Tools for Financing Education Presented by Keri Neidig and Claudine Murphy Sallie Mae

1. Tools for Financing Education Presented by Keri Neidig and Claudine Murphy Sallie Mae

2. What We Will Cover • Cost of a College Education • How America Pays for College • 1 – 2 – 3 Approach to Funding Education • Free Money • Federal Loans • Gap Funding Options

3. Cost of a College Education

4. Students Value a College Education Source: College Board (by Hart Research Associates): One Year Out, Findings from a National Survey Among Members of the High School Graduating Class of 2010 Considering the money and time involved in getting a college degree, do you think getting a college degree today is worth it?

5. Students Value a College Education (Cont) Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2011 Majority of enrolledundergraduates andParents strongly agree that, “College is an investment in the student’s future.” In 2011, student Strong agreement rose to 90%.

6. College Cost Continues to Increase • Estimates for academic year 2010/2011 indicate that 20 million students enrolled in higher education and incurred costs of over $410 billion.

7. College Cost Continues to Increase (Cont) • Assuming Federal Loans and Grants remain constant – a 4% increase in the cost of education would result in $15 billion incremental funding requirement for students and families.

8. Students’ Challenges Going to College • The biggest challenge faced in transition to college was financial Source: College Board (by Hart Research Associates): One Year Out, Findings from a National Survey Among Members of the High School Graduating Class of 2010

9. How America Paysfor College

10. Managing College Costs • Families are making decisions to reduce cost: • Lower-cost school choices • Living at home • Reducing personal spending Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2011

11. How the Typical Family Pays for College • Average Percent of Total Cost of Attendance Paid from Each SourceAcademic Year 2010-2011 Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2011

12. College Savings • College savings reach new high in 2011 Total Assetsin State-Sponsored Section 529 Savings Plans ($ Billions) Source: College Board 2010 Trends in Student Aid and Financial Research Corp., data as of June 2011

13. 1-2-3 Approach for Funding Education

14. 1-2-3 Approach to Paying for College • Step 1. Use Free Money • Grants • Scholarships • Work-study • 529 Savings Account • Tuition Payment Plans • Step 2. Explore Federal Loans • Federal loans – some available regardless of need – offer options for both students and parents • Stafford • PLUS • Step 3. Fill Any Gaps • After free money and federal loans, private education loans may be the best alternative to cover the rest of the education costs.

15. Federal Grants Source: College Board 2010 Trends in Student Aid Combined Federal Grant Volume up $15 Billion

16. Scholarship Tools Sallie Mae’s free scholarship search provides more than 3 million scholarships worth More than $16 billion • SallieMae.com/ScholarshipSearch FastWeb.com features over 1.5 million scholarships • Fastweb.com/College-Scholarships Scholarship America • ScholarshipAmerica.org • Private Scholarship • Resources • KFC Scholarship • Coca-Cola Scholarship • Ronald McDonald Scholarship • Scholarships for Women • WalMart Scholarship • African American Scholarships • Target Scholarship Application

17. Scholarship Search - Best Practices • FREE Easy-to-use database • Calendar listing scholarships by deadline • Filtering capabilities • By name • By deadline • By award amount • Rating of scholarships • Adjustable settings

18. Tuition Payment Plans • Most colleges and universities offer tuition payment plans • 26% of families report using a tuition payment plan in academic year 2010-2011 to pay for undergraduate education • Tuition Payment Plans help attract and retain students by giving them an additional funding solution

19. Rate of FAFSA Completions,Year-over-Year • FAFSA completion is growing • Freshman rates continue to increase • Reasons for not completing the FAFSA: • Didn’t need aid • Didn’t believe their family would qualify • Weren’t aware of FAFSA Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2011

20. Student Loans: Federal & Private Loan Originations ($MM) Source:College Board 2010 Trendsin Student Aid

21. Federal Student Aid: 2011-15 Plan TRENDS LIKELY TO SHAPE FEDERAL STUDENT AID • Rising cost of attendance • Decline in availability of nonfederal sources of funding • Decline in family contribution • Decline in state and institutional funding due to budget constraints • Increase in enrollment • Expanded role of the federal government in student aid • As borrowers increase the FSA continues to increase its budget Source: FSA Strategic Plan FY 2011-15

22. Parents Want Shared Responsibility • Parents are key contributors to college education, paying 37% of the overall cost • 75% of parents believe paying for college should be a shared responsibility • 13% say parents should be entirely responsible for costs • 94% of parents intend to pay some of the costs of college for their child • 72% planning to pay half or more of the cost • Parents use various sources to fund the gap: • Parent’s current income • 529 plans • 401k loans and withdrawals • Other savings & investments • PLUS loans • Private loans • Home equity loans • Credit cards Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2011

23. Commonly Used Gap Financing Tools

24. PLUS vs. Cosigning a Private Loan • Parents want shared responsibility – and they have the option to take on some of the cost by borrowing a PLUS loan in their own name • Cosigning a private student loan is another form of sharing the financial responsibility – most private loans offer cosigner release

25. PLUS vs. Cosigning a Private Loan (Cont)

26. Fixed vs. Variable Rate Private Loans • Fixed interest rates appeal to consumers and seem to convey a sense of stability • Consumers should be educated and gain an understanding that while a variable rate can go up,it can also go down. Over time, a customer will see movement in both directions, and the net effect over time may be fairly small • Many families view gap funding through private loans as a short-term financing • Fixed rate loans are most beneficial for loans with a long lifetime • Variable rates, especially for well-qualified families, are more beneficial in a low interest rate environment • Fixed rate loans can come at a premium to borrowers with good credit. We encourage schools and borrowers to evaluate both fixed and variable rate loan options

27. Questions Questions

28. The information contained in this presentation is not comprehensive, • is subject to constant change, and therefore should serve only as • general, background information for further investigation and study • related to the subject matter and the specific factual circumstances • being considered or evaluated.  Nothing in this presentation • constitutes or is designed to constitute legal advice.