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Financing Higher Education how to get it, and how to pay for it
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Slide 2
Who We Are
“Making college accessible and affordable for all Illinois students.”
- ISAC’s Mission Statement
KnowHow2GOIllinois.org
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Slide 3
DEAL OR NO DEALIs a college education a sound investment?
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Slide 4
Tuition & Fees
Room & Board
Transportation
Books & Supplies
Miscellaneous Living Expenses
Cost of Attendance (COA)
+
What are the costs?
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Slide 5
Source: The College Board, Trends in College Pricing 2009; Annual Survey of Colleges.
Cost of AttendanceAverage U.S. Undergraduate Budgets, 2009-2010
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Slide 6
College costs are rising, and that's a fact. In Illinois alone, tuition has averaged an almost 8% increase each year for the last 20 years.
Increase in cost
Source: Illinois Student Assistance Commission, Historical Illinois Tuition & Fees, 2010.
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Slide 7
Individuals with higher levels of education earn more and are more likely than others to be employed.
Is college worth the cost?
Source: Illinois Department of Employment Securities, Learn More Earn More, 2009.
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Slide 8
Job TrendsGrowth Rates
In Illinois, jobs that require higher education are growing faster than those that require less education.
Source: Illinois Department of Employment Securities, Learn More Earn More, 2009.
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Slide 9
COLLEGE EDUCATIONHow to get it
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Slide 10
Why do YOU want to go to college?
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Slide 11
There is no “one-size-fits-all”
• Who are you?Person
• How will you and your family pay?Price
• What will you study?Program
• Where will you live and learn?Place
• Who will help you learn and grow?People
Start with the end in mind
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Slide 12
It is in your best interest to know their roles
Know the Players
Admission Office
Financial Aid Office
Registrar
Bursar’s Office
Student Services
Student Financial Services
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Slide 13
Different types of degrees come from different types of colleges for different types of study.
• Certificates, Licensures & Registrations
• Undergraduate (i.e. Associate & Bachelor)
• Graduate (i.e. Master, Doctoral, Professional)
Refer to collegezone.com for a Map of Illinois Colleges.
Illinois Colleges and Universities
9
public universities on 12 campuses
48
community colleges
97
independent not-for-profit colleges and universities
35
independent for-profit institutions
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Slide 14
Myth 1. “I just won’t get a high quality education at a community college.”
Myth 2. “Financial aid is harder to get at a community college.”
Myth 3. “Transferring to a four-year college is very difficult to do after attending a community college.”
Myth 4. “Even if I am able to transfer to a four-year college, I’ll be unprepared for the rigors of tougher classes.”
Myth 5. “If my child attends a community college, he is likely to drop out.”
Myths Are Not Facts
Community College
Source: Bissonnette, Zac (2010). Debt Free U.
FACT. A good student can get a good education almost anywhere.
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Slide 15
Choose a Major That Makes Sense
Regional Wage and Employment Information
Source: Illinois Department of Employment Security, Economic Information and Analysis Division. Wage data for 2008Q3; Employment projections 2006-2016 series. Visit lmi.ides.state.il.us for more detailed information.
Recognize that your intelligence, motivation, passion, and choice of career path will have a far greater impact on your financial and life success than your choice of major.
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Slide 16
SHOW ME THE MONEYHow much can you afford, and where will you get the money?
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Slide 17 How will youpay for fouryears of college?
Financial Aid
Programs
Start at a Community
College
Employer Tuition
Reimbursement Plans
Tuition Payment
Plans
529 Savings & Prepaid
Tuition Programs
Loan Repayment Programs
Tax Credits
Start early…
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Slide 18
Note: Funds may be merit-based, need-based, or non need-based.
Financial aid helps make up the difference between what you can afford to pay and the cost of college.
