The Education Funding Consultants Association

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The Education Funding Consultants Association Powered By Docstoc
					“ Affording College & Solving
  the Financial Aid Mystery”

                 Sponsored By

     The Education Funding
     Consultants Association

      A National 501 (c ) 3 Non-Profit Organization
 Handouts: Does everyone
 have one?

• Strategies


• Evaluation Form

       Program Outline
• Who We Are

• The College Cost Environment

• College Facts & Myths

• The differences between the SAT VS ACT

• The Financial Aid Process

• Paying For College?

• Strategies & Programs-Making College a
  Financial Non-Event!
Who Is The Education Funding
 Consultants Association?

• Federal tax-exempt 501(c)3 non-profit organization.

• Works in conjunction with member colleges,
  universities, and organizations/companies.

• Provides HS informational programs to parents of
  college-bound students.

• Provide the necessary information about - financial
  aid, maximizing awards & coping with the costs of
Do You Know What This Is?
Three Most Important Years

Schools use a students first three
years when considering acceptance for
that student into their school.

What they look at:
•GPA and SAT
•AP or Honors classes
•Extracurricular activities (Talent/Skills)
    High School - 9th Grade

  This is an important year!

• This year lays the foundation for the classes that
  the student needs to take in the coming years (the
  better the classes the better the chances for
  acceptance at the most competitive colleges).

• Take challenging classes in English, mathematics,
  science, history, geography, foreign language,
  government, civics, economics, the arts AND DO

• Get to know your career or guidance counselor as
  well as other college resources available in your
   High School - 10th Grade

• This is the most important year and often not
  considered as such…this is the “qualifying heat”
  when determining where to place for 11th grade.

• Become involved in school - or community-based
  extracurricular (before or after school) activities
  that interest you and/or enable you to explore
  career interests

• Take the Preliminary SAT/National Merit
  Scholarship Qualifying Test (PSAT/NMSQT). You
  must register early.
      Myth about the PSAT

“Does my child’s score really matter on the PSAT?
 I heard the score does not count towards anything.”

Yes it does…

The PSAT is used to disburse National Merit
Scholarships. This is not a test you want to take
for granted.
• Meet with your career or guidance counselor to discuss
  colleges and their requirements.
• Decide which colleges most interest you. Contact them
  to request information and an application for admission.
  Ask about special admissions requirements, financial
  aid, deadlines and ask if you can see sample essay’s?
• Talk to college representatives at college fairs.
• Visit colleges and talk to students. Consider which
  people you will ask for recommendations - teachers,
  counselors, employers, etc.
• Investigate scholarships provided by private sources,
  talk to your guidance department about local
• Register for and take the SAT’s or the ACT, SAT I-
  Subject Tests or any other exams required for
  admission to the colleges you would like to attend.

 Which one should you take?

The Correct answer is ….BOTH!
 How Do These Tests Compare?
                 What is the Content?

          SAT                              ACT
• Math: up to basic             • Math: up to Trigonometry
  Geometry & Algebra ll
                                • Science: charts,
• Science: none                   experiments
• Reading: sentence             • Reading: four passages,
  completion, short & long        one each of Prose Fiction,
  critical reading passages,      Social Science,
  reading comprehension           Humanities, & Natural
• Writing: essay & testing        Science
  grammar, usage, & word        • English: stresses grammar
                                • Writing: essay (optional)

   Note: The ACT essay is optional; the SAT essay is not!
                                About the SAT / ACT
              SAT Scoring                                          ACT Scoring

    Critical Reading              200 - 800               English                     1 - 36
    Math                          200 - 800               Math                        1 - 36
    Writing                       200 - 800               Reading                     1 - 36
    Essay                         2 – 12                  Science                     1 - 36
    (Will account for 1/3 of English/Writing score)       Writing                     2 – 12
                                                          (Will account for 1/3 of English/Writing score)

•     Required for admission by                       •   Used by all U.S. Colleges
      most U.S. Colleges.                                 as an admissions
                                                          requirement & to award
•     It is a reasoning test &                            scholarships.
      requires reasoning skills to
      excel.                                          •   This exam tests more on
                                                          what you have learned in
                                                          school from the classes
    Admissions Timeline

• Early
  – Early Action vs. Early Decision
  – Nov. 1st – 15th Submission
  – Dec. 15th – Jan 10th Acceptance notification

• Regular
  – Jan. 1st – Feb 1st Submission
  – March 1st – April 15th Acceptance
  – On or around May 1st decision by student
College Fairs / Visits

 Great way to get information on colleges you
 wish to consider or visit.

