Make College a Reality

Saving for College

Your 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

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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

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1 Cost of College 2014-2015

Average Estimated Full-Time Undergraduate Budgets by Sector, 2014-15

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Financial Aid Breakdown

Undergraduate Student Aid 2012-13 ($185.1 Billion)

Source: The College Board, Trends in Student Aid 2013 5

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

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2 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.

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How the Formula Works

$60,000 Eligibility $40,000 EFC = $5,000 $20,000

$0

Cost of Attendance of Cost College A College B College C College D

Visit MEFA.org to learn about net price calculators

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True or False

“Saving for college means no financial aid.” False

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3 Expected Family Contribution

$ ++$ $ + $ = $

Parental income Parental assets Student income Student assets EFC

0% to 47% of 3% to 5.6% of 50% over 20% of all adjusted gross nonretirement $6,310 assets income minus assets all taxes and • 529 College • UGMA/UTMA allowances Savings Plans accounts • Brokerage and/or • Other savings mutual funds • Coverdell Education Savings Accounts • Prepaid Tuition Programs

Source: finaid.org The EFC formula above is used for the Federal Methodology.

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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 2015-16 Federal Methodology

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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 2015-16 Federal Methodology

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4 True or False

“It’s not worth saving for college if I can’t save the entire cost.” False

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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.

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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)

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5 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 In this hypothetical example, the Initial Investment is $26,000 security.

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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 1.800.544.2776 to get started.

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The U.Plan Prepaid Tuition Program

Established in 1995 How it works: • 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

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6 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

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The U.Plan Advantage: Locking In a Percentage

• As tuition costs vary, your Percentage Tuition & Initial Institution of Tuition & lock-in percentages vary Fees Investment Fees • Contributions year after year add up to a greater percentage College A $5,000 $1,000 20% of lock- in

• U.Plan locks in only tuition College B $10,000 $1,000 10% and mandatory fee expenses

College C $25,000 $1,000 4%

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The U.Plan: 80 Network Colleges & Universities

Fisher College North Shore Community College American International College Fitchburg State University Framingham State University Northern Essex Community College Anna Maria College Gordon College Art Institute of Boston at Lesley University Pine Manor College Greenfield Community College Quinsigamond Community College Assumption College Regis College Hebrew College Roxbury Community College Bay Path College Hellenic College Benjamin Franklin Institute of Technology Salem State University Holyoke Community College School of the Museum of Fine Arts Bentley College Laboure College Berklee College of Music Simmons College Lasell College Smith College Berkshire Community College Lesley University Springfield College Marian Court College Springfield Technical Community College Massachusetts Bay Community College Bridgewater State University Stonehill College Massachusetts College of Art and Design Bristol Community College Massachusetts College of Liberal Arts Bunker Hill Community College University of Massachusetts Amherst Massachusetts Maritime Academy University of Massachusetts Boston Cape Cod Community College Massasoit Community College University of Massachusetts Dartmouth University of Massachusetts Lowell College of Our Lady of the Elms Middlesex Community College College of the Holy Cross Montserrat College of Art Wentworth Institute of Technology Curry College Dean College Western New England University Mount Ida College Westfield State University Eastern Nazarene College Mount Wachusett Community College Emerson College Wheaton College New England Conservatory of Music Wheelock College Emmanuel College Newbury College Endicott College Worcester Polytechnic Institute Nichols College Worcester State University

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7 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?

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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.

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Helpful Websites: College Savings & Financial Aid

• MEFA: • College Board: MEFA.org CollegeBoard.com

• YourPlanForTheFuture: • Financial aid info: YourPlanForTheFuture.org finaid.org

• Fidelity Investments: • Federal Student Aid: fidelity.com StudentAid.ed.gov

• Info on college savings: • FAFSA4caster: SavingForCollege.com FAFSA.gov CollegeSavings.org • Net Price Calculators: All College Websites

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8 Questions?

Angelina Mancini, Manager of Early College Planning [email protected] 617.224.4817

Jonathan Hughes, Customer Service Team Leader [email protected] 617.224.4818

[email protected] 1.800.449.MEFA

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