Transcript Estimated “Sticker Price” - Entering Fall Semester, 2012

Financial Aid 101:
Update from
State Education Assistance Authority
Davidson College - NCSEAA
Counselor Workshops
Fall 2014
Expected Full-Time Lifetime Earnings Relative to High School Graduates,
by Education Level
Sources: U.S. Census Bureau, 2012, Table PINC-03; calculations by the authors.
For detailed data, see: trends.collegeboard.org.
Education Pays 2013
Not only is income higher, job security is also enhanced by education.
Student aid is
good public
policy.
Median Earnings and Tax Payments of Full-Time Year-Round Workers
Ages 25 and Older, by Education Level, 2011
SOURCES: U.S. Census Bureau, 2012, Table PINC-03; Internal Revenue Service, 2010; Davis et al., 2013; calculations by the authors.
For detailed data, see: trends.collegeboard.org.
Education Pays 2013
And college education brings much more
than just jobs ...
For each of the Five Ways ED Pays ...
College works.
Cfnc.org/collegeworks
Not only is college worthwhile ...
College costs do not have to be paid all at once!
There are four ways to pay for this investment
• Saving in advance
• Paying from current income
• Borrowing – pay with future income
• Scholarships and Grants
9
Observation on the Four Ways to Pay
It is less expensive to save than to borrow
• Those who do not save have to borrow more
• Current income can cut borrowing costs as well
• Some level of sacrifice – at some point – will have to be
made (sooner, now, or later)
• Need-based grants and scholarships are designed to
provide the amount that the family and student cannot
reasonably afford over time
Most families use a combination of all saving, borrowing and
current income to pay their share of college expenses.
10
Paying for College: Saving, Borrowing, or
Current Income
Goal:
$50,000 to help pay college expenses
Monthly Payments
Interest Rate
Number of Years Paid
Total Payments
Save
$268
4%
12
$38,592
Borrow Current Income
$565
$1,042
6.4%
N/A
10
4
$67,800
$50,000
Interest Earned/Paid
$11,408
($17,854)
$0
If you save for 18 years instead of 12, monthly amount is $157 and the
total outlay is $33,912
Borrowing instead of saving costs almost $30,000!
11
Saving for College - 529 Plans
Save and pay for qualified higher education expenses
• Your assets grow free of federal and state income taxes
• Qualified withdrawals also free of federal & state income taxes
• Give up to $14,000 annually without gift tax
(hint to grandparents!)
• Still have control of your money, even after you give it away, by
changing beneficiary and/or investment choices
• Evaluate plans on web site savingforcollege.com
• Learn about North Carolina’s plan on CFNC.org
12
$1 .58 Billion Saved
128,236 Accounts
Average account
$12,148
Data as of 8/26/15
Paying from Current Income
• Student work
–
–
–
12 hours a week during school at $7.25 per hour = $2,610
40 hours a week in summer for 10 weeks = $2,900
pay over $5,000 of college costs
after taxes
• Parental monthly allowance
–
–
for meals, personal expenses, and transportation
expenses already in the family budget and also in total college costs
• Monthly payment plans offered by the college
–
–
–
–
Divide total bill by 10 or 12
Make installment payments with no interest
Usually offer term life insurance on parent
Consider using a 529 account as a personal monthly payment plan!
14
Borrowing Options – Federal Direct
Student Loan Program
• Stafford Loans for undergraduate students
–
–
–
–
–
Current interest rate for 2014-15 is fixed at 4.66%
Each year’s rate will be fixed, based on 10-Year Treasury + 2.05%
Dependent student can borrow
• $5,500 freshman year; $6,500 sophomore year
• $7,500 each for junior and senior years
Nearly all students can borrow … Income-based repayment is available
2 “flavors” – subsidized and unsubsidized – who pays in-school
interest?
• PLUS Loans for parents
–
–
–
Current interest rate is fixed 7.21%
Each year’s rate will be fixed, based on 10-Year Treasury + 4.6%
Borrow full cost of attendance minus other financial aid
15
Other Borrowing Options
You may want to explore alternatives to federal loans
“Alternative” or “private” education loans
•
Check interest rates
•
Check origination fees
•
Check terms and conditions and compare with federal
‒
‒
‒
Deferments and Forbearances
Death and Disability
Repayment Options such as Income Based Repayment
Home equity loans and other loans
Be wary when looking at non-federal loans.
