Vuefolio Seminar for Dare 2B Digital Conference (Feb 28, 2015)

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TACKLING THE RUNAWAY COLLEGE COSTS (PLAN FOR IT!)

DARE 2B DIGITAL CONFERENCE

FEB 28, 2015

Oindrila Ray [email protected]

Vuefolio is a SEC Registered Investment Adviser

Do not distribute without permission

mailto:[email protected]

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Disclaimers


• All materials, graphs and analysis are solely for educational purposes.

• This is not a pitch for any investment product.

• Please do not consider this as financial or investment advice.

• We are not tax lawyers or accountants.

• We do not represent nor endorse any college, educational institution or any funds that may be mentioned in the presentation.

www.vuefolio.com Do not distribute without permission

As PARENTS,

we try to SUPPORT our CHILD’s

ASPIRATIONS and EFFORTS

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College Desirability, Aspiration and Expense


Cost of Attendance: Narrow band. Mostly Need blind. Most offer only need based aid.

Wide spectrum of cost. Mostly Need sensitive. Wide range of aid.

Different cost of attendance for residents and non-residents. Need blind for residents.

Other Private

Colleges

Elite Private

Colleges

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Cost of Attendance: Snapshot


Elite Private College: Dream schools $60,000-$65,000

Flagship Public Colleges: Dream, Reach and Safety Schools Instate CA: ~$34,000 Out of State: $30,000-$58,000

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Cost of Attendance


Does everyone pay these prices?

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Cost of Attendance


NO!

Different families may pay different amounts.

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Example: Harvard vs. UCB estimated 2014-15 costs


$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

Net Cost: Harvard

Aid: Harvard

Net Cost: UC Berkeley

Aid: UC Berkeley

• Estimated cost for a typical California family with one child in college • Besides income, the cost of attendance will also vary depending upon the

asset level of the family.

Income

Cost/Aid

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Your Price Tag for College


Your Family Income

# of kids attending

college

Non Retirement Assets

(private colleges consider your home

equity)

Financial Aid available

Your “Actual Cost of College” or Net Price depends on:

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Financial Aid


Need based Aid

• Income • Assets • Family profile

Merit Aid

• GPA • Leadership • Sports, etc

Types of Financial Aid

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Financial Aid


Federal Grants: Pell Grants

State Grants: Cal Grants

Institutional Aid

Federal Student Loans

Need based Aid


Grant By College Type

Source: College Board “Trends in Student Aid” 2014

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To get financial aid


Free Application for Federal Student Aid (FAFSA)

CSS Profile

Institution’s own Aid Form (some private colleges only)

Cal Grant application

Need to file

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Takeaways : Need Based Aid


• Federal and State grants phase out by $100,000 family income. • Institutional aid is available in Private Colleges but can varying combinations of grants and loans. Research grant aid. • Rule of thumb: Elite Private Colleges have the most institutional grant aid. But they have v. low acceptance rates. • Don’t forget Public Colleges: In state and “Out of State”. Reasonable institutional aid but lower income cutoff for aid. • Federal Student Loans is also considered as aid. Be careful while looking at numbers.

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First Year Merit Aid: Private Colleges


Private College Cost of

Attendance Admission

Rate Financial Aid

Avg. Merit Grant

Vanderbilt $62,970 13.0% Need + Merit $18,797

Northwestern $65,844 15.0% Need + Merit $2,740

Johns Hopkins $64,679 17.0% Need + Merit $32,379

Rice $56,415 17.0% Need + Merit $20,132

Georgetown $62,000 17.0% Need Based -

Harvey Mudd $65,200 19.0% Need + Merit $8,275

USC $64,694 20.0% Need + Merit $20,752

Wellesley $62,088 29.0% Need Based -

Boston College $62,822 32.0% Need + Merit $32,461

NYU $66,000 32.0% Need + Merit $26,202

Carnegie-Mellon $63,822 40.0% Need + Merit $7,053

Only 10-20% of students actually get merit aid.

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Merit Aid : Private Colleges


Most of the Merit Aid is available in tiers below the Elite Private Colleges

Source: College Board “Trends in Student Aid” 2014

Merit Aid/other aid almost more than need based aid

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Merit Aid Facts


• Elite private colleges do not offer merit aid. • Most merit aid is available at 2nd and 3rd tier private colleges. • Limited number of merit aid available at public universities. • UC Regents scholarship: top 1-2 % entering freshman. • CSU Trustees Award. • Some state universities have more merit aid as compared to

others. Even for out of state students. • Some colleges may require the student to file FAFSA and CSS for

merit aid.

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How can families in Bay Area get Financial Aid?


• Demonstrate need based on income … before applying try out college’s online

net price calculator.

• Multiple kids in college at the same time.

• Apply to Private Colleges which offer Merit Aid … research those colleges.

• Some Out of State Public Colleges have Merit Aid … find those colleges.

