Reducing The Cost Of College Parents

College Funding

“The Best Kept Secret in America”

How-to-Legally Arrange Your Financial Situation To Pay For College With As Little Out Of

Pocket As Possible!

Parent’s Workshop

Nannette Jodar

College Resource Advisor

Watermark College Planning Resources, LLC

4809 E. Thistle Landing Drive, Suite 100

Phoenix, AZ 85044

888-984-8882www.watermarkcollegeplanning.com

[Locations: Phoenix Metro Area, Orange County Calif., Milwaukee Metro Area]

Teens Experiencing High Anxiety Over Nation’s Economy and Family Finances

Teens Tighten Personal Purse Strings

• 85% of teens polled have reduced their personal spending in the past 12 months but 29% say they haven’t saved any money toward their college education

• 78% who have reduced their personal spending have cut back on entertainment expenses such as movies, sporting events and concerts

• 24% say the item they are least willing to give up in order to save money is their cell phone, followed by 14% who don’t want to scrimp on transportation expenses such as gas or bus and train fare.

Teens Experiencing High Anxiety Over Nation’s Economy and Family Finances

Recession Hits Home

• 25% report that at least one of their parents has been laid off in the past year

• 59% say their stress or anxiety level about their family’s finances is high or very high

• 43% say their stress or anxiety level about the nation’s economy is high or very high

• 70% of teens surveyed say their parents have had a serious talk with them about the state of the economy and how it affects their family

College Costs a Big Concern

• 37% of the students have no idea how much money their parents have saved toward their college education.

• 29% indicate their parents have saved no money at all toward their college costs.

• 37% of students report they will now be expected to pick up a larger portion of their college expenses but 26% say they have no idea how they will pay for college.

•45% say they will rely more on loans than they had initially planned.

• 32% of high school students have saved less than $1,000 toward college.

• 23% report having saved between $1,000 and $5,000 toward their education.

Annual College Costs Per Child

• Average public university - $13,589for in-state student

• Average private university - $32,307• Elite private universities - over $48,000

and…this is paid with after-tax dollars!The cost of college create the most

expensive years of a family’s life-cycle.

College Plans Take a Detour• Teens are changing their college choices in response to economic conditions

with nearly 53% indicating they had hoped to attend a private college but are now limiting their choices to public institutions.

• 39% are shifting away from high-priced private schools to less expensive private options.

• 33% who intended to live on-campus have changed plans in the past 12 months and now expect to live at home while attending college.

• 27% say they have changed their plans in the past year and now will start their degrees at local two-year community colleges instead of four-year-schools.

• 21% plan to defer college and work for a year in order to save money toward tuition

• 8% report that they have decided within the past year to enlist in the military as a way to help pay for college

• 5% say their plans to attend college are on hold and they will seek full-time employment after high school

• 98% of the teens polled think that a college education is a worthwhile investment with 62% indicating that preparing for a career or profession is the most important reason to go to college.

Higher Education in America

• Graduate and professional degrees

are rising (i.e. law, medicine,etc.)

• “More you learn – the more you earn”.

High school diploma - $595Some college (no degree) - $674 Associate degree (2 year) - $721

Bachelor’s degree - $962Master’s degree - $1,140Doctorial Degree - $1,441

Source: U.S. Department of Education and Labor, and the College Board

Who Goes To College?

• 62-69% of high school grads go to some form of postsecondary education

•80% middle/junior high school students project college is in their future

•Over half of those entering college (52%) will earn a degree within 5 years

•More than half of the students are on some form of financial assistance! At some institutions, as many as two/thirds (i.e., scholarships, grants, work study, loans, etc.)

Source: U.S. Department of Education and Labor, ACT and HERI

Who Goes To College? (continued..)

