Making CollegeAffordable

Pursue Your Education While Minimizing Debt

by Dick Heylmun & Matthew Kutz

A Proactive Financial Guide For Students & Parents

THE PROBLEM 3 out of 4 graduating seniors, this year, have an average student loan debt of $37,000, at an interest rate between 3.76% and 11%. The monthly payment required to pay off this debt over 10 years, is between $370 and $600. Many of these loans are "Plus Loans", which means that parents must cosign and are also responsible for the loan payments. Normally s Normally students and parents do not know the total sum of loans, until the financial aid package is received. This is often too late to make more affordable arrangements at other institutions Since students are eager to begin their schooling, they, and their parents usually accept what the college offers, not realizing that 4 years of this, and similar loans, can add a huge burden after graduation (see chart on page 9).

THE SOLUTIONTHE SOLUTION Intelligent planning and decision making can provide a good college or post high school education that will enable the student to participate in today's rapidly changing world, without acquiring a crushing debt load that either he/she or their family must repay.

This booklThis booklet will attempt to explain how to get a good post high school education with little or no student debt.

AUTHORSDick Heylmun: U of U of P. Wharton graduate with 5 sons and 14 grandchildren who simply wants to help parents avoid the costly mistakes being made, today, by many parents, who want to help their children get a good education. This booklet is being made available at cost.Matt Kutz:AA recent Penn Tech graduate who is currently paying off his student debt, and wants to help others from making the same mistakes, he made, and having the same burden that he faces.

For more info, go to: MakingCollegeAffordable.netCOPYRIGHT © 2016 R HEYLMUN

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www.bls.gov/bls/blswage.htm

FOR EXAMPLE

The website: "Bureau of Labor Wages by Occupation and State" provides information on over 800 occupations, with starting salaries, and average salaries in each area of the nation.

The world of employment is currently undergoing huge changes. Large segments of our population are finding it difficult to find good paying jobs because they lack the skills and education which our modern economy is demanding. If a student is going to spend 2 to 4 years, or maybe longer, acquiring an education, or skills, he or she should make certain, beforehand, that there are employers who are willing to pay for those skills and knowledge acquired, when they grgraduate.

in the military can result in not only training in an area of interest, but also a free college education (see page 7).

Most students have not decided what they want to do with the rest of their lives, while they are in high school, thus, it is difficult for many of them to determine what it is that they want to study after they graduate from high school. It is genegenerally recommended that in these cases, students use the first year or two after high school to complete the basic courses that most major fields of study require.Students should also consider military career counseling. 3 years

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Many high school students have decided on the college of their choice long before graduation. Others wait until the last minute before deciding. In many cases, both students and their parents do not seriously take into account the financial consequences of their choice. There is a huge difference in cost between various institutions. For those parents that have significant assets and income, they can afford the luxury of being very selective of the schools schools for their children. However, with the cost of most private institutions approaching $200,000 to $250,000 for a 4-year degree, common sense suggests that most ordinary parents should use care and planning to determine just where their children are going to get the additional training and education after high school that they will need.

nces.ed.gov/collegenavigatorNational Center for Educational Statistics also known as

The College Navigator gives info on:1. The various costs of going to most every college or university.2. The average scholarship aid given to students at that school.3. The average SAT and class standing of students accepted.4. The percent of students who return after their freshman year

Finally, there is a Finally, there is a worksheet that will estimate potential scholarships, grants, and other aid as well as the annual Net Cost of going to the school. From this, parents and students can plan what the family is going to have to provide in payments themselves, scholarships they bring with them, or private loans, which must be used. The school can usually arrange these loans, but, beware they can be very expensive (See page 10).

Pay Scale is another web site that provides information on the average pay that each graduate from the selected school received upon graduation. The local Montco Community College data is included on this site, as are most other colleges. The site also provides the same information about graduates with various degrees. This site can be a very valuable source of useful information. www.payscale.com

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There are 154 traditional private colleges in Pennsylvania alone. Wealthy benefactors, as well as religions and other institutions have established many of these colleges. Most all of them are nonprofit entities and have been in existence for over 100 years, having excellent worldwide reputations for providing a high quality educational experience. It is not unusual, even for the smaller colleges, to have students from 10 or more foreign countries. Thus, employers of all kinds seek semployers of all kinds seek students with degrees from these institutions, which leads them to become very selective. Some, well known universities, such as Harvard, or Yale, choose as few as 5 out of every 100 applicants. These schools however, are anxious to attract the finest high school students. They offer full scholarships to many of our nation's most promising graduates. This is why it is important for high school students to not only peperform well academically, but get involved in extra-curricular activities as well as assuming leadership roles whenever possible, to enhance their attractiveness to our finest universities.