• UC: Regent’s scholarship. CalState: CSU and other scholarships.

• Many colleges will send offers even before application based on SAT and other

scores.

• External Scholarships.

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Paying for College


Source: Sallie Mae “How America pays for College 2014

Parents paying for % of college costs from savings

Low Income: 0 - 20% Middle Income: 25 – 50%% High Income: 50 -100 %


How do most families in Bay Area

Pay for College?

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How Parents Pay For College


Savings and Investments Current Income

Loans

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Savings and Investments


529 Plans Investment/ Savings Accounts

Custodial Accounts

(child’s savings) ESPP

Money from retirement accounts Roth IRA

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Easiest way to pay for college


Tap into your 529 plan

Similar impact on financial aid (5.64%) as other parental savings

Least impact on subsequent year’s aid

Middle/High school: Not to late to start a

529 . If you have a plan, keep contributing

Can save for grad, med, law school too!

Withdrawal is tax free. Qualified education

expenses only

Book keeping becomes simple as compared to

taxable accounts

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529 State Plans: CA Residents


Fees/Loads/Expense

Ratios

Asset allocation

and Diversificati

-on

Number of options in the plan

Underlying fund quality

•Parents open account directly with 529

•Available in 48 states

Direct Sold 529

Plan

•Only available through an advisor

•Rarely beats a good direct sold plan

Advisor Sold 529

Plan

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Paying for College: 529 Plans


Pros

Earnings grow tax free: so more money at

withdrawal

Only 5.64% of 529 assets are counted against aid

The withdrawal does not count as income on next years financial aid forms

Cons

If withdrawn for non education purposes, 10%

penalty and tax on earnings

Cannot claim Education tax credits

529 plans charge management fees. However there are great

plans with very low fees available


Savings

Parents use the following strategies…

Loans Savings

Income

Savings Income

Savings

Loans Income

Income Savings

Home Equity

Loans Income

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Loans


Federal Student Loans Students borrow, not parents

Parent Plus Loans

Home Equity Loans/ Line of Credit Private Education Loans

Loans against 401k accounts

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Federal Student Loans


Subsidized

• Need based • Interest accrues after

graduation • Annual Limit

Unsubsidized

• Any student can borrow

• Interest starts accruing immediately

• Annual Limit

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Paying for College: Federal Student Loan


Pros

Student has a responsibility towards education and employment

Grace period of 6 months after graduation for repayment

Income based repayment of loans

Does not affect credit score. Does not put parent on the hook

Cons

It’s a loan. Student debt is a problem. Can affect later financial decisions

Cannot discharge loan in bankruptcy.

Annual and maximum limits. Max limit covers just 1 yr at a UC!

Have to file the FAFSA every year to get loans for all years of study

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Paying for College: Pros and Cons


Visit https://www.vuefolio.com/

To learn about PROS and CONS

529 Plans Investment/ Savings Accounts

Custodial Accounts ESPP

Roth IRA

Federal Student Loans Parent Plus Loans

Home Equity Loan/

Line of Credit

Private Education Loans

Loans against 401k accounts

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The strategic way to pay for college


Financial Aid Eligibility • Child eligible for need

based aid?

Beyond first year • Will your child need aid to

continue studying?

Investments • Do you have investments

which can be used in a tax efficient way?

Siblings • Any siblings going to

college during the same time?

Student Loans • Discuss with your child

about student loans and its pros and cons

Income • Monthly income enough for

regular expenses + college costs?

Retirement: • How old are you? Is your

retirement secured?

Home Equity • Do you have home equity?

Is it being counted ? Thinking of tapping into it?

Loan impact • What impact will loans for

education have on your retirement/life?

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Choosing a college …


College & Major

Acceptance Academics

Extra Curricular

Personality Fit

Financials

ROI: Employability

after graduation


Online Resources

https://www.vuefolio.com/

https://www.sofi.com/ https://collegeabacus.org/ https://www.collegeboard.org/

https://fafsa.ed.gov/ http://www.ed.gov/

https://studentaid.ed.gov/ http://www.cde.ca.gov/

Information on saving and paying:

Information on private loans:

Information on aid/loans:

https://www.edvisors.com/

https://www.tuition.io/ https://www.edvisors.com/

https://www.meritaid.com/ https://www.scholarships.com/


Thank you for your time.

To learn more, check out our website

https://www.vuefolio.com

Disclaimer: Vuefolio does not render legal, accounting, or tax advice. This presentation is solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Vuefolio is not responsible for any college costs, financial aid, student or any other kinds of loans, investment performance of the 529 state plans. Any data quoted represents historical information. Any past performance quoted is no guarantee of future results. Vuefolio is a SEC registered Investment Adviser.

Vuefolio Seminar for Dare 2B Digital Conference (Feb 28, 2015)

Economy & Finance

harvard aid

permission cost of attendance

aid form

types of financial aid

permission grant

permission federal grants

uc berkeley aid

actual cost of college