Saving for College. Make College a Reality. About MEFA. Agenda

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1 Make College a Reality Saving for College Your Massachusetts Educational Financing Authority. The one Authority you can trust to be on your side when it comes to paying for college. 1 About MEFA Massachusetts Educational Financing Authority Not-for-profit state authority that works to make higher education more accessible and affordable Created in 1982 by the State Legislature Helping families: o Plan: Extensive community outreach o Save: U.Fund and U.Plan college savings plans o Pay: Affordable fixed interest rate college loans for over 30 years 2 Agenda Cost of College Understanding Financial Aid Myths about Saving Two Massachusetts Saving Options: U.Fund and U.Plan MEFA as a Resource for You Questions and Discussion 3 1

2 Cost of College Average Estimated Full-Time Undergraduate Budgets by Sector, Financial Aid Breakdown Undergraduate Student Aid ($185.1 Billion) Source: The College Board, Trends in Student Aid Two Different Ways to Award Aid Need-Based Financial Aid Based on family s financial eligibility ( need ) Eligibility determined by a standardized formula Includes grants, loans, and work-study Most financial aid is need-based Must meet certain GPA for renewal Merit-Based Financial Aid Awarded in recognition of student achievements (academic, artistic, athletic, etc.) Applicants often compared against one another May or may not be renewable Not offered at every school 6 6 2

3 Financial Aid Formula _ Cost of Attendance (COA) Expected Family Contribution (EFC) = Financial Aid Eligibility/Financial Need Visit MEFA.org to learn more about the financial aid process and calculate your estimated EFC. 7 7 How the Formula Works Cost of Attendance $60,000 $40,000 $20,000 $0 Eligibility EFC = $5,000 College A College B College C College D Visit MEFA.org to learn about net price calculators 8 True or False Saving for college means no financial aid. False 9 3

4 Expected Family Contribution $ + $ + $ + $ = $ Parental income Parental assets Student income Student assets EFC 0% to 47% of adjusted gross income minus all taxes and allowances 3% to 5.6% of nonretirement assets 529 College Savings Plans Brokerage and/or mutual funds 50% over $6,310 20% of all assets UGMA/UTMA accounts Other savings Coverdell Education Savings Accounts Prepaid Tuition Programs Source: finaid.org The EFC formula above is used for the Federal Methodology Asset Impact on EFC An example: 4 in the family, 1 child in college: Family A Family B Family C Parent Income $60,000 $60,000 $60,000 Parent Assets $0 $75,000 $150,000 EFC $5,040 $6,765 $10,635 Difference $1,725 $5,595 Based on Federal Methodology 11 Income Impact on EFC An example: 4 in the family, 1 child in college: Family A Family B Family C Parent Income $60,000 $100,000 $150,000 Parent Assets $50,000 $50,000 $50,000 EFC $5,745 $16,252 $31,609 Difference $10,507 $25,864 Based on Federal Methodology 12 4

5 True or False It s not worth saving for college if I can t save the entire cost. False 13 Saving vs. Borrowing Past Income Savings Other Assets Present Income Salary Gifts Future Income Parent Loans Student Loans *Based on 10 years at an interest rate of 7%. This example is an estimate only and market conditions may change. 14 Family Savings Options Assets Specific to College Section 529 Savings Plans (MEFA U.Fund) Prepaid Tuition Plans (MEFA U.Plan) Coverdell ESAs (formerly known as Education IRAs ) Assets Not Specific to College Direct Asset Ownership by Parent (CDs, money market accounts, etc.) UTMA/UGMA Accounts United States Savings Bonds Retirement Accounts (Roth IRAs and Traditional IRAs) 15 5