•Freshman popular majors are:

Business 17%

Professional 14%

Arts & Humanities 14%

Biological and Physical Sciences 13%

Social Sciences 12 %

Engineering 9%

Education 8%

Other 8%

Undecided 6%

Source: U.S. Department of Education and Labor, ACT and HERI

How Colleges Admit Students

•Grades in college preparatory classes

•Admission and related test scores

•Grades in general education courses

•Interview / essay

•Extracurricular activity / service learning

•Teacher / counselor recommendations

•Special talent and characteristics

•Other factors

Three Basic Questions

1. Academic Fit – Is the college the RIGHT place to learn?

2. Environmental Fit – Is the college the RIGHT place to live?

3. Affordability – Is the cost affordable and can the college provide a reasonable financial aid package?

Deciding Where To Apply

1. Colleges that meet student criteria.

2. Student exploration

3. Balance of “Safety” schools and “Reach” schools

4. Admissibility factor – Colleges where student’s application will be competitive.

5. Colleges where cost and financial aid package will work.

Ten Most Common College Admission Mistakes

1. Miss the boat academically2. Ignore great resources3. Follow the pack4. Fail to take a test drive5. Believe there is only one “right”

college6. Make price a priority7. Essay and/or interview bombs8. Allow dog to eat the application9. Fail to manage time10. Ignore counseling allies

Current College Freshman Profile

• More than eight in ten (87%) are enrolled in their first or second choice college.

• Reasons cited in selecting their college:– Academic reputation 65%

– Graduates get good jobs 54%

– Financial Aid offer 43%

– Campus visit 41%

– Cost of attending 40%

– Right size 39%

– Social Life reputation 38%

Regarding college financing, nearly 2/3 (64%) expressed “some” or “major” concern about having sufficient funds to complete college.

Source: American College Freshman Survey, Higher Education Research Institute, UCLA, 2009

Parents’ Complex Problems

Desire to provide a good education

versusWiping out savings

and retirement and/or

Putting debt on the home or business

How Are You Going To Pay That?

• Savings?• Borrow?• Scholarship?• Go To A Lesser School?• Not Go At All?

College $ Spent = Retirement $ Lost Forever

College Financial Facts

• Many families qualify for financial aid even though they think they earn too much money!

• Colleges are in competition for students

• Colleges have empty seats to fill• Colleges will pay for good students• 80% of students attending private

colleges receive financial aid

Total College Costs

• Tuition and fees• Books and supplies• Room and board (on/off-campus living)• Personal expenses

– Clothing, insurance, medical, recreation, etc.

• Transportation (daily commuting and roundtrip travel during breaks)

• Cost of a computer

How Much Aid Is Available?

Federal Loans 46.7%

Collegiate Resources 19.8%

Federal Grants 11.8%

Tuition Tax Grants 7.7%

State Grants 6.5%

VA 2.9%

Employer-Paid Tuition 3.6%

Private Sources 1.0%

Based on a "needs analysis" formula

EXAMPLE:

Total College Costs $20,000

Expected Family Contribution (EFC) – 8,000

Financial Need $12,000

Concept of Financial Need

EFC is the Total of:

Student's Contribution

+

Parents' Contribution

=

Expected Family Contribution

Financial Aid is Based on:

• Merit– Academic– Athletic– Other

• Financial need– Family income and assets

Number in College

One in College Two in College

College cost perstudent

$15,000 $15,000

“Expected FamilyContribution”*

- $ 8,000 - $ 4,000

Financial need perstudent

$ 7,000 $11,000

*Assumes student contribution to the EFC is zero

Sources of Financial Aid

Where To Get Money!

1. Federal Government– Pell Grants– SEOG Grants– College Work/Study– Subsidized and Unsubsidized Stafford

Loans– Perkins Loans– PLUS Loans and SLS Loans

Where To Get Money!

1. Federal Government

2. State Government– Special programs for in-state residents.– Teachers, health professionals, minorities,

etc.– Contact state higher education agency for

more information.

Where To Get Money!

1. Federal Government

2. State Government

3. Colleges and Universities– Private universities have endowment funds,

outside of federal and state funds.– Awarded on a first come, first served basis.– Give preferential packaging to student who is

in the top 25% of applicants.

Where To Get Money!

