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Preparing for College Finances Preparing for College Finances in Middle Schoolin Middle School

Presented byJames Madison University

December 8, 2007

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Before We Get StartedBefore We Get Started

This PowerPoint Presentation will be available to download on the JMU Office of Financial Aid &

Scholarships website

www.jmu.edu/finaid(under the “Prospective Students” link)

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ObjectivesObjectives

• Review those involved in paying for college

• Understand college costs

• Discuss options to pay for college

• Answer questions

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Consult with Appropriate Consult with Appropriate StakeholdersStakeholders

• Determine who will be involved in paying for the student’s education

• Those parties should begin discussions now and develop a plan together

• Keep the lines of communication open

• If you use a financial planner or consultant, talk with him/her about college savings

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Learn More About Schools NowLearn More About Schools Now

• Understand the costs of schools

• Examine the types of schools

• Try not to let cost be a large deterrent at this point, you have some time to save and plan

• Many colleges are willing to work with students

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What Does College Cost Now?What Does College Cost Now?

Example at JMU in 2007-08 (full-time in-state undergraduate student)$6,666 – tuition$6,836 – on campus room/board$13,502 – direct (billable) costs

• Tuition has been rising around 6% - 8% per year for the past several years

• Room/Board has been rising around 2% - 6% per year for the past several years

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What Will College Cost Later?What Will College Cost Later?

• There is no way to accurately predict what college will cost in the next 4 to 5 years

• For planning purposes, you may want to use an annual tuition increase of 7% and room/board increase of 4%, 5 years out in the 2012-2013 school year costs could be:Tuition = $9,349 Room/Board = $8,317Direct (billable) Costs = $17,666

*Figures provided for demonstration and planning purposes only and are no guarantee of what costs will be in the future.

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How Am I Going To Pay For How Am I Going To Pay For CollegeCollege

Five primary sources of financial aid are:• Federal• State• Institutional• Private• Self/Family

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Federal AssistanceFederal Assistance• Pell Grant• Supplemental Educational Opportunity Grant

(FSEOG)• Academic Competitiveness Grant (ACG)• National Science and Mathematics Access to

Retain Talent Grant (National SMART Grant) • Federal Workstudy• Federal Perkins Loan• Federal Stafford Loan• Federal Parent PLUS Loan

*Aid programs are subject to change

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More information on Federal AidMore information on Federal Aid

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State AssistanceState Assistance

• Virginia Guaranteed Assistance Program• Commonwealth Award• Tuition Assistance Grant Program (private

colleges only)• College Scholarship Assistance Program• Virginia Transfer Grant (new for 2008-09)• Higher Education Teacher Assistance Program• And many more

*Aid programs are subject to change

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More information on State AidMore information on State Aid

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Institutional AssistanceInstitutional Assistance

• Need-based grants

• Need-based scholarships

• Merit-based scholarships

• Combination Need/Merit-based scholarships

• Institutional Employment

*Aid programs are subject to change

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How Do I Apply For These?How Do I Apply For These?

• At most schools the Free Application for Federal Student Aid (FAFSA) is the primary application for these funds

• Some schools may require additional applications, specifically for scholarships

• Need to ask the school• All schools do NOT work the same when it

comes to this• Years away from applying right now

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Financial aid fromprivate resourcescan be the mostelusive of all aidprograms

Available From:• Local businesses• Civic groups• Churches• Private benefactors • National organizations

Where to Look:• High school guidance

counselors• Write, call, or visit businesses,

civic groups, churches, etc.• Public libraries • Internet (free ones only)

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Avoid Being ScammedAvoid Being Scammed

To check legitimacy of scholarship search services or individuals, for information about financial aid scams, & tips to avoid being scammed visit these Web sites:• Better Business Bureau: http://www.bbb.com

• U.S. Department of Education: http://studentaid.ed.gov/students/publications/lsa/index.html

• Federal Trade Commission: www.ftc.gov/bcp/conline/publs/alerts/ouchart.htm

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How Do I Apply For These?How Do I Apply For These?

• Start the research now

• It can be time consuming

• May find you are close to being eligible for an award, and you have the time to bring yourself up to the eligibility standards before the application date

• It is possible to be awarded scholarships now for college expenses in the future

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What Can I Do Now?What Can I Do Now?

• SAVE, SAVE, SAVE!

• If you have not started, you should do so immediately

• If you have started, evaluate your current savings plan and see if you can afford to increase it if necessary

• There are many savings options

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Education Savings Account Education Savings Account (ESA)(ESA)

• Also called the Coverdell ESA

• Money invested for college that is tax-free if used for college

• Generally, allowed to invest up to $2,000 per year

Website to research this program:http://www.savingforcollege.com/coverdell_esas/

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529’s529’s

Two Types:

–Prepaid Tuition Plans

–Education Savings Plans

Website to research this program:http://www.savingforcollege.com/college_savings_201/

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Prepaid Tuition PlanPrepaid Tuition Plan

• Called VPEP in Virginia • Locks in “tomorrow’s” tuition at “today’s” prices• Guaranteed to pay tuition based on your

contract• Has become progressively more expensive over

the years

Information available at

www.virginia529.com

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Education Savings PlansEducation Savings Plans

• Virginia has three such plans:• VEST (oldest of the 3)• College America• College Wealth (newest of the 3)• Can also use independent brokers for these 529 plans

• Money is invested to grow tax free for college• Can be used for qualified college expenses such as

tuition/fees and room/board• Flexibility in investment options and contribution

amounts

Information available at www.virginia529.com

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ESA or 529 GrowthESA or 529 Growth

Example based on an average annual return of 10%

– First semester of college will be August 2012

– Begin investing in January 2008, starting with zero saved before this point

– Stop in July 2012

– Investing for 4 ½ years

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Average Growth of ExampleAverage Growth of Example

• $100/month• Total of $5,400 invested• Grows on average to

$6,785

• $300/month• Total of $16,200 invested• Grows on average to

$20,354

• The longer you save, the more you can earn– Example, $200/month over 10 years would grow to around $40,969 (on

average)

• This is no guaranty of future growth or value• Growth is subject to the economy• Consult an expert before investing

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Other OptionsOther Options

• Personal savings• Investments (e.g., Mutual Funds, CD’s, bonds,

etc.)• Payment plans offered through the college• Part-time employment• Private Loans (last resort)• Reducing debt or expenses prior to college to

make paying for college more affordable

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Budget!Budget!

• Often overlooked• If you begin using a zero-based budget,

you may find you are spending money on things you do not need now

• Can incorporate college savings into your budget

• Get control of your money!• Generally, will spend less in life if you

budget

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Zero-Based BudgetZero-Based Budget

• Income minus expenses each month equals zero

• This means you have told every dollar of income you have to do something very specific

• If you stick with this for each category, you will not overspend and will likely avoid unnecessary debt and expenditures

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Financial Literacy AssistanceFinancial Literacy Assistance

• http://www.jmu.edu/finaid/finliteracy.shtml– Budget worksheet– PowerPoint on financial information– Other information and tools

• www.jmu.edu/finaid Listen to a 23 minute podcast discussing issues pertaining to paying for college and financial literacy

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QuestionsQuestions

Office of Financial Aid & Scholarships Contact Information:– 3rd floor counter in Warren

Hall– Phone: (540) 568-7820– E-mail: fin_aid@jmu.edu– Web: www.jmu.edu/finaid