Saving for College

This webinar is for parents with children of all ages and describes information and resources that families can use to put a college savings plan in place. We answer questions such as: Why and how much should I save for college? When and how should I start? What is the best way to save? How will saving affect college financial aid? Watch to learn how to prepare best for college costs.

Download the webinar slides to follow along.

Transcript

Please note that this transcript was auto-generated. We apologize for any minor errors in spelling or grammar.


[00:00:00] Graceful as I can and switch this to my PowerPoint that I have here and it's not going to be graceful enough I'm sure but let me try it and I apologize if it if it looks a mess for a minute or two All


right Wonderful.


Well, as I've already mentioned, this is MIFA Saving for College presentation. My name is Jonathan Hughes. I'm the Associate Director of College Planning and Content Creation at MIFA. I've worked at MIFA for a really long time. So I've talked with a lot of families, uh, over the years, the decades, in fact, that I've worked at MIFA.


And I'll tell you before I get started that saving for college is my favorite thing to talk about. Um, I worked for a long time and still work. Intimately [00:01:00] with our savings programs, two of which will will go over tonight. Well, both of them will go over them tonight. Um, but, um, I want to say before I get started, something that I repeat to families all the time, and it sounds Maybe like a line, but it is absolutely true.


And that is in all the time that I've been working for MIFA, I have never talked to anybody who has regretted saving what they saved for college. Everyone is glad that they've saved what they, what they have. Maybe they've wished that they've saved a bit more, but they always express gratitude for what they do have.


And that's one of the reasons that I really love to talk about savings because it's just good. It just helps people. To pay for college doesn't have, you know, the, the sort of, um, double edged sword of a loan or something like that, that you, you know, you might need to get, but of course you have to pay that back with interest savings is just going to help you, uh, pay for education.


And we're going to go over a couple of ways to maximize that help tonight. So before we [00:02:00] go through this presentation, if you have any questions, you can please put them in the Q and a. And I can answer those as we go. If I don't do that, um, it's because I know that. that the answer to that question is coming up, or maybe I want to wait to answer that question until after the presentation.


Uh, and if you want to wait, that's fine too. I'll be here after the presentation for as long as you have questions. Um, but feel free to ask. Before we get started the actual savings content, I want to tell you a little bit about MIFA. MIFA is the Massachusetts Educational Financing Authority. We're a state authority.


We were created by the Commonwealth of Massachusetts back in 1982, and we were created with a public service mission to To help families to plan, save and pay for college. And now I've added college and career readiness, um, to that. And, you know, when we were first created, we were created to offer a loan.


[00:03:00] Um, but you know, as time has continued on since 1982 and the cost of college has continued to rise. Uh, we just really understood how important adding those savings products and that saving curriculum was. So, uh, a couple of things we're going to talk about tonight. Why saving is important. I've already.


sort of talked a little bit about it. You, if you're here, obviously have some idea that savings is important. And, um, and we're going to talk about just why that is. We're going to talk about those Massachusetts savings options that MIFA offers, um, in, in detail. So that's the MIFA U Fund 529 plan and the MIFA U Plan prepaid tuition program.


I am always careful to say that whatever way you end up actually saving, is a good way to save. So, uh, having something saved, no matter what it is, is better than not having something saved. So I'm not really here to pitch a product to you, but there are certain ways where your college [00:04:00] savings will go a bit further or should go a bit further.


That is vehicles that are specifically designed for college and career savings and have benefits associated with them. And those, that's what these programs represent. Um, once we talk about that, we'll talk about strategies for savings, which is for saving, which is really important. So, um, what are some of the ways that we know that parents and families have had success in saving?


for, uh, college for their, their child. And then finally, and this is important, how families actually do pay for post secondary education. And when I say post secondary education, that just means whatever comes after high school. So it could be college, could be career training. Um, not everybody, Is going to go or needs to go to college, just whatever you're our kids end up doing or students end up doing after high school.


