Vuefolio Seminar for Dare 2B Digital Conference (Feb 28, 2015)
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Transcript of Vuefolio Seminar for Dare 2B Digital Conference (Feb 28, 2015)
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TACKLING THE RUNAWAY COLLEGE COSTS (PLAN FOR IT!)
DARE 2B DIGITAL CONFERENCE
FEB 28, 2015
Oindrila Ray [email protected]
Vuefolio is a SEC Registered Investment Adviser
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Disclaimers
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• All materials, graphs and analysis are solely for educational purposes.
• This is not a pitch for any investment product.
• Please do not consider this as financial or investment advice.
• We are not tax lawyers or accountants.
• We do not represent nor endorse any college, educational institution or any funds that may be mentioned in the presentation.
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As PARENTS,
we try to SUPPORT our CHILD’s
ASPIRATIONS and EFFORTS
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College Desirability, Aspiration and Expense
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Cost of Attendance: Narrow band. Mostly Need blind. Most offer only need based aid.
Wide spectrum of cost. Mostly Need sensitive. Wide range of aid.
Different cost of attendance for residents and non-residents. Need blind for residents.
Other Private
Colleges
Elite Private
Colleges
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Cost of Attendance: Snapshot
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Elite Private College: Dream schools $60,000-$65,000
Flagship Public Colleges: Dream, Reach and Safety Schools Instate CA: ~$34,000 Out of State: $30,000-$58,000
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Cost of Attendance
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Does everyone pay these prices?
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Cost of Attendance
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NO!
Different families may pay different amounts.
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Example: Harvard vs. UCB estimated 2014-15 costs
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$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
Net Cost: Harvard
Aid: Harvard
Net Cost: UC Berkeley
Aid: UC Berkeley
• Estimated cost for a typical California family with one child in college • Besides income, the cost of attendance will also vary depending upon the
asset level of the family.
Income
Cost/Aid
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Your Price Tag for College
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Your Family Income
# of kids attending
college
Non Retirement Assets
(private colleges consider your home
equity)
Financial Aid available
Your “Actual Cost of College” or Net Price depends on:
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Financial Aid
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Need based Aid
• Income • Assets • Family profile
Merit Aid
• GPA • Leadership • Sports, etc
Types of Financial Aid
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Financial Aid
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Federal Grants: Pell Grants
State Grants: Cal Grants
Institutional Aid
Federal Student Loans
Need based Aid
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Grant By College Type
Source: College Board “Trends in Student Aid” 2014
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To get financial aid
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Free Application for Federal Student Aid (FAFSA)
CSS Profile
Institution’s own Aid Form (some private colleges only)
Cal Grant application
Need to file
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Takeaways : Need Based Aid
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• Federal and State grants phase out by $100,000 family income. • Institutional aid is available in Private Colleges but can varying combinations of grants and loans. Research grant aid. • Rule of thumb: Elite Private Colleges have the most institutional grant aid. But they have v. low acceptance rates. • Don’t forget Public Colleges: In state and “Out of State”. Reasonable institutional aid but lower income cutoff for aid. • Federal Student Loans is also considered as aid. Be careful while looking at numbers.
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First Year Merit Aid: Private Colleges
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Private College Cost of
Attendance Admission
Rate Financial Aid
Avg. Merit Grant
Vanderbilt $62,970 13.0% Need + Merit $18,797
Northwestern $65,844 15.0% Need + Merit $2,740
Johns Hopkins $64,679 17.0% Need + Merit $32,379
Rice $56,415 17.0% Need + Merit $20,132
Georgetown $62,000 17.0% Need Based -
Harvey Mudd $65,200 19.0% Need + Merit $8,275
USC $64,694 20.0% Need + Merit $20,752
Wellesley $62,088 29.0% Need Based -
Boston College $62,822 32.0% Need + Merit $32,461
NYU $66,000 32.0% Need + Merit $26,202
Carnegie-Mellon $63,822 40.0% Need + Merit $7,053
Only 10-20% of students actually get merit aid.
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Merit Aid : Private Colleges
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Most of the Merit Aid is available in tiers below the Elite Private Colleges
Source: College Board “Trends in Student Aid” 2014
Merit Aid/other aid almost more than need based aid
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Merit Aid Facts
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• Elite private colleges do not offer merit aid. • Most merit aid is available at 2nd and 3rd tier private colleges. • Limited number of merit aid available at public universities. • UC Regents scholarship: top 1-2 % entering freshman. • CSU Trustees Award. • Some state universities have more merit aid as compared to
others. Even for out of state students. • Some colleges may require the student to file FAFSA and CSS for
merit aid.
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How can families in Bay Area get Financial Aid?
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• Demonstrate need based on income … before applying try out college’s online
net price calculator.
• Multiple kids in college at the same time.
