Financing
Higher
Education
how to get it and
how to pay for it
Who We Are
“Making college accessible and
affordable for Illinois students.”
- ISAC’s Mission Statement
Is a college education a sound investment?
DEAL OR NO DEAL
What are the costs?
Tuition & Fees
Room & Board
Transportation
Books & Supplies
+
Miscellaneous Living Expenses
Cost of Attendance (COA)
Cost of Attendance
Average U.S. Undergraduate Budgets, 2012-2013
$43,289
$35,312
$22,261
$15,584
Source: The College Board, Trends in College Pricing 2012; Annual Survey of Colleges.
Increase in cost
College costs are rising, and that's a fact. In Illinois alone, tuition increases
have averaged between 7 and 8 percent each year for the past 20 years.
Source: Illinois Student Assistance Commission, Historical Illinois Tuition & Fees
Is college worth the cost?
Individuals with higher levels of education
earn more and are more likely than others
to be employed.
Source: Illinois Department of Employment Securities, Learn More Earn More, 2010.
Job Trends
Growth Rates
Average Projected Growth Rate for all Jobs
All Jobs
Growth Rates for Jobs That Require Some Higher Education
In Illinois, jobs that
require higher
education are
growing faster
than those that
require less
education.
Advanced Degrees
Bachelor’s Degrees
Associate’s Degrees
Postsecondary Vocational
Training
Growth Rates for Jobs That Do Not Require Higher Education
Work Experience in
a Related Occupation
Moderate-term on-the
job Training
Short-term on-the
job Training
Projected Rate of Increase in Number of Jobs
Source: Illinois Department of Employment Securities, Learn More Earn More, 2010.
How to get it
COLLEGE EDUCATION
Why do YOU
want to go to
college?
There is no “one-size-fits-all”
Start
with the
end in
mind
Person
Price
Program
• Who are you?
• How will you and
your family pay?
• What will you
study?
Place
• Where will you live
and learn?
People
• Who will help you
learn and grow?
Know the Players
It is in your
best interest to
know their
roles
Admission Office
Financial Aid
Office
Registrar
Bursar’s Office
Student Services
Student Financial
Services
Illinois Colleges and Universities
9
public universities on 12 campuses
51
community colleges
97
independent not-for-profit colleges
and universities
35
independent for-profit institutions
Different types of degrees
come from different types of
colleges for different types
of study.
•
Certificates, Licensures
& Registrations
•
Undergraduate (i.e.
Associate & Bachelor)
•
Graduate (i.e. Master,
Doctoral, Professional)
Refer to isac.org for a
Map of Illinois Colleges.
Community College
Myths Are Not Facts
Myth 1. “I just won’t get a high quality education at a community
college.”
Myth 2. “Financial aid is harder to get at a community college.”
Myth 3. “Transferring to a four-year college is very difficult to do after
attending a community college.”
Myth 4. “Even if I am able to transfer to a four-year college, I’ll be
unprepared for the rigors of tougher classes.”
Myth 5. “If my child attends a community college, he is likely to drop
out.”
FACT. A good student can get a good education almost anywhere.
Source: Bissonnette, Zac (2010). Debt Free U.
Choose a Major That Makes Sense
Regional Wage and
Employment Information
Recognize that your intelligence,
motivation, passion, and choice of career
path will have a far greater impact on your
financial and life success than your choice
of major.
Source: Illinois Department of Employment Security, Economic Information and Analysis Division. Wage data for 2008Q3; Employment projections 20062016 series. Visit lmi.ides.state.il.us for more detailed information.
How much can you afford, and where will you get the money?
SHOW ME THE MONEY
How will you
pay for four
years of
college?
Tax Credits
Financial
Aid
Programs
Loan
Repayment
Programs
Start at a
Community
College
529 Savings
& Prepaid
Tuition
Programs
Employer
Tuition
Reimburseme
nt Plans
Tuition
Payment
Plans
Start Early…
What is Financial Aid?
Financial aid helps make up the difference
between what you can afford to pay and the cost
of college.
Grants
gift aid
Scholarships
self-help
aid
Work-Study
Loans
Note: Funds may be merit-based,
need-based, or non need-based.
Sources of Financial Aid
Financial aid comes from a variety of sources.
U.S. Department of
Education’s Office of
Federal Student Aid
Illinois Student
Assistance
Commission
College
(institutional aid)
Private Sources
The Financial Aid Process
Complete
FAFSA
Receive and
review the
Student Aid
Report
Receive and
review
Respond
Award Letter
to college
Renew
FAFSA
every year
Complete
verification
process
(if selected)
Complete all
pending
processes
The Big Three
Financial Aid Programs
Up to
$4,968*
Up to
$5,550*
Up to
$4,000*
Total = $14,518
* Maximum award for 2013-2014
State of Illinois
Monetary Award
Program (MAP)
Federal Pell Grant
Federal Supplemental
Education Opportunity
Grant (FSEOG)
Financial Need
How much aid can a student receive?
Cost of
Attendance
(COA)
-
Expected
Family
Contribution
=
Financial
Need
(EFC)
Ask Questions
• What percentage of my financial need will you meet?
• What percentage of the financial aid offer will be
made up of loans?
In
Out
“Schools are not car dealerships
where you can get a better deal
through a combination of bluff and
bluster. It’s a much more formulaic
process.”
- Zac Bissonnette, Debt-Free U (2010)
No Savings, No Loan, and No Financial Aid
Change Your Spending Habits
Pay for College Monthly
•
Tuition Payment Plans
(a small set-up fee may apply
Pay-As-You-Go Method
•
•
Hard-Work
Short-Term Sacrifice
Tax Credits
The IRS offers federal income tax credits to
certain tax payers for higher education expenses.