We want to make sure that they're in a position to succeed and, you know, circling back to my many years working at MIFA. [00:05:00] The number one question that I get from families is how do people. do this? How do people pay for college? Because it's, it can be overwhelming and you just want to know how do other people do this?


Um, so this is important. How families actually do pay for post secondary education. All right, starting off at the beginning, why saving is important. So I want to start by talking about a couple of myths. That we hear about saving for college. And so the first one is savings will hurt my fan financially.


These are the things that people think they know about college savings. And it, it sort of means that they don't start saving for college. They don't ever start saving or they start late because they're worried about these things. And we're really going to debunk some of these, these two myths here. The first one.


My savings will hurt my financial aid. Um, and it just really doesn't work that way. There are two ways to measure financial aid. This is, there are two ways that, that it can be awarded. So the first one [00:06:00] is merit scholarships. Those are things like academic scholarships, athletic scholarships. These, of course, have nothing to do with, um, with your finances and, and what you have saved.


Now, it's true that most financial aid granted in a year is not merit based financial aid, but need based financial aid. And that's when you're filing your financial aid forms. We're going to talk more about that near the end of the presentation, but when you're filing your financial aid forms, they're going to ask the family, you know, how much money you make, They're going to ask the student how much money you make.


They're going to ask the parents how much money you have in certain, um, savings vehicles or assets. They're going to ask the student the same question. And this is where sometimes your college savings might show up here and they may factor into your need based eligibility. But the fact is, If they do impact it, they impact it very, very minimally.


So parent income is really the main [00:07:00] driver, not assets, but income. The main driver of how much need based financial aid that you'll be eligible to receive. So they're going to take a look at all of your assets as a parent. And they're going to take anywhere from three to 5. 6 percent of that total asset as what you should contribute towards college.


So that's what that is. Whereas income, they'll take anywhere from zero to 47 percent of your adjusted gross income for the year as to what you can pay for college. It's a progressive scale. So the more you make, the more they'll expect you to pay. So income is way more. heavily factored in than savings or assets.


So it, to the extent that it may impact things, it will not impact it anywhere close to coming close to negating the value of actually having the savings. If you have 10, 000 saved, they're going to expect you in the financial aid formula then to pay an extra 560. So that's what we're talking about. The second [00:08:00] one is that it's not worth saving for college.


If I can't save the entire cost now, We hear about the cost of college a lot every fall, there are articles about it now costs this amount of dollars to go to this particular school for the year. Um, and if you have that in your head is the amount that you need to save times for, you know, I can see why it would be paralyzing.


I remember when my son was born, my colleague said, let's see how much college is going to be for him when he turns 18. And it was a huge number that I thought, Oh my God, I can never save that amount. And you know what? I probably can't save that amount, but that shouldn't be my target. There is financial aid available.


Most families are going to qualify for some level of financial aid and everything that you have saved is something that you don't have to finance another way, including borrowing. Um, so it is definitely worth it to save what you can, even if it's not the entire cost of college. And we're going to talk more about financial aid, as I said, later on.


near the end of [00:09:00] the presentation. So your college savings will definitely help you. Gives you more education options. It can increase the range of colleges that you're applying to or looking at. Really the biggest thing for me, it reduces or eliminates the need to borrow loans. So it was, we all know student loans and educational loans are a huge story right now.


Um, people are graduating sometimes with all this debt and they have a hard time paying that back. Loans can be part of how you pay for college, but you shouldn't be borrowing more than you can comfortably afford to pay back. And savings can play a huge role in, in making that a reality. As we've already mentioned, it has a minimal impact on financial aid eligibility.


And just having money saved in a 529 account, and they've done studies on this, um, is linked to increased attendance, college attendance, and graduation. So, and this is regardless of of the amount of money that you have [00:10:00] saved. Um, I believe that the figure is it makes attendance three times as likely and graduation four times as likely.


Any amount saved, if a child knows that money is being set aside for them in a 529 account. And this is true across income levels. It doesn't just benefit The upper and middle classes. Um, this is lower to middle income classes, um, as well. So this, we've seen this across the board. I see. I have a question here if I can get to it and I apologize.


