College Bound Personal Finance for College
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Transcript of College Bound Personal Finance for College
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College BoundPersonal Finance for College
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Take Stock
• Where are you now?– How long before college?– How much have you saved?– What is your current plan?– What resources are available?
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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
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Create a Budget - Income
• Allowance• My job or business• Odd jobs• Grants• Scholarships• Gifts• Loans
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Create a Budget - Expenses
• Money I owe• Savings• College savings• Giving• Gifts• Transportation• Food
• Clothing• Personal care• School supplies• Telephone• Recreation• Vacations
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College Costs Continue to Rise
• In 2008-09, total expenses for private 4-year college– $33,301– 439 percent increase from 1982 to 2007
• In 2008-09, total expenses for public 4-year college– $16,357 – In-State– $26,304 – Out of State
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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
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Options to Pay for College
• Grants• Loans• Campus based aid programs• Scholarships
• 529 plans• Pre-paid tuition plans• Coverdell plans• Roth IRA• Military coverage
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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
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Fill Out Your FAFSA
• Determine if you are a dependent• Get your PIN• Gather tax, income and asset information• Keep copies of everything
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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
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Federal Pell Grant
• Does not need to be repaid• Maximum award for 2008-2009 is $4,731• Grants depend on need, school costs and full-
vs. part-time status• For undergraduates only
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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
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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
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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
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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
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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
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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
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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
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Scholarships
• Apply through your high school or college offices
• Use library references• Be wary of internet sites that charge fees to
search for you
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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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College Bound