What is Financial Aid?
gift aid
self-helpaid
Grants
Scholarships
Work-Study
Loans
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Slide 19
Financial aid comes from a variety of sources.Sources of Financial Aid
U.S. Department of Education’s Office of Federal Student Aid
Illinois Student Assistance
Commission
College
(institutional aid)
Private Sources
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Slide 20
Complete FAFSA
Receive and review the
Student Aid Report
Complete verification
process (if selected)
Receive and review
Award Letter
Respondto college
Complete all pending
processes
Renew FAFSA
every year
The Financial Aid Process
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Slide 21
Financial Aid Programs
Total = $14,518
The Big Three
* Maximum award for 2010-2011
Up to $4,968*
Up to $5,550*
Up to $4,000*
State of Illinois Monetary Award Program (MAP)
Federal Pell Grant
Federal Supplemental Education Opportunity Grant (FSEOG)
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Slide 22
Cost of
Attendance
(COA)
Expected
Family
Contribution
(EFC)
Financial
Need- =
How much aid can a student receive?Financial Need
Ask Questions
• What percentage of my financial need will you meet?
• What percentage of the financial aid offer will be made up of loans?
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Slide 23
“Schools are not car dealerships where you can get a better deal through a combination of bluff and bluster. It’s a much more formulaic process.”
- Zac Bissonnette, Debt-Free U (2010)
In Out
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Slide 24
Change Your Spending Habits
Pay for College Monthly• Tuition Payment Plans
(a small set-up fee may apply
Pay-As-You-Go Method• Hard-Work
• Short-Term Sacrifice
No Savings, No Loan, and No Financial Aid
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Slide 25 Tax CreditsThe IRS offers federal income tax credits to certain tax payers for higher education expenses.
See IRS Publication 970 at www.irs.gov
TAX CREDIT VALUE DETAILS
AmericanOpportunity Tax Credit
Up to $2,500 of the cost of tuition and related expenses
New! Specific to tax years 2009 and 2010 for the first 4 years of post-secondary education * Credit is part of an economic stimulus package that make provisions for cost of college textbooks, course materials, and tuition
Hope Up to $1,800 per eligible
student or $3,600 if the student is in a Midwestern disaster area
Available for 1st and 2nd year students enrolled at least half-time. It applies to tax year 2008 and earlier.
Lifetime Learning
Up to $2,000 for qualified expenses per return or $4,000 ifstudent is in a Midwestern disaster area
Applies to undergraduate, graduate, and professional degree students and for less-than half-time study.
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Slide 26
IT’S A BIG, BIG LOANHow to handle student loans after graduation
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A loan provides borrowed funds that you must repay with interest. It is a serious financial and legal obligation.
The federal government requires:
• Entrance Counseling
• Exit Counseling
What is a loan?
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Subsidized vs. Unsubsidized
Type Need or no need InterestSubsidized Stafford Loan
• A need-based loan • Interest on the loan is paid by the federal government while you are in school, during your grace period, and during authorized periods of deferment.
Unsubsidized Stafford Loan
• NOT a need-based loan • You are responsible for paying the interest on your loan from the date of disbursement
Within limits, the financial aid administrator of the college determines the amount for which you are eligible.
Know the differences
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Federal Loan Programs (for Undergraduates)
* FAFSA and Program Application(s) are Required
Type GraceRate
Perkins Subsidized 5%
Fixed
9
Months
Stafford (2010-2011)
Subsidized 4.5%
Fixed
6
Months
Unsubsidized 6.8%
fixed
6
Months
PLUS Credit-based 7.9%
fixed
Could be within first
60 days
Note: Stafford Loans (both subsidized and unsubsidized) for Graduate students have a fixed interest rate of 6.8% through 2013.
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Slide 30
Federal student loans have annual maximums that are based on:
Too many students borrow amounts that are likely to cause them difficulties, particularly if their earnings are either below average or unusually uneven over time.
How much can a student borrow?Borrowing Limits
grade level dependency status
aggregate limits
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Slide 31
Experts recommend that student loan payments do not exceed 8% of the work income in year one.