16
What we constantly hear about college...
College costs too much, delivers too little [Orange County Register]
College Costs Out Of Control [Forbes]
America’s Trillion Dollar Student Loan Train Wreck [Sense on ¢ents]
Student Loan Debt: $1 Trillion and Counting [Forbes]
Student loan debt nearing $1 trillion threatens recovery [NY Daily News]
Real Questions:
– Lots of students with debts of $75,000? Really?
– Are students borrowing more or are more students
borrowing? Or both?
– What are average debt levels and how are they
changing?
– What is really happening regarding college costs and
financial aid in North Carolina?
Average Total Debt Levels of Bachelor’s Degree Recipients,
Public Four-Year Colleges and Universities in 2012 Dollars
SOURCE: The College Board, Trends in Student Aid 2013, Figure 10A.
For detailed data, see: trends.collegeboard.org.
Education Pays 2013
Average Total Debt Levels of Bachelor’s Degree Recipients,
Private Nonprofit Four-Year Colleges and Universities in
2012 Dollars
SOURCE: The College Board, Trends in Student Aid 2013, Figure 10B.
For detailed data, see: trends.collegeboard.org.
Education Pays 2013
Student Debt in North Carolina, 2010 Graduates
Proportion of Graduates With
Student Debt
100%
Average Debt Level at
Graduation
$30,000
90%
$25,000
80%
70%
$20,000
66%
60%
50%
$25,250
$20,959
$15,000
53%
40%
$10,000
30%
20%
$5,000
10%
0%
$0
NC
USA
NC
USA
Source: Project on Student Debt, Fall, 2011
Default rates for College Foundation loans are about 1/3 of the national average!
So, what should the headlines actually say?
• Student loans should be approached cautiously, but for the vast
majority they provide access to higher education.
• College costs a lot, but it is worth it, and financial aid lowers the
cost for those who need help.
• College Works!
Issue of borrowing for graduate school may be much more serious!
The fourth way to pay
23
Centralized State Grants
Education Lottery Scholarship (UNC + Community Colleges)
Community College Grant (Community Colleges)
UNC Need Based Grant (UNC)
NC Need Based Scholarship (Independent Colleges)
To apply, file FAFSA and list a participating college.
Consideration is automatic.
Numbers and Changes in NC FAFSA Filings
Academic Year
FAFSAs Filed
% Change
2005-2006
312,632
4.33%
2007-2008
338,919
5.93%
2008-2009
397,231
17.21%
2009-2010
499,800
25.82%
2010-2011
553,390
10.72%
2011-2012
581,302
5.04%
2012-2013
592,789
1.97%
2013-2014
580,932
-2.00%
All NC resident undergraduate filers w/o prior degree
Cumulative
+86%
Who
applies
for
aid?
Who Applies for Financial Aid?
Distribution of Centralized State Grants by Income
Dependent Students 2013-2014
3%
15%
38%
$0 - $30,000
$30-$60,000
$60-$90,000
Above $90,000
44%
How to learn more about financial aid in North Carolina
Advise your students:
1. Pay attention to deadlines
2. Consider the new IRS data match with FAFSA
–
–
May pay to wait a couple of weeks after filing taxes to file FAFSA
But do not miss college deadlines!
3. “Net Price Calculators” can be helpful tools
– Only as good as the data put into them
• Access all North Carolina colleges via www. CFNC.org
• Access out of state colleges via www.collegeboard.org
28
“What order should I do all of this?”
1. Complete PROFILE if required by earliest deadline
2. Apply for merit aid by appropriate deadlines
3. File federal taxes as early as feasible in 2015 so you can get
accurate data and use IRS Data Retrieval Tool
4. File FAFSA by earliest deadline of your colleges
5. Notify colleges of any special conditions
6. Hear from colleges and evaluate offers of aid
7. Notify colleges of outside scholarships
8. Apply for federal loans per directions of your colleges
9. Apply for non-federal loans if preferred
10. Do not forget federal tax benefits the next year
29
PLEASE BE ALERT TO SCHOLARSHIP SCAMS!
30
Contact information
Steven E. Brooks
Executive Director
State Education Assistance Authority
P.O. Box 14103
Research Triangle Park, NC 27109
919.248.4642
[email protected]
Questions and Comments?