I'm not that zoom changed the way they do things and it's kind of, um, confusing me still. Oh no, here we go. All right. Yeah, we're going to get somebody has questions on strategies for saving them. We're going to get to that. Um, first I want to talk about the two actual savings vehicles that you can use among many, but, um, the ones that we're going to talk about tonight are the Massachusetts specific options.


The first one being the MIFA U fund, and that's the [00:11:00] 529 plan and 529 plans. If you've heard of college savings vehicles, you may have heard of 529 plans. They're kind of the most well known at this point way to save for college that become like the college savings vehicle of choice. And essentially it's a tax advantage investment plan.


And so every state is charged with creating their own 529 plan and Massachusetts plan is the MIFA U Fund. We have contracted with Fidelity Investments to offer this program. So it's a MIFA program, but Fidelity handles the investments and services the account. So I have a couple of you fund accounts myself, one for my nephew, one for my son.


And so when I want to know what's going on with those accounts, I call up Fidelity and they're able to help me out. Um, and so essentially how the program works is you open up an account. And you do that at fidelity. com slash you fund. And you put some money into that account. Now you don't have to put in [00:12:00] money right away.


You can open an account and then fund it later if you want. So there's no minimum to get started, but you can put money in, you can have money drafted automatically out of your checking account or bank account. Every so often the money is put in, invested in the market. by fidelity. Uh, and it grows without taxes.


So it grows tax deferred. And when you use the funds, as long as you use them for a qualified educational expense or expenses, you pay no taxes on the earnings. So that's where your tax, um, benefit comes from. So you're, you're not paying taxes on that, on those gains, as long as you use them for qualified educational expenses.


Um, so what are qualified educational expenses? Um, Oh, I'll get to that in just a minute. I apologize. Um, as I mentioned before, there's no minimum investment to get started. So you can open an account with as little as 5 or no money and choose to fund it later. There is no account maintenance fee. What that means is there's no fee that you're going to have to [00:13:00] pay out of pocket every year to, uh, to participate in the plan.


There are fees built in as there are to every 529 plan, but they're taken from the earnings. So, you know, the different investments have different fee structures. Uh, there are multiple investment options to choose from, including FDIC insured portfolios. So if you're not sure that you want, you know, sort of a risk of market volatility there, you can talk to Fidelity about that.


And actually, this is where I have to be very careful. But, uh, MIFA, we are not. financial analyst. We're not qualified to give investment advice. I wouldn't know where to begin with investment advice. I don't know anything about it myself. Um, but this is where fidelity also plays a really important role for us.


So if you're not sure, and you're going through the application and you get to that point where you have to choose an investment option, that's where most people, myself included, stop and say, [00:14:00] well, I don't know. I don't know anything about investment. How do I know? You can call up Fidelity and they can get a feel for how comfortable you are with certain investments.


They can sort of tell how old the child is and base their, uh, investment structure on that. So the money booth will be ready to use by the time they are ready to go to college. You can do it a separate way. There's all sorts of ways to invest, but Fidelity is the, the resource to consult with if you have any investment questions.


So, Just because we are talking about the Massachusetts U Fund, the 529 plan, it doesn't mean you have to use the funds for a Massachusetts college. It can be used for any accredited college or university in the country. Actually, even some international colleges, if they're set up to take U. S. funding, you can use your 529 funds without taxes at those international colleges too.


It actually doesn't even have to be used for college per se. So, it can be used for [00:15:00] Vocational programs, training, career training programs, as long as those institutions themselves are set up to take US federal funding. Um, now there's a limit to how much money you can put in, which is 500, 000. That's the combined account maximum.


Meaning if I have an account for my son and my mother has an account for my son, that can happen. But both of those together could not exceed 500, 000. If they do, then we can't put any more money into it until it's below that 500, 000. It's not usually a problem for most people. It's a good problem to have, certainly.


Um, but that is the maximum that you can put in. Now, as I mentioned before, As long as you use these funds for qualified educational expenses, you pay no taxes on the earnings. So what are qualified educational expenses? [00:16:00] Tuition, fees, housing and food, books and required equipment. These are all associated with colleges.


