FUND CH8 Education and Funding Flashcards
Planners should be able to answer (5) client questions regarding Planning for college education
o How much is current tuition?
o How much is tuition expected to increase in the future?
o What other costs are associated with a college education?
o What type of financial aid is available and where to locate information regarding financial aid?
o What are the tax advantaged plans, deductions, and credits available for education funding?
Financial aid is administered by
U.S. Department of Education
Approximately what percent of all full-time undergraduate students receive some type of financial aid
85
Financial Aid Process
Is initiated by completing the Free Application for Federal Student Aid (FAFSA)
EFC determined
Information contained in the FAFSA can be provided to
universities
Expected Family Contribution amount
(EFC) three methods
o Regular Formula: Income and Assets
o Simplified Method
o Automatically Assessed Formulas
Financial Need vs. EFC
The EFC is subtracted from the cost of attendance at a
university and can include living expenses
Grants
Grants are money provided to students for postsecondary education that does not require repayment. Typically awarded based on financial need
Federal government only awards grants for undergraduate studies
Federal Grant Types (5)
o Federal Pell Grant
o Teacher Education Assistance for College and Higher Education (TEACH) Grant
o Academic Competitiveness Grant (ACG)
o National Science and Mathematics Access to Retain Talent (SMART) Grant
o Federal Supplemental Educational Opportunity Grant (FSEOG)
Financial Aid – Loans Stafford Loan
- Stafford Loans are administered by the U.S. Department of Education.
- Funds are provided by the federal government.
- Students with low incomes and large loan balances are only required to repay up to 10 percent of their income each year
- Forgives loans after 20 years of repayment
- For a subsidized loan, the federal government pays interest on the loan while the borrower is in school.
- For an unsubsidized loan, the borrower is responsible for interest from the time the funds are dispersed.
- Interest rates for Stafford Loans can be found at the U.S. Department of Education’s website
Loan Programs
Federal Perkins Loan program
Parent PLUS Loans
Graduate PLUS Loans
Federal Perkins Loan program
oIs for undergraduate and graduate students with exceptional financial need.
o Has a low interest rate loan (5%).
Parent PLUS Loans
o Are for parents to borrow to help pay for a dependent’s undergraduate education expenses
o PLUS Loans are not based on financial need, but are instead based on the parent’s credit history.
Graduate PLUS Loans
o Are for student’s seeking graduate and professional degrees.
o Based on the parent’s credit history and is not based on financial need.
Income Based Repayment (IBR)
- IBR
- Pay as You Earn Repayment:
- Income Contingent Repayment:
Income Contingent Repayment:
o Similar to Pay as You Earn, except 20% of
discretionary income with 25 year loan forgiveness
o Only available from US Dept. of Education
o Qualified higher education expenses include tuition
and fees, books, room and board, and computer
related expenses
