Saving for College: A Critical Step Toward College

Affordability

• College Savings Landscape and Current Research

• Our college savings work • What have we done as individual organizations?

• Our collaboration• What has collaborating allowed us to do?

• Best practices

• Q&A

Agenda

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Student Loans in the Headlines• “Student-loan debt tops $1 trillion” – WSJ, 3/22/12

• “Over 60 and still paying student loans” – Money MSN, 4/5/12

• “A generation hobbled by the soaring cost of college” – NYT, 5/12/12

• “Student loans have basically ruined my life” – Yahoo, 6/27/12

• “Student loan debt is worse than it seems” – CBS News, 9/5/12

• “Student loan debt hits record high, study shows” –NBC News, 10/18/12

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Facts and Figures> Of the private, not-for-profit 4 year colleges with the highest

tuition costs – 70 percent are in New England and the Mid-Atlantic area

> Of the private, not-for-profit 4 year colleges with the highest net prices – 55 percent are in New England and the Mid-Atlantic area

> Of the 13 states with the highest average student debt, half are the 6 states in New England

Sources: US Department of Education, Project on Student Debt, 2012

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

States with the highest average student debt

Source: Project on Student Debt, 2012

Participation in states’ collegesavings plans has increased rapidly.

BUT• Government Accountability Office Report on 529 college savings plans found that a

small percentage of families nationwide save in 529 plans. The families who save in 529 plans have median income 3 times that of non savers and most of these parents have gone to college

• Fidelity College Savings Indicator Study 2012 found that parents overestimate the starting salaries of their students.

• How America Saves for College (2013) Sallie Mae Study found that parents’ anticipated savings don’t match actual savings nor meet with reality of college costs

College Savings Landscape

• “Youth who expect to graduate from a four-year college and have a (college savings) account are about 7 times more likely to attend college than youth who expect to go to college but do not have an account.” Elliot, W. and Beverly, S. (2011)

• While assets are positively related to college attendance, completion, and success, account ownership alone seems to be a very large predictor of success.

• Behaviorally there is evidence that saving for college may focus attention of parents and children on postsecondary education affecting outlook, orientations, course selection, and discipline.

Research that Motivates

• MEFA is a not-for-profit state authority that works to make higher education more accessible and affordable through community education programs, college savings plans and low-cost financing options.

• Created the U.Fund® and the U.Plan® college savings plans and has offered affordable and fixed interest rates college loans for 30 years.

• MEFA has assisted hundreds of thousands of families to finance a college education.

About MEFA

Mayor Menino at a Start U Reading Event

• MEFA reaches families of young children in a number of ways to emphasize the importance of saving for college early.

› Start U.Reading› Art Competition› Dreams Tour› Museums and Road

Races

The Early Years: Outreach Initiatives

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MEFA U.Fund College Investing Plan

•How it works:> Save for qualified higher education expenses such as

tuition, fees, room, board, books, supplies and equipment.> Savings can be used at any accredited college or university nation wide

> Minimum Initial Investment - $50 lump sum or $15/ monthly automatic investments

> Combined Account Maximum - $300,000

> Annual Account Maintenance Fee - No Fee

> Multiple investment options (active management; indexed portfolio; individual allocation portfolios)

> FDIC insured option

• Enroll online at www.fidelity.com/ufund or by calling 1.800.544.2776 to get started.

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Established in 1999

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MEFA U.Plan Prepaid Tuition Program

•How it works:> Prepay up to 100% of college tuition and

mandatory fees 80 Massachusetts public and private colleges and universities

> Minimum to get started is $300 to purchase a tuition certificate.

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> Money saved in the U.Plan grows tax free for Massachusetts residents.> If a family does not use the money saved towards school, they could always

get it back with interest accrued at CPI over the years.> U.Plan Tuition Certificates represent interest in Commonwealth General

Obligation Bonds and are backed by the full faith and credit of the Commonwealth of Massachusetts; not subject to market fluctuation.