 •   Graduation Rate          • SAT and GPA requirements
 •   Financial Aid            • Admission requirements
 •   Majors offered           • Internship programs
 •   Campus life              • Job placement rate
 •   Cost of Attendance
 •   Give you a feel of their campus life (do you see
     yourself at this school?)
Fear Factor - Control The Fear

• Get Your Forms Done

• Avoid Making Mistakes

• Follow the Admissions Time Line

• Search for Grants & Scholarships
      Visit our website for entry to a $10,000
         monthly scholarship giveaway!


• Visit a few Colleges
Marketing Opportunity for

 Besides tuition colleges have many
   money making opportunities…

        • Health Insurance
        • Credit Cards
        • Cell Phone Plans
College is EXPENSIVE !

     Annual Costs
    The $200,000 + Mark!

           College / University

George Washington U.      Bucknell University
University of Richmond    Bennington College
Sarah Lawrence U.         Columbia U.
Kenyon College            Wesleyan
Vassar College            Trinity Coll.
Drexel University         UPENN

   Chances of Graduating
       In 4 Years???

• 2 in 10 from a Public School.

• Less than 1 in 2 from a Private School.

• 65% of enrolled students do not complete a
  degree in 4 years.

• 50% do NOT finish where they started.

           Useful Statistics

• Number of HS Grads expected to increase until 2014
             (58% women, 42% men)

•   50% of apps filed on-line
•   70% of students file 3 or more apps
•   Steady increase in early apps (to 16%)
•   400 apps per admission officer

• 70% of HS’s rank
• Public HS counselor to student ratio is 315:1
• 21% of public HS’s have college counselor
        Types of Colleges
           (4200 total)
In the U.S. there is a higher education opportunity
for every level of student interest and ability.
My categories:

Register and attend (1900)
        Routine enrollment process
Specialty schools (300)
        Admit on interest and talent
Meet basic standards (1500)
        Admit more than 75% of applicants
Competitive (400)
        Admit from 40% to 75% of applicants
Selective (100)
        Admit fewer than 40% of applicants
             Specialty Schools

For students who have a very specific career interest
and don’t need the typical college experience.

Examples: (300)

    •   Culinary arts: Johnson & Wales
    •   Aeronautics: Embry-Riddle
    •   Art, design, fashion: Art Institute of Philadelphia
    •   Technology, engineering: Webb Institute
    •   Business, accounting: Babson
    •   Performing arts, music, dance: Julliard
    •   Military academies: West Point
Competitive and Selective
• 5-year grad rate:
   – 50% or more for publics
   – 80% or more for privates

• 50% or more of freshmen have SAT over 1200, ACT
  over 24

• 3.5 average high school GPA

• 1/3 or more from top 10% of H.S. class

• They are the types of colleges where good admission
  planning is needed.

• They tend to be more expensive and information
  about how to pay, with or without aid, is important.
 Personality and Career

• As a first step in the admission process, it
  may be a good idea to make a connection
  between ..
     Personality characteristics
     Areas of interest
     College courses, majors, and schools
     Career choices

• -
  Increasing Pressures on
    Middle Class America

    INCOME IS DOWN              DEBT IS UP

And Parents are busier than ever!
        * Parade Magazine – April 2006
                The Cost of College
                   2008 – 2009

                         Annual      Total Cost       ** Pre-tax
      5 years
                         Cost                         $ Needed

University of Maryland   $37,218    $200,297          $266,395
RUTGERS U.               $24,500    $138,109          $183,685
NYU                      $52,290    $294,763          $392,035
BOSTON COLLEGE           $48,934    $267,108          $355,254
VILLANOVA                $48,530    $273,568          $363,845
GEO WASHINGTON U         $53,760    $303,050          $403,056

             *Assumes 6% Tuition Increase Annually.
           **Assumes 33% Federal Tax & NJ State Tax
 What is Financial Aid?
 How is it Dispensed?

• Merit
   – Academic
   – Athletic
   – Other Talents
• Financial Need
   – Family income
   – Assets
• Scholarships
• Grants
   The Goal of Financial Aid

Assist students in paying for college and achieved by:

 • Evaluating family’s ability to pay

 • Distributing limited resources in an equitable manner

 • Providing a balance of gift aid and self-help aid
    Meeting a Student’s
      Financial Need
• 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

• Loans

• Work Study

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

Based on a "needs analysis" formula

Total College Costs (COA)            $30,000
Expected Family Contribution (EFC)   – 12,000
“Financial Need”                     $18,000
What is the "Expected Family
   Contribution (EFC)"?
• How much the family is expected to contribute,
      based on the “FAFSA” or “PROFILE”

          The Cost of Attendance
                Tuition and Fees
                Room and Board
           +    Cost of Computer
                Misc. Expenses
      =    Cost of Attendance COA
2007 – 2008 EFC Calculations
  Based on Parent Income and Family Size
Methods Used to Determine EFC

    • Federal Formula (FM)

    • Institutional Formula (IM)
      Federal Methodology

• Used by all accredited public and
  private colleges and universities
• Used to disburse Federal financial
  aid funds
• Does not assess home or family
  farm equity or retirement accounts
  (including annuities and cash-
  value life insurance)
• FAFSA form is used to collect the
FAFSA on the Web:
To Register for a PIN:
       Reportable Assets
          On FAFSA

• Brokerage Accounts, Savings Accounts

• In Parent and Student Names – includes:
  Mutual Funds, Stocks, Bonds, etc.