The, uh, qualified educational expenses. So almost everything except transportation to and from college. And that's an easy one to remember because people sometimes ask me, can I use it to buy a car? And you can't use it to buy a car. Um, but those are the costs. So there's a great variety of costs that you can, um, pay for with 529 plan and still enjoy that tax benefit.


Now, as you can see here by these next three bullet points, there are some. There has been some expansion in recent years to what you can use these funds for and still enjoy that tax benefit. And so that includes up to 10, 000 annually for costs, uh, related to apprenticeships, 10, 000 annually for tuition for private and public K through [00:17:00] 12 education, and up to 10, 000 in a one time 10, 000 disbursement to repay a student loan.


So those are. also qualified expenses, even though they're not college related. So one of the great things about the 529 programs in general and the youth fund specifically is it is so versatile and you can use it for so many different things. But of course, people have questions. What happens if I take my money out for ineligible expenses?


So if that happens, um, there are penalties associated with that. It should be noted that the penalties are all on the earnings, not what you put in. Um, but if you have to take money out and, um, use it for an expense that it was not designed for, there will be a 10 percent penalty on the earnings, and the earnings will be taxed at [00:18:00] the owner's rate of income.


So there's three exceptions to paying the 10 percent penalty, which you can see down here in the last bullet point death, the disability of the student and scholarship. So, uh, you know, of course the first two, we don't really want to contemplate, but the third, uh, scholarship, if your child is awarded a scholarship and can't use the funds, um, as they were intended, 10 percent penalty.


on that scholarship amount. But even in these three examples, um, the earnings will be taxed at the owner's rate of income. Also, you know, what happens if, um, if the child ends up not going to college, there are options. So you can transfer funds over to another beneficiary within the family, so if you, there's another child.


sibling, a cousin, even maybe a parent. Um, if, uh, if I was just speaking with somebody from Fidelity the [00:19:00] other day, and they were talking about a case where, um, you know, mom went back to school and the child had some money left over in their five 29 plan, and, and they were able to roll it over back into mom's name.


And she was able to use that. Um, and also it can be used for graduate study as well. So if you're lucky enough to have funds left over after your undergraduate. Um, program, you can use your 529 funds for graduate school. Now, a really new development in 529s that people are really excited about is that you can transfer again, this question of what happens if my child doesn't go to college.


So this trips, a lot of people up. Sometimes they want to put money away for college, but especially when a child is really young, you really, of course, don't know what is going to happen after high school. Um, so, uh, a great. boon to that anxiety or salve to that anxiety has been this, um, the ability to roll over 529 [00:20:00] funds into a Roth IRA, a retirement program for the beneficiary.


So a couple of rules regarding this, the Roth IRA must be for the same beneficiary as the 529. Right. So you can't roll it over into someone else's five 29. It has to be the person that you set up the five 29 for to receive. They turns out that they can't use it and they can take all that money and all that value and roll it over into a Roth IRA five 29, um, which, you know, I spoke to somebody the other day.


left over in their 529 after their undergraduate and graduate program, a very, very small amount. And they're going to roll that into their, uh, retirement young person, 22, 23, already getting started with all that value, um, investing in, in retirement. So the 529 account must have been open for at least 15 years.


And again, if you [00:21:00] follow that, that narrative, that story of I opened up a, uh, a 529 to save for my child for college or for the student for college, they didn't end up using it. And now we can roll it over. That's that's That's why that exists. It's not there to just open a 529 and then immediately roll it over.


The transfer amount must have come from contributions made at least five years prior. So again, you have to have had this money in here for a while in order to roll it over. And the amount transferred annually has to be limited to the Roth IRA contribution limit. Which for this year is 7, 000. There's also a lifetime cap and the amount that you can transfer over of 35, 000.


Um, so there's a lot of, of sort of, um, details involved here, but it's still a huge, huge, benefit for a lot of people. Uh, we have a blog post on detailing, transferring 529 funds into a Roth IRA. And according to [00:22:00] the 2024 college savings indicator study, 48 percent of respondents were not aware that 529 funds could be rolled over to a Roth IRA.


