How to Pay for College in This Economy

Andrew Lockwood, J.D.

College Funding Specialists

497 South Oyster Bay Road

Plainview New York 11803Miami – Boca Raton – Weston (FL)

Key Topics:

• How Much College Really Costs• The “Double Secret” Formula Used to Decide How Much

You’ll Get - Grants, Scholarships, etc.• The Strange Reason That An Expensive, Private College

Can Cost You Less Out of Pocket Than a So-called “Cheap” Public University!

• Money-making “Loopholes” - Especially for the “Forgotten Middle Class” - and Money Losing ”Landmines” to Avoid Like the Swine Flu

• What to Do When You’ve Been “Hosed” by the Financial Aid Office

25 30 35 40 45 50 55 60 65

Parent who don't pay for college

Parents who pay for college1.0

1.5

$2.0million

Retirement Saving

To Retire Well or to Educate Well?Devoting savings to college education can put parents far behind those who instead save for retirement. Indeed, parents who save for college may find they do not have enough for their retirement.

Who is Andy Lockwood and Why Should You Pay Attention to Him?

• Owner, College Funding Specialists – Plainview, Miami, Boca Raton

• Author – Never Pay Retail For College• Radio Host – The College Planning Power Hour

ESPN Radio - FL • Corporate lawyer NYC, then in-house counsel to publicly-traded

broker dealer - “insider” education in financial services industry• Wesleyan University (B.A.) St. John’s University Law School (J.D.) -

$100,000 student loans• Frequently in the media – BankRate.com, Miami Herald, Live

With Lisa Wexler Radio – 1400 – Southern CT and North Shore Long Island

The “Never Pay Retail For College” ©College Funding System

• Tax Strategies – “Tax Scholarships”• Title IV Financial Aid System• Student “Positioning”

College Is Expensive!!(Thank You, “Captain Obvious”)

• It’s not just tuition – books, room and board, living expenses, etc. “Cost of Attendance”

• Four years* can cost $80,000 to $200,000…plus!

• Multiply this cost by # of kids!

• Keeps going up by 6–8%, every year (15% in some states)!--------------------------------- * If your kid can graduate in four years!

Average Cost Of Private Versus State

Schools!

How Is A Family Supposed To Pay For All That?

• Savings?• Borrow?• Scholarships?• Go To Less

Desirable School?• Not Go At All?

7

TaxBrackets

25%

28%

33%

35%

Five-Year College “Net” Cost

Public$70,000

$102,941

$107,692

$116,667

$125,000

Private$140,000

$205,882

$215,385

$233,333

$250,000

Elite$200,000

$294,118

$307,692

$333,333

$357,143

Key Concept: Pay for College With After-Tax Dollars

*Assumes additional 6% state and local tax and only ONE child’s college expenses

Examples of Tax-Advantaged Strategies Buried in the Tax Code

1. HOPE Scholarship Credit

2. Lifetime Learning Credit

3. College Tax Deduction

4. Student Loan Interest Deduction

5. Coverdell ESAs (formerly called Education IRAs)

6. Penalty Free IRA/401K Withdrawals

7. Employee Education Assistance Plan Extension

8. Qualified State Prepaid Tuition Programs

The Financial Aid SystemCourtesy - Department of Education

The Five Biggest, Most Persuasive Financial Aid Myths

• “I earn too much to qualify.”• “My kid’s grades are too low.”• “I own a home...”• Aid is only for “special” groups.• It’s an easy process.• School people - Financial Aid Officers and/or

Guidance Counselors - can help.

• EFC stands for__________ ____________ __________• Average EFC for a family earning $120,000: _____• Formula Every College in U.S. uses to calculate your

financial aid package:

COA- EFC

= Need

Show Me the Money!EFC and the “Double Secret” Formula

EFC in Action - Case StudySchool A - Ivy or Equivalent:

COA- $50,000

EFC - $10,000

Need - $40,000

School A:

Meets 100% need - $40,000!

Gift aid – 80%

Self help – 20%

School B – State U:

COA - $20,000

EFC - $10,000

Need - $10,000

School B:

Meets 60% need = $6,000 ($4,000 short!)

Gift aid – 50%

Self help – 50%

How Much Each College Really Costs – Out of Pocket:School A:

Total Cost = $10,000

Total Gift = $32,000

Total Self = $8,000

School B:

EFC = $10,000

+ Unmet Need = $ 4,000

Total Cost = $14,000

Family pays $4,000 more for the “cheaper” school!

Don’t rule out schools based on “sticker price”!!!

How Do “They” Calculate What I’ll Get?

Parent's Living Allowance Parent's Contribution

Income - Income Taxes X (22-47%) = from IncomeSocial Security

Parent's Asset Protection Parent's Contribution

Assets - Allowance X 12.0% = from Assets

Student's Income Taxes Student's Contribution

Income - $4,500 X 50% = from Income

Student's No Student's Contribution

Assets - Asset Protection X 20% = from AssetsAllowance

For More Info:

516.882.5464

info@collegeplanningadvice.com

www.CollegePlanningAdvice.com

Andy LockwoodPeter “College Pete” Ratzan

College Funding Specialists497 South Oyster Bay RoadPlainview, New York 11803