• Apply to Private Colleges which offer Merit Aid … research those colleges.
• Some Out of State Public Colleges have Merit Aid … find those colleges.
• UC: Regent’s scholarship. CalState: CSU and other scholarships.
• Many colleges will send offers even before application based on SAT and other
scores.
• External Scholarships.
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Paying for College
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Source: Sallie Mae “How America pays for College 2014
Parents paying for % of college costs from savings
Low Income: 0 - 20% Middle Income: 25 – 50%% High Income: 50 -100 %
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How do most families in Bay Area
Pay for College?
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How Parents Pay For College
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Savings and Investments Current Income
Loans
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Savings and Investments
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529 Plans Investment/ Savings Accounts
Custodial Accounts
(child’s savings) ESPP
Money from retirement accounts Roth IRA
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Easiest way to pay for college
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Tap into your 529 plan
Similar impact on financial aid (5.64%) as other parental savings
Least impact on subsequent year’s aid
Middle/High school: Not to late to start a
529 . If you have a plan, keep contributing
Can save for grad, med, law school too!
Withdrawal is tax free. Qualified education
expenses only
Book keeping becomes simple as compared to
taxable accounts
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529 State Plans: CA Residents
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Fees/Loads/Expense
Ratios
Asset allocation
and Diversificati
-on
Number of options in the plan
Underlying fund quality
•Parents open account directly with 529
•Available in 48 states
Direct Sold 529
Plan
•Only available through an advisor
•Rarely beats a good direct sold plan
Advisor Sold 529
Plan
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Paying for College: 529 Plans
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Pros
Earnings grow tax free: so more money at
withdrawal
Only 5.64% of 529 assets are counted against aid
The withdrawal does not count as income on next years financial aid forms
Cons
If withdrawn for non education purposes, 10%
penalty and tax on earnings
Cannot claim Education tax credits
529 plans charge management fees. However there are great
plans with very low fees available
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Savings
Parents use the following strategies…
Loans Savings
Income
Savings Income
Savings
Loans Income
Income Savings
Home Equity
Loans Income
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Loans
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Federal Student Loans Students borrow, not parents
Parent Plus Loans
Home Equity Loans/ Line of Credit Private Education Loans
Loans against 401k accounts
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Federal Student Loans
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Subsidized
• Need based • Interest accrues after
graduation • Annual Limit
Unsubsidized
• Any student can borrow
• Interest starts accruing immediately
• Annual Limit
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Paying for College: Federal Student Loan
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Pros
Student has a responsibility towards education and employment
Grace period of 6 months after graduation for repayment
Income based repayment of loans
Does not affect credit score. Does not put parent on the hook
Cons
It’s a loan. Student debt is a problem. Can affect later financial decisions
Cannot discharge loan in bankruptcy.
Annual and maximum limits. Max limit covers just 1 yr at a UC!
Have to file the FAFSA every year to get loans for all years of study
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Paying for College: Pros and Cons
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Visit https://www.vuefolio.com/
To learn about PROS and CONS
529 Plans Investment/ Savings Accounts
Custodial Accounts ESPP
Roth IRA
Federal Student Loans Parent Plus Loans
Home Equity Loan/
Line of Credit
Private Education Loans
Loans against 401k accounts
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The strategic way to pay for college
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Financial Aid Eligibility • Child eligible for need
based aid?
Beyond first year • Will your child need aid to
continue studying?
Investments • Do you have investments
which can be used in a tax efficient way?
Siblings • Any siblings going to
college during the same time?
Student Loans • Discuss with your child
about student loans and its pros and cons
Income • Monthly income enough for
regular expenses + college costs?
Retirement: • How old are you? Is your
retirement secured?
Home Equity • Do you have home equity?
Is it being counted ? Thinking of tapping into it?
Loan impact • What impact will loans for
education have on your retirement/life?
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Choosing a college …
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College & Major
Acceptance Academics
Extra Curricular
Personality Fit
Financials
ROI: Employability
after graduation
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Online Resources
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https://www.sofi.com/ https://collegeabacus.org/ https://www.collegeboard.org/
https://fafsa.ed.gov/ http://www.ed.gov/
https://studentaid.ed.gov/ http://www.cde.ca.gov/
Information on saving and paying:
Information on private loans:
Information on aid/loans:
https://www.edvisors.com/
https://www.tuition.io/ https://www.edvisors.com/
https://www.meritaid.com/ https://www.scholarships.com/
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Thank you for your time.
To learn more, check out our website
https://www.vuefolio.com
Disclaimer: Vuefolio does not render legal, accounting, or tax advice. This presentation is solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Vuefolio is not responsible for any college costs, financial aid, student or any other kinds of loans, investment performance of the 529 state plans. Any data quoted represents historical information. Any past performance quoted is no guarantee of future results. Vuefolio is a SEC registered Investment Adviser.