This is because this is a really new, um, And, uh, that study that was cited actually is a fidelity study that they do every two years and they sort of survey people and their attitudes about college savings. And if you're interested, um, we just did a podcast with fidelity about the 2024 college savings indicator study.


They can check that out of me for podcast. Um, and, uh, But as this, as with all other sort of personal financing matters, we do recommend that you speak with your financial advisor or tax preparer if you have questions. Now, one other thing that I want to mention in relation to the U Fund is the Baby Steps program.


So if you, uh, have a child or know someone who is expecting a child or has a young child, um, that may qualify for [00:23:00] this, you want to know about it. It's Massachusetts first statewide account, seeded college savings account program. It was created by the Massachusetts office of the treasury in conjunction with, uh, some other organizations, MEPA included.


And essentially what it does is it sets aside 50 in a U fund account for every baby born or adopted in Massachusetts or, or You know, lives in Massachusetts by before their first birthday or first year of adoption. And so what they would have to do is just open up a U fund account and go to fidelity.


com and open that up. And if the beneficiary, that meaning the child has a Massachusetts address and is younger than one, or, you know, has been adopted within a year, they will automatically get Uh, funded into that pipeline and, and get a free 50, [00:24:00] uh, seed deposit from the Baby Steps Program. So, again, if you have a really young child, a newborn, or if you know somebody who does or is expecting, make sure that they check that box in the hospital, um, on the birthing form that they are interested and they want information once that's happened.


We will start emailing out to them and reminding them that they need to open up an account so they can get their free 50 savings account. I mean, 50 seed deposit in a youth fund. Okay. The next program I want to talk to, so that's the youth fund. That's 529 plan and all related to the 529 plan. Um, The second program that we have to talk about is the U plan.


And this works in a different way. It's actually older than the U fund. It's older than the 529, the federal 529 program at all. Um, one of the first prepaid plans in the country. And like I said, it's not, A 529, it is a prepaid [00:25:00] tuition plan. And the way it works is you put money into the account. It is not invested in the market.


It's actually invested in bonds that are backed by the full faith and credit of the Commonwealth. And depending on how much you put in, you're locking in a percentage. Of tuition and fees for this year at every participating college or university in Massachusetts. So, um, there is a large network of Massachusetts public and private colleges that are partnered with the U plan.


I think about 70 by now. Um, and how the program works, I guess I said, you can open an account. At any point throughout the year, put funds in, uh, you can put just like the U fund, a lump sum in, or you can get a sort of recurring draft set up where your money is, is being contributed every month or so, uh, however it is convenient for you to do, you can do that.


The [00:26:00] money is, uh, invested, or it sits in a money market account and throughout the year and is gaining interest and. Then there's an annual bond purchase. Or as I said, that the, um, money is invested in general obligation bonds. There's a bond purchased purchase in August. And so we take all the funds that have been contributed plus the interest throughout the year.


and buy bonds. Now, if you have at least 300 in your account, by the time that happens, that is enough to buy you plan certificate and lock in a percentage of tuition. If you have under 300, it is not enough. So there's a 300 minimum, uh, but your money will stay in the account. And if you're continuing to contribute throughout the next year, Perhaps then you'll have over the 300 amount to buy a certificate.


But let's say you put in over 300, your money is invested [00:27:00] in the U plan. Depending on how much you put in that year, that is going to buy a percentage of tuition at each participating college. You don't have to pick the college that you're investing in when you put the money in, you just put the money in and you select the year or years that you want to use the money in.


And then since every college has a different tuition and tuition and fee figure, you're going to buy a different percentage at every college. And we'll get into that in just a little bit more detail later on. Um,


I just wanted to mention here, well, I think I mentioned everything on this slide here. Um, so maybe we won't. I'm sorry, disorganized here. So, uh, how do you plan works is let's assume that you put in a thousand dollars, um, in one year and you say, okay, I want this to all go towards my son or daughter's, [00:28:00] um, freshman year in college, and that's going to be in 2035.