1. Federal Government

2. State Government

3. Colleges and Universities

4. Private Sources– Are private scholarship services worth it?– Only 1% or less of all aid.– Don’t spend your time looking for crumbs!

Sources of Financial Aid

• Third-party scholarships are only 1% of total available financial aid

• Beware of scholarship scam companies

• Over 90% of all financial aid is from:– Federal and State Governments– Colleges

Dates of Assessment

• Income as of December 31 of preceding calendar year

• Assets at market value as of date of signing the financial aid form application

Methodologies Used to Determine EFC

• Federal formula• Institutional formula

Federal Methodology

• Used by all accredited public and private colleges and universities

• Used to disburse Federal financial aid funds

• FAFSA form is used to collect the information

Institutional Methodology

• Used by some private colleges to distribute endowment funds

• Assesses the home, family farm equity, and family business

• Allows for excessive non-reimbursed medical costs

• PROFILE® form is used to gather the information

• FAFSA

Meeting a Student’s Needs

• Choose your college wisely, because:– Not all will meet 100% of need

• Private colleges generally:– Meet a higher percentage of need– Award a higher percentage of gift aid

• Many students can attend a private college for the same cost as a public university!

Which Colleges Give The Most Money?

• Percentage of NEED MET.• Percentage of GIFT AID.

– Some schools meet most needs in FREE money, while others give mostly loans.

• Percentage of SELF-HELP AID.– Some schools meet most or all of needs in work/study or loans.

(You do not want to find out in June that they met most of your need in loans!)

• Know BEFORE applying!

Which Colleges Give The Most Money?

• Percentages of Need Met.– Some schools meet 100% of Need– Others only meet 30 - 60%– [COA – EFC = NEED]– COA: ($20K) – EFC: ($10K) = NEED ($10K)

• 10K – 60% = $ 4,000 + $10,000 = $14,000 your new EFC

You MUST KNOW these statistics BEFORE APPLYING!

Case StudySchool A:Cost - $30,000EFC - $10,000Need - $20,000

School A:Meets 100% need.Gift aid - 80%Self help - 20%

School B:Cost - $20,000EFC - $10,000Need - $10,000

School B:Meets 60% need = $6,000 ($4,000 short!)Gift aid - 50%Self help - 50%

What you actually pay at each school:

School A:Total EFC = $10,000Total Gift = $16,000Total Self = $4,000

School B:EFC = $10,000+ Unmet Need = $4,000Total EFC = $14,000 Total Gift = $3,000

Total Self = $3,000 Family actually pays $4,000 more out of pocket to send their child to the “cheaper” school! Don’t make the huge mistake of picking schools based on cost of attendance only! Your Family may not get the best education…because you didn’t know the inside secrets of college funding!

PUBLIC vs. PRIVATE COLLEGE

Public College Private College

Total Cost $16,000 Total Cost $36,000

EFC - 6,000 EFC - 6,000

NEED $10,000 NEED $30,000

% Need Met 80% % Need Met 90%

Financial Aid Eligibility $8,000 Financial Aid Eligibility $27,000

Gift Aid (20%) $ 1,600 Gift Aid (70%) $18,900

Self-Help (80%) $ 6,400 Self-Help (30%) $8,100

“Out-of-Pocket Cost” (Total Cost – Financial Aid Eligibility)

$ 8,000 “Out-of-Pocket Cost” (Total Cost – Financial Aid Eligibility

$ 9,000

“True Cost” (Total Cost – Gift Aid)

$ 14,000 “True Cost” (Total Cost – Gift Aid)

$17,100

---------Cost of Attendance----------- ------------Family Resources-------------Tuition & fees: $32,675 Parent Contribution: $1,763Room/Board: $11,595 Student Contribution: $ -0-Travel: $ 1,385 Financing / Other Cont: $9,871 Other: $ 2,250 Total Resources: $11,634 Total COA: $47,905

----------------Summary----------------Cost of Attendance: $47,905Total Resources: $11,634 Total Awarded: $36,271