> Account owner has full control of the account and over the beneficiary assignment

Annual enrollment period begins May 1st - June 30th each year. Enrollment kit may be accessed online at www.mefa.org/uplan during the enrollment

period or by calling 1.800.449.MEFA (6332)

Established in 1995

Our Work: FUEL

• Boston – based private nonprofit• College planning and saving program for parents• Reach parents through collaborations with community

organizations• Boston, Chelsea, and Lynn

Families United in Educational Leadership

FUEL families

Boston

ChelseaLynn $362,425

Our Work: uAspire’s Mission & Vision

uAspire works to ensure that all young people have the financial information and resources necessary to find an affordable path to – and

through – a postsecondary education

College cost is a barrier that every college-ready young person from a low and moderate income family must

overcome.

Our Work: uAspire Program Model

PREPAREFight the misperceptions of college costs that derail students early in their high school careers

7th-11th

Grade

AFFORDGuide students through the

financial aid process, securing financial aid and enabling

good decision-making

12th

Grade

SUCCEEDSupport students throughout their

postsecondary career, helping them reach their goal of college graduation

College

EARLY COLLEGE PLANNING INITIATIVE (ECPI)*

U.S. Department of Education College Savings Research Project (3 year study)

Working with parents of low and moderate income 8th and 9th graders within the Boston Public Schools

Core question: How can we support families to prepare for college financing earlier?

*Project funded through grants from the United States Department of Education and the Bill and Melinda Gates Foundation

Collaborative Work: MEFA & uAspire

Provide general college

planning info?

Provide general info

AND introduce the 529 plan?

Provide general info

AND introduce the 529

plan AND provide the

$50uAspire+MEFA uAspire+MEFA uAspire

Collaborative Work: Compass, MEFA & FUEL

• Early messaging to students and families• Integrate savings into current access/success

programming• Collaborate: partner with your state’s 529

provider• Make savings automatic and provide incentives• Optimize other savings opportunities• Walk through process step-by-step• Simplify the overall process• Build trust and strong relationships with families• Provide ongoing coaching support

Best Practices

• Age level: elementary and middle school audiences

• Content: combine savings information for parents with college cost information

• Sticker price• Scholarship information

• Benefits: early messaging allows you to break down myths and misconceptions early

Best Practices: Early messaging

• uAspire program model evolution• Where and when we integrate savings

Best Practices: Integrate savings

• Partner with your state’s 529 provider• Widespread agreement about the importance of financial education

about 529 plans and about college savings in general as it relates to receiving financial aid and paying for college.

• States have generally structured the investment options to benefit participants from all economic backgrounds within their state.

• Low contributions; less risky investments• Convenient enrollment procedures and contribution options-payroll

deduction, electronic fund transfers, and online contributions and enrollment.

• Local college access organizations; schools• Visits, panel discussions, college fairs• Financial aid nights• Access personnel, guidance counselors

Best Practices: Collaborate

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Best Practices: Make Savings “Automatic” & Use Incentives

Source: Inspire Compass Working Capital Survey, n=31

0%

20%

40%

60%

80%

100%

Perc

ento

fRes

pond

ents

Workshop Attendees

Presentations from MEFA andFidelity

$100 incentive

Open an account at the workshop

Sign up with direct deposit

Q: Which aspect of the workshop had the biggest impact on your decision to open an account? (Choose one)

Best Practices: Optimize Other ResourcesIndividual Development Account (IDA) programs - matched savings accounts for working, low-income families (www.idanetwork.org)

Family Self-Sufficiency Programs – an employment and savings program for families in Section 8 or public housing.

Tax-Time – encourage families to save part of their Earned Income Tax Credit (EITC)

Best Practices: Walk through paperwork

• Example - FUEL formats application for uploading personal information, and adds helpful hints

Regardless of how you promote saving for college, if you are successful and parents begin saving, you can encourage them to keep it going through financial coaching strategies.

• Fielding questions, referring to the appropriate agency• Navigating account statements• Workshops

• Strategies• Vocabulary• Using funds• Applying for financial aid

Best Practices: Provide Ongoing Support

Rosa and Kassandra

• What have you and/or your institution done to outreach about savings?

• Collaborated with other schools? Community Based Organization?

• What’s worked for you?

• If you have not incorporated savings into outreach or financial aid work, how could you include this?

• What key messages (about savings) have not been mentioned today that you would like your applicants/enrollees to know?

Best Practices: Your Turn

For more information:

• Julie Shields-Rutyna MEFA jshields-rutyna@mefa.org

• Michelle Murphy FUEL m.murphy@fuelaccounts.org

• Claire Dennison uAspire claired@uaspireusa.org

Question & Answer