan options Fixed vs. Variable Rate Private Loans

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. Questions

Confidential and proprietary information © Sallie Mae, Inc. All rights reserved. The information contained in this presentation is not comprehensive, is subject to constant change, and therefore should serve only as general, background information for further investigation and study related to the subject matter and the specific factual circumstances being considered or evaluated. Nothing in this presentation constitutes or is designed to constitute legal advice.