AWARDS TOTALColumbia University Grant $28,721Federal College Work Study $ 1,975Federal Pell Grant $ 550Federal Perkins Loan $ 1,900Federal SEOG $ 500Federal Stafford Loan $ 2,625

**TOTAL** $36,271

Columbia University

Emory UniversityEXPENSES

Tuition & fees 32,095.00Living expenses 10,665.00Books & supplies 1,280.00Travel 1,305.00

Total expenses 45,345.00

AWARDS & RESOURCES Total

Emory College Grant 3,565.00Federal Stafford Loan 2,625.00 Federal Work-study 1,375.00 Estimated Pell Grant 750.00 Family Share Of Expenses 37,030.00Total 45,345.00

Estimated Expenses Estimated Family ResourcesTuition $ 31,105.00 Parental Contribution $ 1,000.00Room & Board $ 10,465.00 Student’s Savings & Assets $ .00Books & Supplies $ 1,470.00 Student’s Non-Academic Yr Earnings $ 1,500.00Personal Expenses $ 2,070.00 Other Resources $ .00Transportation $ 1,110.00 Total Family Contribution $ 2,500.00Other $ .00 Total Financial Need $43,720.00Total Expenses $ 46,220.00 Total Fin. Assistance & Other Resources $43,720.00

University Awards:Federal SEOG (Anticipated) $ 4,000.00NU Appropriated Grant A058 $29,820.00Federal Perkins Loan $ 4,000.00Federal College Work Study $ 2,850.00

Other Awards and ResourcesFederal Pell Grant (Anticipated) $ 3,050.00

Total Aid Offered: $43,720.00

Northwestern University

Academic Achievement Family Income

Up to $29,999 $30,000-49,999

$50,000-74,999

$75,000-100,000

Over $100,000

Rank in class top 5-10% Chances: SAT 1200/ACT 29: Avg. GRANT aid: Avg. total aid package:

Excellent

95.5% $16,859 $21,250

Excellent

96.4% $14,466 $18,776

Very Good

89.3% $11,018 $14,525

Good 62.5% $9,089 $11,551

Fair

22.8% $9,095

$10,884 Rank in class top 10-20% Chances: SAT 1100/ACT 26: Avg. GRANT aid: Avg. total aid package:

Excellent

91.7% $15,333 $19,946

Excellent

94.8% $13,250 $17,901

Excellent

90.7% $10,012 $13,927

Good 69.6% $7,678 $10,318

Fair

27.0% $7,666

$10,182

Rank in middle of class Chances: SAT 1000/ACT 24: Avg. GRANT aid: Avg. total aid package:

Very Good

85.5% $11,104 $15,103

Excellent

91.7% $10,099 $13,241

Very Good

82.2% $8,697 $12,181

Good 70.9% $7,300 $10,355

Fair

27.5% $6,176 $8,834

Private CollegesProbability of Receiving Financial Aid

Financial Aid Process

1. Apply and be admitted

2. Financial aid forms

3. Student Aid Report (SAR)

4. Verification (if selected)

5. Award package

Financial Aid Forms

• FAFSA– Required by all public & private colleges

• PROFILE– Required by some private colleges

• SCHOOL’S INSTITUTIONAL FORMS• ADDITIONAL FORMS

– Business / Farm Supplement

– Divorced / Separated Agreement

• File ASAP to maximize aid– Use estimated numbers

• Note the college deadlines

Student Aid Report (SAR)

• Shows EFC– Verify information used is correct– Correct errors immediately

• May indicate selection for verification– Copy of tax return– Questions on the data submitted

Award Letters

• Details of award– Grants & Scholarships– Student loans– Work-study

• Accept, deny, or appeal any portion– You must know whether or not to accept the first award letter!

– You must know how to talk to these people in the financial aid offices!

