Transcript Presentation Title

HOW AMERICA PAYS FOR COLLEGE
Jill Gosse, Senior Account Executive
SPRING 2014
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
Agenda
This presentation is an overview of trends in
the industry and how families are paying for
college
►
Total Cost of Education
►
Is it Worth It?
►
How America Pays for College
►
Best Practices for Counseling Families
2
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Total Cost of Education
3
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College Costs Continue to Increase
Average Published Charges for Undergraduates, AY 2012-13
SOURCE: College Board Trends in College Pricing 2012.
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
4
Trends Likely to Shape Student Aid
Rising cost of attendance
► Decline in availability of non-federal sources
of funding
►
– Decline in family contribution
– Decline in state and institutional funding due to
budget constraints
Increase in enrollment
► Changes to PLUS loan eligibility
► Limited number of providers
►
5
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Legislative / Regulatory Issues
►
Higher Education Act (HEA) up for reauthorization
– No official action expected
– Extended on year-by-year basis
– 2013 hearings and proposals
►
Sequestration
– Increase in fees on Stafford Loans to 1.072% and PLUS Loans
to 4.288%
– Reduced funding for other higher education programs funded
from non-exempt accounts, including federal work-study, SEOG,
TRIO, GEAR UP, and other smaller programs.
►
Federal loan interest rates
– Rates reduced July 1, 2013, looks like over 1% increase in ‘14
►
Pell Grant shortfall
– FY 2014 appropriations must find $6B to $9B to fund
– Pell Grants at current levels for AY 14-15
– 10-year shortfall is nearly $80B
6
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Total Education Spend
Total Postsecondary Education Spend
$550
20.4
20.0
$420
$391
Total Education Spend ($B)
$400
$6.0
$430
$438
$6.4
$7.2
18.0
16.0
$6.8
$355
$10.3
$175
$180
14.0
$191
$167
$300
$250
22.0
20.6
19.1
$450
$350
21.0
12.0
$168
10.0
$20
$21
$21
$17
$200
$12
$98
$150
8.0
$111
$113
$116
Total Fall Enrollment ($MM)
$500
21.0
1
6.0
$77
$100
$50
4.0
$88
$102
$108
$110
$103
08-09
09-10
10-11
11-12
*12-13
2.0
$0
0.0
State/ Federal Loans
Grants
2
Ed. Tax Benefit/ Work Study
Family Contribution
Private Student Loans
3
Enrollment
4
1) Total education spend includes “all-in” cost of attendance (e.g., in AY09-10, total spend of $387B was comprised of $203B in tuition and fees, $122B in room and board, $17B in books and supplies, and $45B in
transportation/other costs). 2) Grants include federal, state, institutional, and private/employer. 3) Includes private loans based on MeasureOne data. 4) Fall enrollment – degree granting - AY1213 estimated.
*Sources: Department of Education, College Board, McKinsey & Company team analysis, MeasureOne, National Student Clearinghouse
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
7
Proportion using Federal and Private Student Loans
Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
8
Average Individual Indebtedness
Average outstanding student
loan balance per borrower =
$23,300.
Median balance = $12,800
10% owe more than $ 54,000
3% owe more than $100,000
Source: Federal Reserve Bank of New York
9
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The Pell Grant Shortfall
10
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Is it Worth It?
11
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Education Pays

31% of the total population ages 25 and older held a Bachelor’s degree or higher, 43% had a high
school degree or less

