Sending Your Child to College
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Transcript of Sending Your Child to College
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Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a registered investment adviser.
Ameriprise Financial Services, Inc. Member FINRA and SIPC.
© 2009-2015 Ameriprise Financial, Inc. All rights reserved.
Sending your child to college
Gerrilee Hartman
Financial Advisor
Skillrud Financial Group
A financial advisory practice of
Ameriprise Financial Services, Inc.
May, 20th
2016
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Why are you willing to risk the investment?
Source: Bureau of Labor and Statistics U.S. Department of Labor. USUAL WEEKLY EARNINGS OF WAGE AND SALARY WORKERS, FOURTH QUARTER 2014. Data on chart is annualized.
High school only Bachelor's degree only
Advanced degree $-
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$34,528
$63,648 $72,852
Annual median income for workers over age 252014 (Q4)
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Defining your goal
What investment options are available?
Which type of school will you and your child select?
How much will it cost?
How much are you willing to pay?
What sources of aid are available?
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2-yr. public 4-yr. public in-state
4-yr. public out-of-state
4-yr. private $3,347
$9,139
$22,958
$31,231
$7,705
$9,804
$9,804
$11,188
Tuition & fees Room & board Books & supplies Transportation Other
Annual cost of college by type2014-2015 average estimated undergraduate costs
$16,325
$23,410
$37,229
$46,272
Source: Source: Trends in College Pricing. © 2014 The College Board. www.collegeboard.org
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Are there ways to lower the cost?
• A later start
• Community college
• Living at home
• Less expensive school
• Child contributes
• State residency
• A vocational degree
• An alternate path
Consider
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Other financial considerations
Your child does not attend college
Divorce
Blended family
Small business ownership and partners
Shared custody
Current K-12 tuition
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How much are you willing to pay?
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How much should you save?
Neither Ameriprise Financial nor its affiliates or representatives may provide tax advice. Consult your tax advisor or attorney regarding specific tax issues.
• Timing• Risk tolerance• Amount needed• Ability to save• Taxes
Important factors
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Federal financial aid (2013-2014)National distribution*
Grants $8,080
Federal loans $4,840
Other $1,260
Average aid per recipient*
$14,180 Total
*Source: Trends in Student Aid. © 2014 The College Board. www.collegeboard.org
Federal work-study
Private & employer grants
State grants
Other federal grant programs
Tax credits & deductions
Institutional grants
Pell grants
Federal loans
1%
6%
5%
7%
8%
21%
18%
34%
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Free Application for Federal Student AidSM (FAFSA)The federal financial aid application process
Source: Free Application for Federal Student AidSM − www.fafsa.ed.gov
FAFSA to-do list Find form at www.fafsa.ed.gov Apply Apply early Avoid mistakes Answer every question Apply annually
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Expected Family Contribution (EFC)The federal financial aid application process
Factors• Your money• Your child’s money• Number of children• Number of children in college• Age of oldest parent• Unusual family circumstances• Unemployment
Source: Free Application for Federal Student AidSM − www.fafsa.ed.gov
Cost of attendance– Expected family contribution Financial need
Formula
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Pay less than “sticker price?”The federal financial aid application process
Source: Free Application for Federal Student AidSM − www.fafsa.ed.gov
Public university
Private university
Annual cost of attending $20,000 $40,000
EFC $10,000 $10,000
Financial need or aid $10,000 $30,000
FAFSA/EFC
Example — Expected Family Contribution (EFC) remains constant
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EFC — what is included in the calculation?The federal financial aid application process
Included in calculation
• Custodial parent & custodial stepparent income
• Custodial parent & custodial stepparent assets such as:– Trusts– Stocks, bonds, mutual funds, CDs– Savings/checking
• Student’s income & assets including EE savings bonds
Not included in calculation
• Income of non-custodial parent• Scholarships• Tax credits for educational expenses• Home/farm equity• Retirement plans• Annuities• Life insurance policies
Source: Free Application for Federal Student AidSM − www.fafsa.ed.gov
FAFSA/EFC
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EFC — assessing the family’s assetsThe federal financial aid application process
Owner name Savings Assessment
rateExpected
contribution
Kelly (Daughter) $10,000 20% $2,000
Karl (Dad) $10,000 5.6% $560
This scenario is shown for illustrative purposes only and does not represent actual clients. Actual client experiences will vary.