Tuition and Fees are $25,000-$65,000 per year

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For Profit Colleges/Universities

These instiThese institutions are relatively new, are usually very expensive, advertise heavily, do not normally provide a quality education, and have been going bankrupt recently in large numbers, stranding their students with little to show for their time and money. Matheir time and money. Many employers do not recognize their degrees.

THESE SCHOOLS SHOULD BE AVOIDED AT ALL COSTS.

APPLICATIONSAlmost all educational institutions require that when a request for aid is made, the applicant is required to complete a federal FAFSA financial aid form. This form has become universal, with almost all institutions now requiring it when aid is requested. The government also requires it when Pell Grants and Stafford and Perkins loanappliapplications are made. Various states also have their own applications when state aid is requested. See your state's educational website to determine their requirements. These applications determine a student's eligibility for grants and loans. They can be downloaded on line, and are available at most college student aid offices.

GRANTSGGrants are funds made available to students that do not have to be repaid. Most federal and state grant programs are based on need. Families with incomes of $30,000 or less are generally eligible. In many cases families with incomes above that amount, can also receive grants, based on individual circumstances (other children in school is an example). Students should apply for financial aid as soon as possible, because in some cases it is first come first served, and and funds may run out.

SCHOLARSHIPSIt is estimated that $100 million in scholarship money is not being awarded each year because no one has applied for these grants. The process of finding available scholarships, for which a student qualifies, should begin in 11th grade. A recent college graduate, Christopher Gray, has developed software called "Scholly" that enables the user to locate hard to find scholarships for which they qualify. It has proven to be a huge aid in helping find scholarships saving thousands and thousands of dollars for its users. It is available, online, for just $2.99. Visit myscholly.com for more information. The program has been featured in “The Smithsonian" magazine and many other reputable publications.

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THE LARGEST AVOIDABLE COLLEGE EXPENSE

The most important task in getting an affordable education is to keep expenditures down to a manageable level.

1. The largest avoidable expense is the room and board expense, which amounts to approximately $10,000 per year, or $40,000 over a 4-year degree program. Selecting a school that is close enough for commuting can save this money.

2. The next task is to select a school whose cost does not overextend the family's ability to provide the necessary funding. Tuition & fees can be as little as $4,500/year, and as much as $50,000/year.

Do your research: The federal government Pell Grant programand the Pennsylvania state PHEAA program websites providehuge amounhuge amounts of helpful information about grants. There arealso many Internet sources of information about scholarships

and grants that are available.

THE MILITARY A FREE COLLEGE EDUCATION

High School graduates age 17 or older, can enlist for 3 years, and get training and experience in a field of their choice, and earn $53,000 towards college tuition and fees, plus $1,800/month in living expenses for 3 years.

It should be noIt should be noted that only one career field out of five, in the military, is combat related. The military services also provide up to $4,000/year in educational benefits while serving.

AA visit to the student's area recruiter for career counseling, and exploring of the educational benefits available should be undertaken by every high school senior, boy or girl who is

undecided about a career direction.

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FEDERAL LOANS - GOODStafford Loans - Subsidized* - up to $5,500 - $7,500 No interest while student is in school, and up to 6 months after graduation - Interest rate 3.76% SStafford Loans - Not Subsidized* - Interest starts when loan is made. Accrued interest can be added to total loan at end of education. Interest rate 3.76%Perkins Loans - Based on extreme need - Schools have to be in program and make the loans, up to $5,500. Interest rate 5%

FEDERAL LOANS - GOOD/BADFFederal Plus Loans - These are unsubsidized loans that are usually made to parents of students. They currently carry an interest rate of 6.4%. The parents are fully responsible for the repayment of these loans. There are some important benefits for the borrower, as compared to loans from private sources.Federal Loans may qualify for repayment modifications and loan forgiveness programs.

PRIPRIVATE LOANS - UGLYAlmost all pAlmost all private student loans require a cosigner. Interest rates are very high, averaging 7 to 11%. PARENTS ARE USUALLY FULLY RESPONSIBLE for the repayment of these loans, even if the student drops out of school, dies, can't earn enough for his/her repayment of the loan, etc. Many parents have lost their life savings and homes because they cosigned their children's student loans. Banks insist that these loans must be repaid. Bankruptcy does nonot wipe out these loans and parent's wages can be taken for payment. Most colleges, intent on attracting students, make it very easy to acquire these types of loans, which have many friendly sounding names to describe them, such as Sally Mae.