The unemployment rate for individuals 25 and older with at least a bachelor’s degree averaged
4.0%, compared with an average unemployment rate of 6.8% for all individuals 25 and older.
Source: Bureau of Labor Statistics, Current Population Survey 2012
Data is for age 25 and over, earnings are for full-time wage and salary workers
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
12
Recent Research Reinforces Value of College Degree:
College Degree Recipients Weather Recession Better Than Less Educated
Source: Georgetown Public Policy Institute, Center on Education and the Workforce , “The College Advantage:
Weathering the Economic Storm,”
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13
2008
2009
2010
2011
2012
2013
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Strongly Agree
Source: “How America Pays for College,” August 2013
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An Investment in
The Future
Somewhat Agree
Degree More
Important Now
2008*
2009*
2010
2011
2012
2013
Rather Borrow
Than Not Go
2008
2009
2010
2011
2012
2013
Willing to Stretch
Financially
2008
2009
2010
2011
2012
2013
Agreement with Value of College, Year-Over-Year
*Not asked in 2008 or 2009
14
Recent Graduates & The Great Recession
Of those who graduated between 2006 -2011
Progress Students Have Made
Paying Off Debt
Confidence in the Next 10 Years That…
Sources: The John J. Heldrich Center for Workforce Development Chasing the American Dream: Recent College Graduates and the Great Recession, May 2012
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
15
How Well Do Students Correlate Amount Borrowed and Repayment?
The Future?
Student Estimates of Monthly Loan Repayment
2,000
1,800
Expected Monthly Payment
1,600
1,400
1,200
1,000
800
Actual Monthly Cost
600
400
200
0
0
20000
40000
60000
80000
100000
120000
Total Expected Borrowed Amount
16
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How America Pays for College
17
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College Savings
College savings reach new high in 2012
Total Assets in State-Sponsored Section 529 Savings Plans ($ Billions)
Note: Values for 1999 through 2011 are as of December 31. Value for 2012 is as of June 30.
SOURCE: College Board Trends in Student Aid 2012. Data provided by College Savings Plans Network (www.collegesavings.org).
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
18
Role of Savings
►
►
►
►
17% of families used
parent savings from
dedicated college savings
plans/529s
5% used retirement
savings
11% used parent savings
from other types of
investments
27% of families used
student savings
Parents of Children Under 18
Saving for College
Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
Not
Saving
for
College
50%
Saving
for
College
50%
19
Differences in Affordable Actions Taken by School Type
90%
83%
80%
70%
60%
50%
48%
47%
41%
34%
40%
30%
32%
34%
25%
23%
20%
24%
23%
26%
16%
12%
10%
14%
10%
10%
7%
0%
Live at home
Roommate
Transfer
4-yr private
Part time
4-yr public
SOURCE: Sallie Mae (with Ipsos Public Affairs): How America Pays for College, 2013.
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
2-yr public
Accelerate
Change major
20
Affordable Actions
Student Reduced Spending
60%
Living At Home
57%
Parent Reduced Spending
48%
Student Work More
47%
Tax Credits/ Deduc.
41%
Add Roommate**
35%
Accelerate
27%
Early Loan Payments
22%
Parent Work More
20%
Changed Majors
19%
Part Time
15%
Transfer to Less Expensive School*
13%
Military
4%
0%
**Among students not living at home
*Among non-freshmen
10%
20%
30%
40%
50%
Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
60%
70%
21
Cumulative Elimination of Colleges Based on Cost, Year-Over-Year
Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013
22
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Completion of FAFSA by grade level, year-over year
100%
91%
90%
80%
81%
80%
76%
74%
72%
70%
88%
86%
82%
80%
82%
83%
82%
78%
76% 77%
74% 74%
75%
83%
80%
73%
71%
81%
78%
75%
78%
72%
65%
61%
60%
50%
40%
30%
20%
10%
0%
Total
Freshman
2008
2009
Sophomore
2010
Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
2011
Junior
2012
Senior
2013
23
FAFSA Trends
►
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
SOURCE: Sallie Mae (with Ipsos Public Affairs): How America Pays for College,
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
24
How the Typical Family Pays for College, Funding Source
Share
Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
25
Use of Grants and Scholarships, by School Type
70%
$16,000
64%
Percent using source
48%
40%
38%
40%
30%
26%
20%
10%
Average amount used among students with source
52%
50%
$13,709
$14,000
60%
$11,786
$12,000
$10,000
$8,000
$6,000
$4,000
$5,450
$5,903
$5,696
$3,766
$2,000
0%
$2-yr public
Grants
4-yr public
4-yr private
Scholarships
Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
2-yr public
Grants
4-yr public
4-yr private
Scholarships
26
Best Practices for Counseling Families
27
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
Scholarship Search – Best Practices
►
Families should look for resources that offer:
– FREE, easy-to-use database
– Calendar listing scholarships by deadline
– Filtering capabilities
• By name
• By deadline
• By award amount
– Rating of scholarships
– Adjustable settings
28
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
Scholarship Tools
►
Sallie Mae’s free scholarship search provides
access to more than 3 million scholarships
– SallieMae.com/ScholarshipSearch
►
Fastweb.com features over 1.5 million
scholarships
– Fastweb.com/College-Scholarships
►
Private Scholarship Resources
–
–
–
–
–
KFC Scholarship
Coca-Cola Scholarship
Ronald McDonald Scholarship
Scholarships for Women
Wal-Mart Scholarship
–
–
–
–
African American Scholarships
Target Scholarship Application
Scholarship America
ScholarshipAmerica.org
29
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
Parents Want Shared Responsibility
►
Parents are key contributors to college education, paying 36%
of the overall cost:
– 73% of parents believe paying for college should be a shared
responsibility
– 13% say parents should be entirely responsible for costs
– 42% of parents do not want the loan in their name
►
The College Savings Foundation’s 2011 Survey of Parents
found that:
– 94% of parents intend to pay some of the costs of college for
their child
– 72% are planning to pay half or more of the cost
►
Parents use various sources to fund the gap:
–
–
–
–
Parent’s current income
529 plans
401(k) loans and withdrawals
Other savings & investments
–
–
–
–
PLUS Loans
Private Loans
Home Equity Loans
Credit Cards
SOURCES: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2012; College Savings Foundation 2012 Survey of Parents; Rockbridge 2012.
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
30
Gap Financing Tips
►
Families should understand the total cost of funding and should
consider a package of gap financing options and not limit
themselves to just one
– Cash, Tuition Payment Plans, PLUS Loans and Private Loans
►
Families should only borrow what they need
►
Responsible borrowing: A creditworthy borrower has good or
excellent credit, an ability to repay the loan and the capacity to take
on the debt
– The Ability to Pay: A comparison of the applicant’s total debt to their total
income and a review of their outstanding student loan indebtedness
– Stability: How long they have been at their current address, job stability,
and established credit history
– Willingness to Pay: Credit score and payment history on other types
of credit
31
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
Tuition Payment Plans
►
►
Most colleges and universities offer tuition payment
plans
52% of families report using parents’ current income to
pay for college – many of them are using a tuition
payment plan
►
Allows parents and students to pay their tuition in
manageable monthly payments using their income
►
Tuition payment plans help attract and retain students
by giving them an additional funding solution
►
Provides an interest free funding option
32
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.
Private Loan Trends
►
►
Some lenders are offering fixed rates as good or better than
PLUS loans to highly qualified graduate students
Schools are becoming concerned about debt in the student’s
name
►
Death and disability discharge
►
Families are becoming concerned about using 401K to pay for
their child’s education
►
Some lenders have programs available for cohorts of students
not eligible for federal programs
– LTHT students
– Prior balances
33
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Questions
34
Confidential and proprietary information © 2013 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.
For school use only. Not to be distributed to students.
MKT8043
35
Confidential and proprietary information © 2013 Sallie Mae, Inc. All rights reserved.