6 Tax-Deferred Savings This example is an estimate only and market conditions may change. The example is not intended to predict or project the investment performance of any security. In this hypothetical example, the Initial Investment is $26, MEFA U.Fund College Investing Plan Established in 1999 How it works: Save for qualified higher education expenses such as tuition, fees, room, board, books, supplies, and equipment Savings can be used at any accredited college or university nation wide Minimum Initial Investment - $50 lump sum or $15/ monthly automatic investments Combined Account Maximum - $375,000 Annual Account Maintenance Fee - No Fee Multiple investment options (active management; indexed portfolio; individual allocation portfolios), FDIC insured option Enroll online at fidelity.com/ufund or by calling to get started. 17 The U.Plan Prepaid Tuition Program How it works: Established in 1995 Allows you to prepay up to 100% of tuition & fees at 80 MA public and private colleges & universities By purchasing Tuition Certificates now, you lock in today s tuition and mandatory fee rates U.Plan Tuition Certificates: Represent interest in Commonwealth General Obligation Bonds Are backed by the full faith and credit of the Commonwealth of Massachusetts Are not subject to market fluctuation $300 minimum to get started Annual enrollment period: May 1st to June 30th each year To learn more about the U.Plan visit mefa.org/uplan 18 6

7 The U.Plan Benefits > Money saved in the U.Plan grows federal and state tax free for MA residents > Any unused U.Plan money is returned to the owner without penalty and including interest accrued at Consumer Price Index (CPI) > Account owner has full control of account and beneficiary assignment > Beneficiary can be changed at any time 19 The U.Plan Advantage: Locking In a Percentage As tuition costs vary, your lock-in percentages vary Institution Tuition & Fees Initial Investment Percentage of Tuition & Fees Contributions year after year add up to a greater percentage of lock- in U.Plan locks in only tuition and mandatory fee expenses College A $5,000 $1,000 20% College B $10,000 $1,000 10% College C $25,000 $1,000 4% 20 The U.Plan: 80 Network Colleges & Universities American International College Amherst College Anna Maria College Art Institute of Boston at Lesley University Assumption College Babson College Bay Path College Benjamin Franklin Institute of Technology Bentley College Berklee College of Music Berkshire Community College Boston College Boston University Bridgewater State University Bristol Community College Bunker Hill Community College Cape Cod Community College Clark University College of Our Lady of the Elms College of the Holy Cross Curry College Dean College Eastern Nazarene College Emerson College Emmanuel College Endicott College Fisher College Fitchburg State University Framingham State University Gordon College Greenfield Community College Hampshire College Hebrew College Hellenic College Holyoke Community College Laboure College Lasell College Lesley University Marian Court College Massachusetts Bay Community College Massachusetts College of Art and Design Massachusetts College of Liberal Arts Massachusetts Maritime Academy Massasoit Community College Merrimack College Middlesex Community College Montserrat College of Art Mount Holyoke College Mount Ida College Mount Wachusett Community College New England Conservatory of Music Newbury College Nichols College North Shore Community College Northeastern University Northern Essex Community College Pine Manor College Quinsigamond Community College Regis College Roxbury Community College Salem State University School of the Museum of Fine Arts Simmons College Smith College Springfield College Springfield Technical Community College Stonehill College Suffolk University University of Massachusetts Amherst University of Massachusetts Boston University of Massachusetts Dartmouth University of Massachusetts Lowell Wellesley College Wentworth Institute of Technology Western New England University Westfield State University Wheaton College Wheelock College Worcester Polytechnic Institute Worcester State University 21 7

8 What happens if I withdraw funds for another purpose? My child doesn t go to college? My child graduates without using all the funds? My child receives a scholarship? 22 Strategies for Saving Start saving as early as possible. Use time to your advantage. Use automatic transfers. Get the word out and let your family and friends know that they may contribute or open a plan on behalf of your child. Involve your child in the process. There are great savings tools for kids online. 23 Helpful Websites: College Savings & Financial Aid MEFA: MEFA.org YourPlanForTheFuture: YourPlanForTheFuture.org Fidelity Investments: fidelity.com Info on college savings: SavingForCollege.com CollegeSavings.org College Board: CollegeBoard.com Financial aid info: finaid.org Federal Student Aid: StudentAid.ed.gov FAFSA4caster: FAFSA.gov Net Price Calculators: All College Websites 24 8

9 Questions? Angelina Mancini, Manager of Early College Planning Jonathan Hughes, Customer Service Team Leader MEFA 25 9