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Financing Higher Education how to get it and how to pay for it
FinancingHigher Educationhow to get it and how to pay for it
Who We Are
“Making college accessible and affordable for Illinois students.”
- ISAC’s Mission Statement
DEAL OR NO DEALIs a college education a sound investment?
Tuition & Fees Room & BoardTransportation
Books & Supplies
Miscellaneous Living Expenses
Cost of Attendance (COA)+
What are the costs?
Source: The College Board, Trends in College Pricing 2012; Annual Survey of Colleges.
Cost of AttendanceAverage U.S. Undergraduate Budgets, 2012-2013
$15,584
$22,261
$35,312$43,289
College costs are rising, and that's a fact. In Illinois alone, tuition increases have averaged between 7 and 8 percent each year for the past 20 years.
Increase in cost
Source: Illinois Student Assistance Commission, Historical Illinois Tuition & Fees
Individuals with higher levels of education earn more and are more likely than others to be employed.
Is college worth the cost? The min. wage in IL is $8.25/hr
= $330/week= $1,320/month= $15,840/year
Source: Illinois Department of Employment Securities, Learn More Earn More, 2010.
Job TrendsGrowth RatesIn Illinois, jobs that require higher education are growing faster than those that require less education.
Source: Illinois Department of Employment Securities, Learn More Earn More, 2010.
All Jobs
Advanced Degrees
Bachelor’s Degrees
Associate’s Degrees
Postsecondary VocationalTraining
Work Experience ina Related Occupation
Moderate-term on-thejob Training
Short-term on-thejob Training
Average Projected Growth Rate for all Jobs
Growth Rates for Jobs That Require Some Higher Education
Growth Rates for Jobs That Do Not Require Higher Education
Projected Rate of Increase in Number of Jobs
COLLEGE EDUCATIONHow to get it
Why do Why do YOU YOU want to go to want to go to college?college?
There is no “one-size-fits-all”Start with the end in mind
It is in your best interest to know their roles
Know the Players
Different types of degrees come from different types of colleges for different types of study.
•Certificates, Licensures & Registrations
•Undergraduate (i.e. Associate & Bachelor)
•Graduate (i.e. Master, Doctoral, Professional)
Refer to isac.org for a Map of Illinois Colleges.
Illinois Colleges and Universities
Myth 1. “I just won’t get a high quality education at a community college.”
Myth 2. “Financial aid is harder to get at a community college.”
Myth 3. “Transferring to a four-year college is very difficult to do after attending a community college.”
Myth 4. “Even if I am able to transfer to a four-year college, I’ll be unprepared for the rigors of tougher classes.”
Myth 5. “If my child attends a community college, he is likely to drop out.”
Myths Are Not FactsCommunity College
Source: Bissonnette, Zac (2010). Debt Free U.
FACT. A good student can get a good education almost anywhere.
Choose a Major That Makes SenseRegional Wage and Employment Information
Source: Illinois Department of Employment Security, Economic Information and Analysis Division. Wage data for 2008Q3; Employment projections 2006-2016 series. Visit lmi.ides.state.il.us for more detailed information.
Recognize that your intelligence, motivation, passion, and choice of career path will have a far greater impact on your financial and life success than your choice of major.
SHOW ME THE MONEYHow much can you afford, and where will you get the money?
How will you pay for fourfour years of college?
Start Early…
Note: Funds may be merit-based, need-based, or non need-based.
Financial aid helps make up the difference between what you can afford to pay and the cost of college.
What is Financial Aid?
gift aid
self-helpaid
Grants
Scholarships
Work-Study
Loans
Financial aid comes from a variety of sources.Sources of Financial Aid
The Financial Aid Process
Financial Aid Programs
Total = $14,518
The Big Three
* Maximum award for 2013-2014
State of Illinois Monetary Award Program (MAP)
Federal Pell Grant
Federal Supplemental Education Opportunity Grant (FSEOG)
Cost of Attendance
(COA)
ExpectedFamily
Contribution
(EFC)
FinancialNeed- =
How much aid can a student receive?Financial Need
Ask Questions•What percentage of my financial need will you meet? •What percentage of the financial aid offer will be made up of loans?