Source: Free Application for Federal Student AidSM − www.fafsa.ed.gov
Example — it may be better for money to be in a parent's name
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Finding the money
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Student loans
Source: Trends in Student Aid. © 2014 The College Board.www.collegeboard.org
Average 2012-2013 loan debt per borrower: $25,600
Types of loans• Direct Subsidized Loans• Direct Unsubsidized Loans • Direct PLUS Loans• Direct Consolidation Loans• Federal Perkins Loan Program• Private Education Loans
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Direct subsidized & unsubsidized loans
Terms Subsidized loansundergraduate
Unsubsidized loansundergraduate
Based on financial need Yes No
Interest begins to accrue When borrower leaves school From the day the loan is made
Annual loan limits (depending on grade level) $3,500 − $7,500 $9,500 − $20,500*
Maximum total debt (aggregate loan limits) $23,000 $57,500
Interest rate** 4.66% 4.66%
* Less any subsidized amount received for the same period. Loan limit also depends on year in school and dependency status.** 2014 – 2015 Academic year is July 1, 2014 – June 30, 2015
www.studentaid.ed.gov
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Parent PLUS loans
Source: www.studentaid.ed.gov/types/loans/plus
Overview• For parents of dependent children
• Not granted based on need
• Good credit history required
• Fixed interest rate of 7.21%
Loan limit calculation
Cost of attendance– Other financial aid
Loan limit
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Perkins Loans
Source: www.studentaid.ed.gov/types/loans
Overview• Full and part-time students
• Annual limits - Undergraduates $5,500- Graduates $8,000
• 5% interest rate
• Income-based repayment
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Student loan repayment benefits
Student loan interest deduction • Up to $2,500 deduction
Forgiveness of eligible federal loans
• Discharges debt after 10 years of full-time employment in certain public services
• Visit www.studentaid.ed.gov
Direct Consolidation loan program
• Reduced monthly payments
• One lender, one monthly payment
• Varied deferment options
www.studentaid.ed.gov/types/loans
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GrantsGifts that generally do not have to be repaid
Source: studentaid.ed.gov
TEACH grants
Federal Supplemental Education Opportunity Grants (FSEOG)
Pell grants
State grants
Institutional grants
Iraq and Afghanistan Service grant & the Post-911 GI Bill
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Scholarships
Where to lookScholarship search companies InternetSchool guidance officeEmployersService organizations
When to lookChild’s junior year of high school
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This example is for illustrative purposes only and does not represent actual clients. Actual client experiences will vary.
Educational savings accounts & financial gifts
versus
Unexpected resultsGood intentions
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Age* In 2015, the Kiddie Tax applies when the child’s:
0-17 • Investment income is over $2,100
18 • Investment income is over $2,100 • Earned income not greater than ½ of child’s total support
19-23• Investment income is over $2,100 • Is a full-time student• Earned income not greater than ½ of child’s total support
*Age at the end of the year
Educational savings accounts & financial gifts
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Control of money
Tax benefits Important issues
Financial aid eligibility
Educational savings accounts & financial giftsUTMA/UGMA
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Educational savings accounts & financial giftsCoverdell Education Savings Accounts
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Educational savings accounts & financial giftsEE Savings Bonds (restrictions apply)
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Clients should carefully consider the investment objectives, risks, charges, and expenses associated with a 529 Plan before investing. More information regarding a particular 529 Plan is available in the issuer’s official statement, which may be obtained from an Ameriprise Financial advisor. Investors should read the 529 Plan’s official statement carefully before investing.