• 529 QTP*

Note! Section 529 plans can CAUSE A LOSS OF
FINANCIAL ELIGIBILITY. Value is based on Parents
accessibility formulas and no longer assessed as a
student asset. However, all children 529 accounts are
included in formula.
 Institutional Methodology

• Used by some private
  colleges to distribute:
   – Endowment funds

• Assesses the home and
  family farm equity

• Assesses a fee to
  complete the application

• PROFILE® form is used to
  gather the information
CSS Profile Application

             Some Colleges,
             Universities, Graduate
             Schools & Scholarship

             Information collected
             on PROFILE awards
             non-federal student aid

             Pay a fee to register &
             submit to each specific
             school or program
          Reportable Assets
           on CSS / Profile
          Institutional Methodology

       Savings            Stocks

       Bonds               Mutual Funds

       529 QTP            Sibling Assets

       Home Value         Retirement Plans

Note! Some Schools may ask for the values of Non-
Retirement Annuities, Cash Value Life Insurance, the
value of Family Cars and Personal Property.
        Special Situations
              Two in College

Having more than one student in post-secondary
school at one time will lower your EFC per student

                EFC $10,000

       Two Students        Three Students
         $10,000              $10,000
            2                    3

        EFC=$5,000           EFC=$3,333

            Be careful of Gapping!
          Avoid ERRORS!
    Errors made in completing the FAFSA and/or
supplemental forms may delay application processing
     and result in the loss of financial aid funds.

        Common FAFSA Errors

    •   Divorced/remarried parent information
    •   Not Obtaining Two PINs
    •   Untaxed income
    •   U.S. income taxes paid
    •   Household size
    •   Number in post-secondary education
    •   Real estate and investment net worth
     Meeting a Student’s
       Financial Need

• 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!
                        PUBLIC vs. PRIVATE
University of                                 Cornell University
Total Cost                    $39,235             Total Cost                      $50,384
EFC                           - 11,000            EFC                            - 11,000

NEED                          $ 28,235            NEED                            $39,384

% Need Met                        45%             % Need Met                       100%
Financial Aid Eligibility     $ 12,705          Financial Aid Eligibility         $39,384
Gift Aid (42%)                 $ 5,336            Gift Aid (81%)                  $31,901
Self-Help (58%)                $ 7,369            Self-Help (19%)                 $ 7, 483
“Out-of-Pocket Cost”          $ 26,530            “Out-of-Pocket Cost”           $ 11,000
(Total Cost – Financial Aid                        (Total Cost – Financial Aid
 Eligibility)                                       Eligibility)

“True Cost”                   $33,899          “True Cost”                       $18,483
(Total Cost – Gift Aid)                          (Total Cost – Gift Aid)

                                 * “Out of State” Public School
        Federal Loan Programs:
               (Subsidized and Unsubsidized)

• Subsidized Stafford: Must demonstrate “need”
• Unsubsidized Stafford: Need is not a consideration
• Parent Loans: Helps parents cover the complete cost
  of their child’s education, less any financial aid
  received (Not based on income or assets…even Bill Gates
  would qualify!)
   – Federal Loan Consolidation: programs that takes
     multiple loans and folds them into one entity with
     fixed rates & extended payment terms
               » Lowest Rates in 38 year history of program
               » Lower interest rates than other consumer
                 options (Credit Cards, Home Equity, Private
                 Education Loans)
               » Flexible repayment terms and options for
                 students and parents
               » ***Remember NEVER go into debt without a clear plan to pay
                 it back!!!***
Deficit Reduction Act of 2005

 • $39 billion in cuts to student loan

 •   Stafford limit increased from $2,625 to

 •   Stafford interest rate increased to a fixed

 •   Plus loan interest rate increased to 8.5%

 •   Academic Competitiveness Grants $750 to
 Home Equity Loan                 PLUS Loan


• Potentially lower          • Can borrow the cost of
  interest rate                attendance less
                               financial aid award
• You can borrow             • If you sell your home,
  more than the cost           you do not need to pay
  of attendance                this off
• If you sell your           • If death or total
                               disability occur, loan is
  home, you must
  pay back home
  equity loan
          Know the System!