TAX CREDIT
American
Opportunity
Tax Credit
Lifetime
Learning
VALUE
DETAILS
Up to $2,500 of the cost of
tuition and related expenses
Available for the first 4 years of
postsecondary education
Up to $2,000 for qualified
expenses per return
Applies to undergraduate, graduate, and professional
degree students and for less-than half-time study.
See IRS Publication 970 at www.irs.gov
How to handle student loans after graduation
IT’S A BIG, BIG LOAN
What is a loan?
A loan provides borrowed funds that you
must repay with interest. It is a serious
financial and legal obligation.
The federal government requires:
•
•
Entrance Counseling
Exit Counseling
Subsidized vs. Unsubsidized
Within limits, the financial aid administrator of the college
determines the amount for which you are eligible.
Know the differences
Type
Need or no need
Interest
Subsidized
Stafford Loan
•
A need-based loan
•
Interest on the loan is paid by
the federal government while
you are in school and during
authorized periods of
deferment.
Unsubsidized
Stafford Loan
•
NOT a need-based loan
•
You are responsible for paying
the interest on your loan from
the date of disbursement
Federal Loan Programs (for Undergraduates)
Type
Rate
Grace
Perkins
Subsidized
5%
Fixed
9
Months
Stafford
Subsidized
3.86%
Fixed
6
Months
Unsubsidized
3.86%
fixed
6
Months
Credit-based
6.41%
fixed
Could be within first
60 days
(2013-2014)
PLUS
Note: Unsubsidized Stafford Loans for Graduate students have a fixed interest rate of 5.41%.
* FAFSA and Program Application(s) are Required
Borrowing Limits
How much can a student borrow?
Federal student loans have annual maximums that
are based on:
grade level
dependency
status
aggregate
limits
Too many students borrow amounts that are likely to cause
them difficulties, particularly if their earnings are either below
average or unusually uneven over time.
Debt Burden
How much should a student borrow?
Experts recommend that student loan payments do not exceed 8% of
the work income in year one.
31
For every $10,000 in income,
no more than $800 in loan
payments per year
Debt to Income Ratio
One way to look at the relationship between monthly debt
and income.
Total
Monthly
Debt
Payments
Total
Monthly
Net
Income
Debt to
Income
Ratio
If the resulting percentage is:
Under 15%
RELAX – The debt to income ratio is well within an acceptable range.
15%-20%
BE CAUTIOUS – The borrower may want to reduce the current debt load.
Over 20%
DANGER – The borrower is heavily indebted and should not consider
taking additional debt!
Source: Money Management International. Understanding Money and Credit.
Know What You’re Signing
All federal student loan borrowers must complete and sign
a Master Promissory Note (MPN), agreeing to repay:
loan funds
interest
As with any debt, you are responsible for
paying your loan even if you:
did not complete
school
cannot find a job
in your field of
study
feel that you did
not receive the
educational
services you
purchased
Repayment /Forgiveness Programs
Typically, qualifying borrowers are those who commit to
work for a specific amount of time in a field that has
experienced a shortage of workers.
ILLINOIS
FEDERAL
Illinois Teachers and Child Care
Providers Loan Repayment
Stafford Loan Forgiveness for Teachers
Nurse Educator Loan Repayment
Public Interest Attorney
Loan Repayment Assistance
Public Service Loan Forgiveness
Veterans' Home Nurse Loan Repayment
Avoid Default
Default is defined as being 270 days delinquent
or behind in loan payments.
PENALTIES
CREDIT
RATING
FINANCIAL
AID
BENEFITS
TAX
REFUNDS
INCOME
CREDENTIALS
Default and
penalties
under the
law
An adverse
credit rating
that impacts
future ability
to borrow
Loss of
eligibility for
all federal
student aid
programs
Loss of
deferment or
forbearance
options
Federal and
state tax
refunds to be
withheld
Garnishment
of wages
Loss of
certain
professional
licenses
Loans are not dischargeable in bankruptcy.
Know Your Rights
Loan Cancellation
As a federal student loan
borrower, you are entitled
to the following:
Loan Forgiveness
Prepayment
Deferment
Forbearance
Loan Consolidation
Loan Sales
How does my student loan affect my credit?
• A defaulted student loan (270 days delinquent) will stay
on your credit report for 10 years!
•
Delinquencies (late payments) reduce your credit score
What is a credit score?
• A number based on a statistical analysis of a
person's credit files
•
An indicator of the likelihood that a person will pay his
or her debts
Equifax
Trans Union
Experian
interest rate on
loans
ability to
purchase a home
or rent an
apartment
employment
Your Credit
History Matters
credit
score
ability to receive
more credit
Factors to consider
DO’S AND DON'TS
Graduate with Less Debt
Debt adds up quickly, so keep an eye on it.
Search for more
scholarships
and grants
Consider
transferring to a
less-expensive
school
Work while
attending school
Start at a
community
college
Change your
spending
habits
If you decide to stop
your studies,
withdraw
properly
Manage Your Debt
Be in the
Know
Seek rate
discounts &
repayment
benefits
How
much do
you owe?
Pay more
than the
required
minimum
When are
payments
due?
Look at college as a rational
investment, not a coming-of-age
ritual where money is no object.
- Zac Bissonnette, Debt-Free U (2010)
Time, Money, and Energy
Trusted Web Sites
Get your hands on up-to-date, accurate and trusted
sources of information to learn what you need to know.
KnowHow2GOIllinois.org
WhatsNextIllinois.org
isac.org
FederalStudentAid.ed.gov
FAFSA.gov
CollegeNavigator.ed.gov
PIN.ed.gov
Find answers to your questions
Illinois Student Assistance Commission
800.899.ISAC (4722)
isac.org
isac.studentservices@isac.illinois.gov