Clients contributing to a 529 Plan offered by a state in which they are not a resident, should consider, before investing, whether their, or their designated beneficiary(s) home state offers any state tax or other benefits only available for investments in such state’s qualified tuition program.
Educational savings accounts & financial gifts529 College Savings Plan
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Other education tax benefits
American Opportunity Tax Credit• Extended through 2017• Up to $2,500 for college expenses• Up to 40% of the AOTC is refundable
Lifetime Learning Credit • Up to $2,000• Available for all years of postsecondary
education and for courses to acquire or improve job skills
www.studentaid.ed.gov/types/loans
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Other funding ideas
Private industry jobs
Military ROTC
Federal Work-study
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Investing your own money
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Bankrupting your retirement
How will financial aid be assessed?
Are you willing to quit retirement?
Are you at risk?
What if the money isn’t spent on college?
How important is retirement?
How long can you work?
Can you get a loan for retirement?
Will you become financially vulnerable?
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Individual investments
Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution and involve investment risks including possible loss of principal and fluctuation in value.
Certificates of deposit are FDIC-insured up to $250,000 per depositor.
Stock investments have an element of risk. High-quality stocks may be appropriate for some investments strategies. Ensure that your investment objectives, time horizon and risk tolerance are aligned with stocks before investing, as they can lose value.
There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities.
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Protecting your goal
Cash value life insurance
Before you purchase, be sure to ask your sales representative about the insurance policy’s features, benefits and fees, and whether the insurance is appropriate for you, based upon your financial situation and objectives.
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Smart spending
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Writing your life story
Ameriprise Financial cannot guarantee future financial results. Client experiences may vary.
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Ameriprise Financial
1 Ameriprise helped pioneer the financial planning process more than 30 years ago. We have more financial planning clients and more CERTIFIED FINANCIAL PLANNER™ professionals than any other company in the U.S. based on data filed at adviserinfo.sec.gov and documented by the Certified Financial Planner Board of Standards, Inc. as of Dec. 31, 2013.
2 Source: Company data as of Dec. 31, 2013.3 Source: Ameriprise Financial Fourth Quarter 2014 Statistical Supplement.4 Sources: No.1 financial planning firm in the U.S.: Ameriprise helped pioneer the financial planning process more than 30 years ago. We have more financial planning
clients and more CERTIFIED FINANCIAL PLANNERTM professionals than any other company, based on the number of financial planning clients SEC-registered investment advisers disclosed annually and documented by the CFP Board of Standards, Inc., as of Dec. 31, 2013. There is no guarantee that you will work with an advisor with a CFP® certification. No. 2 mutual fund advisory program in assets: Cerulli Edge - data as of 2Q 2014. No. 5 branded advisor force in the U.S.: Company reports as of 2Q 2014. No.5 variable universal life insurance provider (total assets): LIMRA International, 2Q 2014. No.11 long-term mutual fund assets in the U.S.: ICI Complex Assets, 3Q 2014. No. 10 variable annuity provider, LIMRA International, 2Q 2014.
Founded in 1894.
Ameriprise Financial is America's leader in financial planning.1
More than 2 million individual, business and institutional clients.2
Ameriprise Financial has more than $800 billion in assets under management and administration.3
Ameriprise Financial maintains leadership positions in each of its four core business segments: Advice & Wealth Management, Asset Management, Annuities and Protection.4
Never taken a bailout.
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The initial consultation provides an overview of financial planning concepts. You will not receive written analysis and/or recommendations.
Complimentary Initial Consultation
Beforehand, take the 3-Minute Confident RetirementSM check
Map out your journey using the Confident Retirement approach
Tell me about what’s important to you
Learn about how I work with clients
Determine if we’re a good match
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Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.
The Confident Retirement approach is not a guarantee of future financial results.
Ameriprise Financial and its representatives do not provide tax or legal advice. Consult your tax advisor or attorney regarding specific tax issues.
Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a registered investment adviser.
Ameriprise Financial Services, Inc. Member FINRA and SIPC.
© 2015 Ameriprise Financial, Inc. All rights reserved.
Important information