• Aid doesn’t necessarily go to the most needy…

• It goes to those with the most   KNOWLEDGE!!!
            The Secret Weapon
                Financial Aid Leveraging

         • Financial aid now used as a tool to
           attract affluent and high-scoring

         • Data-mining and pricing techniques
           from the airline and marketing

                 The Sure Things

         • Schools use detailed data to
           systematically cut aid to students
           whose behavior shows they are likely to
           accept admission anyway.
***Source: The Atlantic Monthly, November 2005   Author: Matthew Quirk
         The Result:
   Financial Aid Leveraging

• Financial aid leveraging allows a school
  to buy, within certain limits, whatever
  class it wants.

        “It’s a brilliantly analytical process
             of screwing the poor kids.”
 – Gordon Winston, economist at Williams College
    Financial Leveraging

• A $20,000 merit-based scholarship

• Break into four $5,000 merit scholarships to lure
  the wealthy

• School reaps an extra $240,000 over four years

• Windfall used to buy more rich students – or
  gifted students to improve the school’s profile
  “Admit-Deny” Tactics
• Schools intentionally gap poor

• The school knows they can’t afford
  to attend

• Keeps poor students out claiming it
  doesn’t consider a student’s
  finances when making admission
        The Numbers

• Since 1990, average discount on “sticker-
  price” has risen from 26.5% to just under

• Proportion of students not paying full
  price has grown from 62.5% to 80%

• Shifting from need-based to merit aid,
  increases a school’s average SAT by 50
  points and revenue 162%
There comes a moment in every
Parent’s life when it becomes clear….

     “Winging It”
is no longer an appropriate funding
plan for college.
   Parents Need to Solve the
     Dilemma Between…..
      Education                            Retirement
       Funding                              Funding

These are important & obvious concepts that need to be
examined & solved before settling on any specific school or
giving the student carte blanche to attend any specific school.
          College is Paid with
           After-Tax Dollars
                     Five-Year College After-Tax Cost
        Tax       Public       Private      Elite
      Brackets   $107,000     $202,900    $270,500
        25%      $155,200    $294,000     $392,00
        28%      $162,200    $307,400     $409,80
        33%      $175,500    $332,600     $443,40
        35%      $181,500    $343,800    $458,400

*Assumes additional 6% state and local tax and a 6% college
inflationary increase & only ONE child’s college expenses
 Actual dollar amounts are higher---we rounded down!
   College Cash Flow
      Typical Family Plan of Action

Use of Parent Loans to Pay the College Expenses
          *Based on $25,000 plus loan
   Cash Flow for

• Can cash flow be increased?

• Can you save a comfortable
  monthly amount?

• Which strategies to increase
  cash flow?

   1. Decrease discretionary
   2. Debt consolidation
Understanding HOW to make
    for college a NON-EVENT!!!
     Identification of all appropriate financial strategies
       which may include:
         • Income Shifting
         • Asset Reallocation
         • Tax Concepts
         • Academic Strategies

• Detailed action plan with instructions for
  implementation of all appropriate strategies to effect
  the most beneficial financial snapshot to enhance,
  both financial aid eligibility as well as long-term wealth

•   Long term wealth planning: Retirement
            College Dollars Spent
           Retirement Dollars Lost

              Four Year Costs (2006-2009)

Years Until         Public          Private              Elite
Retirement         $ 90,000        $150,000            $235,000

     15            $285,495        $475,825           $745,459
     20            $419,486        $699,143           $1,095,324

Assumes 6% investment rate, one child in college, after tax dollars
Let the IRS Help Pay for Your
  Child’s College Education

 • Deduction may be the same as scholarship

 • Higher your tax bracket, the greater the benefit

 • IRS rules allow you to keep more $$$

  NOTE: All tax strategies MUST be reviewed with a tax advisor
Income and Asset Shifting

• Accomplished by putting income-producing
  assets in a child’s name

• Creates income and estate tax savings

• Gifts of appreciated assets during college years
  can reduce certain taxes.

• Compensating the child can reduce certain taxes.

• Gifts of highly appreciated assets prior to college
  years can be an effective strategy.
    What Are your Options?

• Do it yourself.

• Utilize the knowledge of
  a Certified College
  Planning Specialist
  (CCPS designation)

   A consultant/specialist
       working in a little
        known but very
       important niche!

         No matter what…have a game plan!!!
  Important Internet Sites

• Financial Aid:

• Scholarship Searches:

• College Resources:
          For College Funding

When you need advice:

   Certified College Planning
     Specialist (CCPS)

     Financial Aid Expert

  Complete Evaluation Form:

Check YES for a Personalized
Thank you for coming!

The Education Funding Consultants
   National 501(c ) 3 Non Profit Organization

          866-597- EFCA (3322)

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