The chart on the following page details the expected monthly payment resulting from each $10,000 borrowed.

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For further information on this topic and suggestions on potential loan forgiveness programs, Google: “USA Today: Student Loan Forgiveness, What You Don't Know, But Should”

DANGERS WHEN CONSOLIDATING LOANS When a student consolidates loans, at any point in the repayment phase after graduation, he/she should never mix federal and private loans into the same repayment program. If this is done, all possible loan modifications that may be available for the federal loans will be lost. There are many scams on the internet related to the consolidation and reduction of student debt. So BEWARE!

A subsidized loan means that the federal government pays the interest from the time the loan is made, until 6 months after graduation. Non-Subsidized accumulate interest while the student is in school, and the amount of the accrued interest is added to the total amount of the loan, which then must be repaid.

* Loan taken out in Senior year ** Loan taken out in Freshman year

*Senior$100$104$118$124$152

**Fresh$100$116$142$151$209

Mo. Pmt./10 Years**Fresh$10,000$11,600$12,800$13,000$15,200

*Senior$10,000$10,380$10,640$10,750$11,100

Total Loan**Fresh

$0$1,600$2,800$3,000$5,200

*Senior$0

$380$640$750$1,100

Total InterestType/Loan Interest

Sta Sub. 3.76% Sta Unsub. 3.76%Federal Plus 6.4% Private Loans 7%Private Loans 11%

The following chart shows the monthly payments for 10 yrs, for every $10,000 for each type of loan, depending on the year the student borrowed.

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Students and parents should understand the role of both the Admissions office and the Student Aid offices of colleges and universities. They are vital for both the school and the students. For the student, the Admissions Department acts as the primary initial contact for the institution, and plays a major role in determining who will and will not be admitted to the school. Quotas established by the school administration are designed to ensure that there will be a ensure that there will be a full complement of students each year. The Student Aid Department works closely with the Admissions Department to aid the student by getting the necessary funding for them to attend the school. Often they play a major role in finding both grants and school scholarships. They have nothing to do with outside scholarships that the students bring with them. Student Aid Departments will also process requests for loans for students. They are required to access low interest government loan programs first, but if additional funds are needed, they do not hesitate to offer plus loans, from both government and private sources, often called Sally Mae loans. The lenders usually require parents to cosign for these private loans. There are a growing number of relief programs now available for borrowers of federal funds. Repayment programs tied to a student's income are now available. Forgiveness programs are also now available for students who go into certain occupations. There are, however, no relief programs available for private loans. These loans must be paid and even bankruptcy will not provide any relief.

OOften students will not know until they receive their acceptance package from their institution, what grants, scholarships, and loan commitments they are going to receive. This poses a real dilemma, because it is only after this information is received, that parents know what kind of funds they are going to have to provide, or how much they will need to borrow. This is how many students get trapped into making financial commitments that ththey really cannot afford. It is often too late to make other educational arrangements for the coming year that are more

affordable.

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Most college degrees require similar basic academic courses. These courses are almost always available at local Community Colleges. The cost per year is $4,000 to $5,000. For lower income families, most all of this expense can be covered using federal and/or state grants, which do not have to be repaid. For upper income families, student jobs during school and in the summer should be able to pay for this phase of their education. A student can also enroll at a nearby State University. Tuition and fees at these schools, average about $10,000/year. Students from low middle-income families can obtain Pell Grants, which will provide most all of this cost. Jobs during school and in the summer should be able to provide adequate funds for transportation and other expenses. For students from middle-income families, a combination of $5,000 of family contributions, plus $5,000/year by the student with jobs during school and in the summer, should enable a student to get a degree with little or no debt. If necessary, the subsidized or unsubsidized low interest Stafford Loan program can be used to provide additional funds.

THE BOTTOM LINEPParents often face huge pressure from children to go away for their college education rather than commuting to a nearby institution. This decision can create a huge financial burden for both students and often parents, as well. The net cost of going to each of the schools under consideration can now be determined, in advance (see page 3). Families with limited incomes or assets, can now determine how much will need to be borrowed over 4 years. They can then dcan then determine what monthly payments will have to be made by the student or, parent, using the chart on page 9. These payments will last for 10 years following graduation.