Transcript Unit Personal Finance

Personal Finance
Higher Education- What are the costs &
benefits associated with Higher Education
• FASFA
• Grants
• COA- Cost of Attendance
• Subsidized Federal Stafford Loans
• Unsubsidized Federal Stafford Loans
• Parent Plus Loans
• For Profit education
• Predatory lending
Why higher education
• Unemployment rates are directly tied to your level of
education
• Studies consistently show that attending college adds to your
lifelong earnings
• Difference between a high school graduate and a
four-year degree—between $800,000 and $1 million
• People who have attended some college
• Report higher levels of job satisfaction
• Typically live healthier lifestyles
• Enjoy benefits such as insurance, paid vacation, a retirement plan,
etc.
Cost of Four-year College Tuition (averages)
1985
2009
One-year tuition, public
college or university
$2,784
$7,020
One-year total expenses,
public college or university
$7,674
$19,338
One-year tuition, private
college or university
$15,487
$39,028
Total cost for four years,
public college or university
$32,000
$80,000
Total cost for four years,
private college or university
$63,000
$160,000
Choosing
• There are more than 6,000 colleges to choose from in the United
States
• Before you start searching, think about your goals
• Some students already know they want to
• Learn a trade or enter a specific profession
• Obtain a degree, maybe in a specific field
• About 80% of college students
change their major at least once
• Narrow down your list of potential colleges by identifying the
characteristics important to you
• Factors some students consider
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Program or major you are considering
College size
Class size
Location or distance from home
Support programs
• Ultimately cost matters but
• Think about cost when making your final decision, not as much when
starting your search
• Consider your net out-of-pocket cost, not just
the sticker price
• Enter college costs graph
• Which college would cost you the most to attend?
• Sample private college—Willamette University-- $52,805
• Sample state college—University of Oregon--$24,075
• The answer seems obvious,
but it isn’t as simple as
comparing these numbers
• When you look at the costs listed on the previous slide, you
are looking at the college’s “sticker price”
• More formally known as “Cost of Attendance” (COA)
• Consists of direct and indirect costs
• Direct costs are paid to the college
• Tuition and fees
• Room and board, if living on campus
Paying for Higher Education
FASFA
• FAFSA = Free Application for Federal Student Aid
• Determines eligibility for
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Most federal financial aid programs
Many state financial aid programs
Much of the aid colleges award from their own funds
Some scholarship programs
• www.fasfa.ed.edu
• IT IS FREE, FREE, FREE!
Types of federal financial aid
• Need-based federal aid
• Pell Grant
• Work-study
• Perkins loan
• Subsidized Stafford loan
• Non-need-based
federal aid
• Unsubsidized Stafford
loan
• PLUS loan
• TEACH grant
What can it be Used for?
• Traditional colleges and Universities- OSU, UofO, Gfox
• Community colleges- Portland Community College, Mt. Hood
Community College
• For Profit vocational schools- ITTech, UTI, Devry
Subsidized and Unsubsidized Student Loans
• During the in-school deferment, the obligation to repay a federal education
loan is suspended while the borrower is enrolled at least half-time.
• Payments of principal and interest are deferred (delayed) until the end of
the grace period after graduation, when the borrower enters repayment on
the loan.
• To be eligible for any federal student aid program, the student must be:
• A U.S. citizen or eligible non-citizen
• Have received a high school diploma or the equivalent (e.g., GED)
• To be eligible for any federal student loan program, the student must be:
• Enrolled at least half-time in an accredited academic program
• Not be in default on any existing federal student loan
Subsidized Student Loans
• With subsidized loans, the federal government pays
the interest as it accrues.
• To receive subsidized Federal Stafford loans, the
student must:
• Have financial need as determined by the FAFSA
• Interest rate of 4.66% for the 2014-2015 academic
year
• Interest is subsidized while the borrower is in school
Subsidized Stafford Loans
undergraduate Grade Level
Subsidized Stafford Loan Annual Loan Limits
Freshman
$3,500
Sophomore
$4,500
Junior, Senior and Beyond
$5,500
Cumulative Limit
$23,000
Unsubsidized Loans
• With unsubsidized loans, the interest is capitalized (added to the loan
balance) if unpaid by the borrower as it accrues. This is in contrast
with a forbearance, where the interest is the responsibility of the
borrower on both subsidized and unsubsidized loans
• Interest rate of 4.66% for the 2014-2015 academic year
• Unsubsidized Loan Eligibility
• Unsubsidized student loans are not need-based funds. Because of
this, they are available to most federal aid recipients, regardless of
financial circumstances.
Unsubsidized Stafford Loans
undergraduate Grade
Level
Unsubsidized Stafford Loan Annual
Loan Limits
Dependent Student
Unsubsidized Stafford Loan Annual
Loan Limits
Independent Student
Freshman
$5,500
$9,500
Sophomore
$6,500
$10,500
Juniors, Seniors and Beyond
$7,500
$12,500
Cumulative Limit
$31,000
$57,500
Education debt dangers
• student loan debt has reached a new milestone, crossing the
$1.2 trillion mark — $1 trillion of that in federal student loan
debt.
• The average borrower will graduate $26,600 in the red.
• one in 10 graduates accumulate more than $40,000.
• National accreditation compared to regional accreditation
• ITT Vs OSU
• Regionally accredited schools are predominantly academically
oriented, non-profit institutions. Nationally accredited schools
are predominantly for-profit and offer vocational, career or
technical programs
Debt Averages
• Most debt is mortgage based (considered good debt) Cnn.com
• Student Loans are also considered good debt “IF” it does not
represent more than 20% of income post education
• The average American household with at least one credit card has
nearly $15,950 in credit-card debt (in 2012)
• 35% of Americans have debt in Collections (180 days past due)
• The 77 million Americans with debt in collections owe an average of
$5,200.
• That includes debt from credit card bills, child support, medical bills,
utility bills, parking tickets or membership fees.
MCSP
• MCSP stands for the Matched College Savings Program which
is a matched savings account (also known as an individual
development account, or IDA) for current and future
students to pursue post-secondary education. The MCSP
program is currently available to residents of Oregon and
Washington to attend participating educational institutions.
• http://mycollegesavings.org/
• Every dollar a student saves in MCSP is matched 5:1. Students are
able to set intermittent goals to draw down from their savings and
match once every twelve months, or at the end of their entire savings
period. Students must save for a minimum of six months; the
maximum savings period is thirty-six months.
• MCSP requires that students:
• Save at least $25 each month throughout their participation in the
program;
• Complete at least ten hours of financial education and training
specific to their educational level and goals;
• Create a goal-oriented educational and financial plan.
To qualify, students must:
• Be enrolled in a partner MCSP school;
• Reside in Oregon or Washington (for select Washington schools only);
• Come from a household whose net worth is below $20,000, excluding
a primary home and vehicle;
• Be within federal/state income guidelines.
• Young Americans (age 25-34) have the second highest rate of
bankruptcy after Americans 35-44
• The average consumer has an average of 3.5 credit cards
• This number has been greatly reduced during the economic downturn; prior
to 2008, Americans averaged 5.5 credit cards
• There are 178.6 million credit cardholders in the U.S.
• The average age to get a first credit card is now 20.8 year
• 26% of Americans admit to not paying their bills on time