TRENDS IN EDUCATION FINANCE

1. TRENDS IN EDUCATION FINANCE Jill Gosse, Senior Account Executive Spring 2014

2. Agenda This presentation is an overview of trends in the industry and how families are paying for college • Total Cost of Education • Is it Worth It? • How America Pays for College • Best Practices for Counseling Families

3. Total Cost of Education

4. College Costs Continue to Increase Average Published Charges for Undergraduates, AY 2012-13 SOURCE: College Board Trends in College Pricing 2012.

5. Trends Likely to Shape Student Aid • Rising cost of attendance • Decline in availability of non-federal sources of funding • Decline in family contribution • Decline in state and institutional funding due to budget constraints • Increase in enrollment • Changes to PLUS loan eligibility • Limited number of providers

6. Legislative / Regulatory Issues • Higher Education Act (HEA) up for reauthorization • No official action expected • Extended on year-by-year basis • 2013 hearings and proposals • Sequestration • Increase in fees on Stafford Loans to 1.072% and PLUS Loans to 4.288% • Reduced funding for other higher education programs funded from non-exempt accounts, including federal work-study, SEOG, TRIO, GEAR UP, and other smaller programs.  • Federal loan interest rates • Rates reduced July 1, 2013, looks like over 1% increase in ‘14 • Pell Grant shortfall • FY 2014 appropriations must find $6B to $9B to fund • Pell Grants at current levels for AY 14-15 • 10-year shortfall is nearly $80B

7. Total Education Spend 1) Total education spend includes “all-in” cost of attendance (e.g., in AY09-10, total spend of $387B was comprised of $203B in tuition and fees, $122B in room and board, $17B in books and supplies, and $45B in transportation/other costs). 2) Grants include federal, state, institutional, and private/employer. 3) Includes private loans based on MeasureOne data. 4) Fall enrollment – degree granting - AY1213 estimated. *Sources: Department of Education, College Board, McKinsey & Company team analysis, MeasureOne, National Student Clearinghouse

8. Proportion using Federal and Private Student Loans Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013

9. Average Individual Indebtedness Average outstanding student loan balance per borrower = $23,300. Median balance = $12,800 10% owe more than $ 54,000 3% owe more than $100,000

10. The Pell Grant Shortfall

11. Is it Worth It?

12. Education Pays • 31% of the total population ages 25 and older held a Bachelor’s degree or higher, 43% had a high school degree or less • The unemployment rate for individuals 25 and older with at least a bachelor’s degree averaged 4.0%, compared with an average unemployment rate of 6.8% for all individuals 25 and older. Source: Bureau of Labor Statistics, Current Population Survey 2012 Data is for age 25 and over, earnings are for full-time wage and salary workers

13. Recent Research Reinforces Value of College Degree: College Degree Recipients Weather Recession Better Than Less Educated Source: Georgetown Public Policy Institute, Center on Education and the Workforce , “The College Advantage: Weathering the Economic Storm,”

14. Agreement with Value of College, Year-Over-Year Willing to Stretch Financially Rather Borrow Than Not Go An Investment in The Future Degree More Important Now *Not asked in 2008 or 2009 Strongly Agree Somewhat Agree Source: “How America Pays for College,” August 2013

15. Recent Graduates & The Great Recession Of those who graduated between 2006 -2011 Progress Students Have Made Paying Off Debt Confidence in the Next 10 Years That… Sources: The John J. Heldrich Center for Workforce Development Chasing the American Dream: Recent College Graduates and the Great Recession, May 2012

16. How Well Do Students Correlate Amount Borrowed and Repayment? The Future? Student Estimates of Monthly Loan Repayment Actual Monthly Cost

17. How America Pays for College

18. College Savings College savings reach new high in 2012 Total Assets in State-Sponsored Section 529 Savings Plans ($ Billions) Note: Values for 1999 through 2011 are as of December 31. Value for 2012 is as of June 30. SOURCE: College Board Trends in Student Aid 2012. Data provided by College Savings Plans Network (www.collegesavings.org).

19. Role of Savings • 17% of families used parent savings from dedicated college savings plans/529s • 5% used retirement savings • 11% used parent savings from other types of investments • 27% of families used student savings Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013

20. Differences in Affordable Actions Taken by SchoolType SOURCE: Sallie Mae (with Ipsos Public Affairs): How America Pays for College, 2013.

21. Affordable Actions **Among students not living at home *Among non-freshmen Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013

22. Cumulative Elimination of Colleges Based on Cost, Year-Over-Year Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013

23. Completion of FAFSA by grade level, year-over year Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013

24. FAFSA Trends • 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,

25. How the Typical Family Pays for College, Funding Source Share Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013

26. Use of Grants and Scholarships, by School Type Source: Sallie Mae (with Ipsos Public Affairs); How America Pays for College, 2013

27. Best Practices for Counseling Families

28. Scholarship Search – Best Practices • Families should look for resources that offer: • FREE, easy-to-use database • Calendar listing scholarships by deadline • Filtering capabilities • By name • By deadline • By award amount • Rating of scholarships • Adjustable settings

29. Scholarship Tools • Sallie Mae’s free scholarship search provides access to more than 3 million scholarships • SallieMae.com/ScholarshipSearch • Fastweb.com features over 1.5 million scholarships • Fastweb.com/College-Scholarships • Private Scholarship Resources • KFC Scholarship • Coca-Cola Scholarship • Ronald McDonald Scholarship • Scholarships for Women • Wal-Mart Scholarship • African American Scholarships • Target Scholarship Application • Scholarship America • ScholarshipAmerica.org

30. Parents Want Shared Responsibility • Parents are key contributors to college education, paying 36% of the overall cost: • 73% of parents believe paying for college should be a shared responsibility • 13% say parents should be entirely responsible for costs • 42% of parents do not want the loan in their name • The College Savings Foundation’s 2011 Survey of Parents found that: • 94% of parents intend to pay some of the costs of college for their child • 72% are planning to pay half or more of the cost • Parents use various sources to fund the gap: • Parent’s current income • 529 plans • 401(k) loans and withdrawals • Other savings & investments • PLUS Loans • Private Loans • Home Equity Loans • Credit Cards SOURCES: Sallie Mae(with Ipsos Public Affairs); How America Pays for College, 2012; College Savings Foundation 2012 Survey of Parents; Rockbridge 2012.

31. Gap Financing Tips • Families should understand the total cost of funding and should consider a package of gap financing options and not limit themselves to just one • Cash, Tuition Payment Plans, PLUS Loans and Private Loans • Families should only borrow what they need • Responsible borrowing: A creditworthy borrower has good or excellent credit, an ability to repay the loan and the capacity to take on the debt • The Ability to Pay: A comparison of the applicant’s total debt to their total income and a review of their outstanding student loan indebtedness • Stability: How long they have been at their current address, job stability, and established credit history • Willingness to Pay: Credit score and payment history on other types of credit

32. Tuition Payment Plans • Most colleges and universities offer tuition payment plans • 52% of families report using parents’ current income to pay for college – many of them are using a tuition payment plan • Allows parents and students to pay their tuition in manageable monthly payments using their income • Tuition payment plans help attract and retain students by giving them an additional funding solution • Provides an interest free funding option

33. Private Loan Trends • Some lenders are offering fixed rates as good or better than PLUS loans to highly qualified graduate students • Schools are becoming concerned about debt in the student’s name • Death and disability discharge • Families are becoming concerned about using 401K to pay for their child’s education • Some lenders have programs available for cohorts of students not eligible for federal programs • LTHT students • Prior balances

34. Questions

35. 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. For school use only. Not to be distributed to students. MKT8043