Theme 8: Financing College
What is “College?”
• What are you paying for?
• What do you hope to gain from the experience?
• What is this product?
Why go to college?
College graduates make
more money?
Average Lifetime Earnings
Professional Degree $5,612,760
Doctorate (Ph.D.) $4,449,440
Master's Degree $3,337,800
Bachelor's Degree $2,742,160
Associate's Degree $1,920,680
Some College, No Degree $1,863,040
High School Graduate $1,531,400
High School Dropout $1,102,120
Paying for College:
Your Role
• You have the primary
responsibility to pay for higher
education.
o Alternatives?
• The role of financial aid is to
offer assistance to families who
need help paying for college
o Who?
• Main players:
o Students
o ~ Parents
Consider
• No one knows better than recent grads how
expensive college is. The college class of 2016
graduated with an avg. of $37,172 in student
loans says Mark Kantowitz, a higher-education
expert. They were the most indebted class ever-
up 6% from the year before.
• With debt totals climbing each year, it’s easy to
picture today’s high school seniors owing more
than $40,000 when they finish college.
•
So how do people do
it??
Sallie Mae- 2012
5 Types of Student
Aid
1) Gift aid, such as grants and scholarships: free money
that does not need to be repaid.
o Scholarships and grants can be academic, athletic, income-based or
sociocultural
2) Work-study jobs: Part-time student employment jobs which
let you earn as you learn.
o Work study is based on your family’s income and is filled on a 1st come
1st serve basis
3) Student loans: Money that is repaid over several years,
usually with interest.
o Student loans may be taken out by the student or the parent
4) Education tax benefits: such as the Hope Scholarship tax
credit, which is money you get by filing a federal income tax
return, even if you don’t owe any taxes.
5) Military student aid: such as ROTC and the GI Bill, where
you earn money for your education in exchange for service in
the United States Armed Forces.
So which is the best
type of student aid?
• Grants and scholarships are better than student
loans because you don’t have to pay them back!
• Need Based: Some funds are awarded based on
financial need (the difference between the costs and
ability to pay)
• Merit Based: Some funds are based on academic,
artistic or athletic merit or other skills and activities
• GPA/ACT or SAT score/Class rank/extracurriculars
• Some funds are based on unusual criteria
– Creating a prom costume out of duct tape
– A scholarship for left-handed students
Federal v. Private
Loans
• Benefits of Federal loans:
o Federal student loans come with a number of
benefits typically unavailable with private
options. Once they enter repayment, federal
student loans let you base payments on your
income, pause repayment if you’re unemployed or
facing a financial hardship, and potentially forgive
your balance if you meet certain criteria.
- (US News and World Reports)
• Loan Comparison-
$30,000 Federal Student Repayment v. $30
Private Student Repayment
• Interest Rate: 3.75% • Interest rate: 8.5%
• $300.33 (monthly • 371.96 (monthly
payment) X 120 payment) X 120 months
months= $36,099.04 = $44,634.85
• How much in interest? • How much in interest?
• What’s the difference?
University
Endowments
• Endowments represent money or other financial
assets that are donated to universities or
colleges.
o The sole intention of the endowment is to
invest it and further invest in the institution.
o They often follow very strict guidelines about
how much can invested back into the
institution each year and for what reasons.
o One reason is to cover tuition of future
students.
• Less than $60,000 and you are accepted, you
may not have to take out loans.
Paying for College-
The Bottom Line
Cost of Attendance/Budget
o Billable (Tuition, Room and Board, Fees)
o Non Billable (Books, Personal Expenses,
Travel Expenses)
Cost (Billable and Non-Billable) - financial aid you receive
=
What you will need to pay
Ted Talks: How
Student Loans Exploit
Students for Profit-
Sanjay Samuel
