Education funding

Question 1

Explain the steps to calculate education funding.

Answer 1

Calculate the first year cost
- current cost (PV)
- increase rate (I/Yr)
- # of years to save (N)
- Solve for FV
Change to Beginning Function
- FV value from step is first year cost. (PMT)
- calculate actual interest gained. (I/Yr)
Rate of return / rate of increase - 1 x 100
- number of years in school (N)
- solve for PV — this is the total amount for all years of school

Calculate annual amount to be saved.
— change to end
— PV from step 2 is entered as FV
— rate of return (I/YR)
— number of years to save
— solve for PMT

Question 2

Which loans are based on financial need and the interest is paid by the government while the student is enrolled?

Answer 2

Subsidized Stafford loans

Question 3

What kind of loan provides one maximum amount for undergrads and another amount for graduate students?

Answer 3

Federal Perkins Loan Program.

Question 4

What are characteristics of Series EE savings bonds being used for education funding?

Answer 4

Must be purchased in the name of the parent(s)
The parents have to be at least 24
The owners must redeem the bonds the same year expenses are paid.

Question 5

What are federal Pell grants?

Answer 5

Outright gifts from the govt. they are only for undergrads that have not previously received a bachelor’s degree

Question 6

What are the characteristics of a Federal Plus Loans?

Answer 6

Parents of undergrads can borrow the total amount of college expenses
Not based on financial need but a credit check is required
Principal can be deferred but the interest needs to be paid while in college.