• Acceptance will safeguard the award

Award Letter Example

Cost of Attendance:Tuition & Fees 8,940Room & Board 3,810Books 390Personal Expenses 700Transportation 350

Total Cost of Attendance 14,190

Family Contribution:Expected Family Contribution -3,956

Financial Need 10,234

Financial Aid Offered:XYZ College Grant Freshman 240Presidential Scholarship 3,800Girls/Boys State Scholarship 500Fed. Subsidized Stafford Loan 2,625Total Financial Aid Offered 7,165

Please indicate acceptance of the above financial aid package:__________I ACCEPT the entire financial aid package as offered.__________I DECLINE the following:

Appealing a Financial Aid Award

• The first award may not be the last offer!– Some schools mis-award.

– Some schools under-award.

– Some schools will try to compete with other schools.

• Follow each school’s appeals procedures• Base appeal on circumstances related to:

– Income and assets– Household information– Any "special circumstance"

• Adequately document the appeal

Negotiate The Best Possible Package!

Original Offer: COA - $30,000 EFC - $10,000 Need - $20,000

Aid offered:University Grant - $4,000College work/study - 4,000Subsidized Stafford - 2,625Perkins Loan -

3,375Total Aid - $14,000Unmet Need -

6,000Total Need - $20,000

Adjusted offer after negotiation:COA - $30,000EFC - $10,000Need - $20,000

New Package:University Grant - $6,500Scholar Award - 3,500College work/study - 4,000Subsidized Stafford - 2,625Perkins Loan - 3,375Total Aid - $20,000Unmet Need - 0!

Successful Appeal of Award Letter

Special Circumstances

+

Student Merit

=

Successful Appeal

Common Special Circumstances

• Elementary/high school tuition costs• Excessive medical costs• Dislocated or unemployed worker• Divorce, separation or death of a parent• Federal natural disaster area• Excessive child care costs

Why Colleges and High School Guidance Counselors Cannot Provide

the Needed Information in the Financial Aid Process

• They don’t have the time.• They don’t have the financial training.• They have other “school” responsibilities.• Asking colleges to help you with financial aid

is like asking the IRS to help you with tax planning strategies!

Guidance Counselor or FAO Questions

• Can you show me how to lower my EFC & maximize my eligibility for aid?

• Can you help me pick schools that will give me the best aid package – meet most Need, more FREE money, less loans, etc?

• Can you help me fill out the FAFSA and CSS/Financial Aid PROFILE forms line by line?

• Will you help me negotiate if I get a bad package or less than I expected from each school?

• Can you show me how to pay for college on a tax-favored basis if I don’t qualify for financial aid?

Make Too Much Money For Need Based Aid?

• College funding planning isn’t only trying to get Need Based Aid!

• Other planning strategies are available to reduce your out of pocket costs!

• There are many legal ways to skin the college funding beast that most people never heard of…and their current advisors don’t know about!

Three Kinds Of Families We Can Help

With College Financial Planning!

1. Families with total financial need!2. Families with partial financial need!

3. Families with assets or income too high to qualify for “Need-Based” financial aid!

– There are numerous strategies, tips and secrets to help the high-net worth family, specifically for:

• Business owners• Independent contractors• Real estate investors• High Income• Families with accumulated company stock or stock options

with their employer• Assets outside their retirement accounts• Expecting an inheritance………………

Cost of College ServicesCost of College Services

Admissions Counseling…………………….. $3,950Admissions Counseling…………………….. $3,950

SAT Preparation Course…………………… 600SAT Preparation Course…………………… 600

SAT Course Materials……………………… 65SAT Course Materials……………………… 65

Essay Review & Coaching………………… 595Essay Review & Coaching………………… 595

Career Testing & Counseling……………... 1,500Career Testing & Counseling……………... 1,500

Financing Planning to Maximize Aid……… 900Financing Planning to Maximize Aid……… 900

Completion of Financial Aid Forms……….. 450Completion of Financial Aid Forms……….. 450

Review of Aid Awards & Appeal…………… 500Review of Aid Awards & Appeal…………… 500

Total……………………………………………. $8,620Total……………………………………………. $8,620

Conclusion

• Develop student merit• Many financial options to

consider with your financial advisor

• Tax laws and asset management are related to the financial aid process

• Start the college funding process TODAY!