How much should a student borrow?Debt Burden
31For every $10,000 in income, no more than $800 in loan payments per year
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Slide 32
If the resulting percentage is:
Under 15% RELAX – The debt to income ratio is well within an acceptable range.
15%-20% BE CAUTIOUS – The borrower may want to reduce the current debt load.
Over 20% DANGER – The borrower is heavily indebted and should not consider taking additional debt!
One way to look at the relationship between monthly debt and income.
Debt to Income Ratio
Total Monthly
Debt Payments
Total Monthly
Net Income
Debt to Income Ratio
Source: Money Management International. Understanding Money and Credit.
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Slide 33
All federal student loan borrowers must complete and sign a Master Promissory Note (MPN), agreeing to repay:
As with any debt, you are responsible for paying your loan even if you:
Know What You’re Signing
did not complete school
cannot find a job in your field of
study
feel that you did not receive the
educational services you purchased
loan funds interest
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Slide 34
Typically, qualifying borrowers are those who commit to work for a specific amount of time in a field that has experienced a shortage of workers.
Repayment /Forgiveness Programs
ILLINOIS
Child Welfare Student Loan Forgiveness
Illinois Teachers and Child Care Providers Loan Repayment
Nurse Educator Loan Repayment
Public Interest Attorney Loan Repayment Assistance
Veterans' Home Nurse Loan Repayment
FEDERAL
Stafford Loan Forgiveness for Teachers
Child Care Provider Loan Forgiveness
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Slide 35
Default is defined as being 270 days delinquent or behind in loan payments.
Loans are not dischargeable in bankruptcy.
Avoid Default
PENALTIES
Default and penalties under the
law
CREDIT
RATING
An adverse credit rating that impacts future ability
to borrow
FINANCIAL
AID
Loss of eligibility for all federal
student aid programs
BENEFITS
Loss of deferment or forbearance
options
TAX
REFUNDS
federal and state tax
refunds to be withheld
INCOME
Garnishment of wages
CREDENTIALS
Loss of certain
professional licenses
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Slide 36
As a federal student loan borrower, you are entitled to the following:
Know Your Rights Loan Cancellation
Loan Forgiveness
Prepayment
Deferment
Forbearance
Loan Consolidation
Loan Sales
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Slide 37
• A defaulted student loan (270 days delinquent) will stay on your credit report for 10 years!
• Delinquencies (late payments) reduce your credit score
What is a credit score?
How does my student loan affect my credit?
• A number based on a statistical analysis of a person's credit files
• An indicator of the likelihood that a person will pay his or her debts
Equifax Trans Union Experian
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Slide 38
Your Credit History Matters
interest rate on loans
ability to purchase a home
or rent an apartment
employment ability to receive more credit
credit score
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Slide 39
DO’S AND DON'TSFactors to consider
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Slide 40
Debt adds up quickly, so keep an eye on it.
Graduate with Less Debt
Search for more scholarships
and grants
Work while attending school
Change your spending
habits
Consider transferring to a less-expensive
school
Start at a community
college
If you decide to stop your studies, withdraw properly
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Slide 41
Manage Your Debt
Be in the Know
How much do you owe?
When are payments
due?
Pay more than the required minimum
Seek rate discounts & repayment
benefits
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Deerfield 1755 Lake Cook Road Deerfield, IL 60015‐5209 Springfield 500 W. Monroe, 3rd Floor Springfield, IL 62701‐1876 Chicago James R. Thompson Center 100 W. Randolph, Suite 3‐200 Chicago, IL 60601‐3219 800.899.ISAC (4722) www.KnowHow2GOIllinois.org............................................................. KnowHow2GO Illinois
Free access to a wealth of financial aid and college planning information
www.collegezone.com .......................................................................... College Zone The official Web site of the Illinois Student Assistance Commission (ISAC)
Making college accessible and affordable for all Illinois students.
- ISAC’s Mission Statement