“Schools are not car dealerships where you can get a better deal through a combination of bluff and bluster. It’s a much more formulaic process.”
- Zac Bissonnette, Debt-Free U (2010)
Change Your Spending Habits
Pay for College Monthly•Tuition Payment Plans
(a small set-up fee may apply
Pay-As-You-Go Method•Hard-Work•Short-Term Sacrifice
No Savings, No Loan, and No Financial Aid
Tax CreditsThe IRS offers federal income tax credits to certain tax payers for higher education expenses.
See IRS Publication 970 at www.irs.gov
TAX CREDIT VALUE DETAILS
American Opportunity Tax Credit
Up to $2,500 of the cost of tuition and related expenses
Available for the first 4 years of postsecondary education
Lifetime Learning
Up to $2,000 for qualified expenses per return
Applies to undergraduate, graduate, and professional degree students and for less-than half-time study.
IT’S A BIG, BIG LOANHow to handle student loans after graduation
A loanloan provides borrowed funds that you must repay with interest. It is a serious financial and legal obligation.
The federal government requires:
•Entrance Counseling
•Exit Counseling
What is a loan?
Subsidized vs. Unsubsidized
Type Need or no need InterestSubsidized Stafford Loan
• A need-based loan • Interest on the loan is paid by the federal government while you are in school and during authorized periods of deferment.
Unsubsidized Stafford Loan
• NOT a need-based loan • You are responsible for paying the interest on your loan from the date of disbursement
Within limits, the financial aid administrator of the college determines the amount for which you are eligible.
Know the differences
Federal Loan Programs (for Undergraduates)
* FAFSA and Program Application(s) are Required
Type GraceRate
Perkins Subsidized 5%Fixed
9 Months
Stafford (2013-2014)
Subsidized 3.86%Fixed
6 Months
Unsubsidized 3.86% fixed
6 Months
PLUS Credit-based 6.41%fixed
Could be within first 60 days
Note: Unsubsidized Stafford Loans for Graduate students have a fixed interest rate of 5.41%.
Federal student loans have annual maximums that are based on:
Too many students borrow amounts that are likely to cause them difficulties, particularly if their earnings are either below average or unusually uneven over time.
How much can a student borrow?Borrowing Limits
Experts recommend that student loan payments do not exceed 8%do not exceed 8% of the work income in year one.
How much should a student borrow?Debt Burden
31For every $10,000 in income, no more than $800 in loan payments per year
If the resulting percentage is:Under 15% RELAX – The debt to income ratio is well within an acceptable range.
15%-20% BE CAUTIOUS – The borrower may want to reduce the current debt load.
Over 20% DANGER – The borrower is heavily indebted and should not consider taking additional debt!
One way to look at the relationship between monthly debt and income.
Debt to Income Ratio
Total Monthly
Debt Payments
Total Monthly
Net Income
Debt to Income Ratio
Source: Money Management International. Understanding Money and Credit.
All federal student loan borrowers must complete and sign a Master Promissory Note (MPN), agreeing to repay:
As with any debt, you are responsible for paying your loan even if you:
Know What You’re Signing
Typically, qualifying borrowers are those who commit to work for a specific amount of time in a field that has experienced a shortage of workers.
Repayment /Forgiveness Programs
Default is defined as being 270 days delinquent or behind in loan payments.
Loans are not dischargeable in bankruptcy.
Avoid Default
As a federal student loan borrower, you are entitled to the following:
Know Your Rights
• A defaulted student loan (270 days delinquent) will stay on your credit report for 10 years!
• Delinquencies (late payments) reduce your credit score
What is a credit score?
How does my student loan affect my credit?
• A number based on a statistical analysis of a person's credit files
• An indicator of the likelihood that a person will pay his or her debts
Your Credit History Matters
DO’S AND DON'TSFactors to consider
Debt adds up quickly, so keep an eye on it.
Graduate with Less Debt
Manage Your Debt
Look at college as a rational investment, not a coming-of-age ritual where money is no object.
- Zac Bissonnette, Debt-Free U (2010)
Time, Money, and Energy
Get your hands on up-to-date, accurate and trusted sources of information to learn what you need to know.
Trusted Web Sites
Find answers to your questions
Illinois Student Assistance Commission800.899.ISAC (4722)