Okay. So you put in a thousand dollars. That's all going to the freshman year. If a college costs 10, 000 this year, and you put in 1, 000, you purchased 10 percent of tuition for 2035. So, by the time 2035 comes around, if they go to that college, and that college is now 30, 000, well, you've got 10 percent of that, or 3, 000.


So your 1, 000 became 3, 000 because it kept pace with the increase in tuition from the time that you purchased. and the time that they went. And so that's how locking in the percentage works. At a different college, you may have locked in five or two or 1%. And whatever tuition is in that year, when they end up going to that college, that's what you'll have.


Now you'll get every year a tuition percentages report with [00:29:00] all the participating colleges and the percentage of tuition that you have purchased there for the year or years that you've chosen. Um, you can add to that. every year. Um, and if you're putting in the same amount of money, let's say you put in another thousand dollars, tuition's gone up the next year, right?


So maybe it won't be 10 percent at that, uh, 10, 000 college, because maybe that's not 10, 000 anymore. Maybe it's just below 11, 000. So maybe you'll have nine and a half percent of tuition. Well, if that's going towards the same year, that's going to be Added on to the 10 percent you purchased so you'll have 19 and a half percent of tuition so it's essentially betting that you know, the the value of this is going to outperform inflation because Tuition has been rising At a substantial rate right and this is so it's going to keep pace with that increase in tuition I can already hear the obvious question in your mind, which is what happens if [00:30:00] My child doesn't go to or participate in college.


If that happens, much like the U Fund, you can transfer those funds over to another beneficiary, or you can cash out, get what you put in plus the interest. Unlike the U Fund, there's really no, um, penalty for unqualified distribution. So you get what you put in plus the interest. In the state of Massachusetts, it's not taxable.


Distributions are not taxable. And it's our bond council opinion that, uh, federally they are not taxable either. So it doesn't. using the funds, whether it's for college or cash out, um, you know, sent to a college or cashed out, it doesn't trigger any tax paperwork. Um, can it be used for graduate school? It cannot, we cannot send funds to graduate school for a percentage of tuition and fees.


Um, you can cash out, as you said, and use the funds that way. But, um, typically speaking, it's been a little bit different lately since inflation has been quite [00:31:00] high because What happens is we put funds into the general obligation bonds. It starts to accrue interest at CPI. Um, and so typically the increase in college tuitions has outpaced, um, CPI, but sometimes, um, the rate of tuition increases has been smaller than CPI.


If that's the case. We have to cash funds out to you if it's worth more that way. Um, so, uh, that's, that's what happens. Distributions from the U plan, whether cashed out or sent to a college, as I mentioned, don't carry Massachusetts or federal tax consequences. Um, So that is the U plan. Now these freeze tuition, a percentage of tuition and mandatory fees.


Mandatory fees are defined as fees that every student has to [00:32:00] pay regardless of their year or their major or they're not, they live on campus, meaning that, um, food and housing costs are not locked in with the U plan. Um, Freshman orientation fees are not locked in with the U plan because they're specific to a year.


Lab fees specific to a certain major. But basically tuition and, and mandatory fees are locked in. There's also an additional tax benefit for both of these programs, and that is there's a Massachusetts state income deduction, income tax deduction, uh, for your contributions. So you can deduct up to 2, 000 of your contributions to either of these programs, um, on your Massachusetts state income taxes, if you are a married filer filing jointly or 1, 000 for individual filers.


So limits are per filer, not per account. So that is your, the ceiling that you can deduct. Um, and again, going back to that. Fidelity [00:33:00] study of, of, uh, college savers, 66 percent of respondents said they would be more likely to save if Massachusetts offered a tax deduction. And we do. Um, so a lot of folks don't know that, but we do offer that.


And it, it is a sort of just a little boost for folks to start saving. Now we're going to talk about strategies for saving. So how do we know people have saved and have had success saving? Um, and the first tip that we have, and it's very, it's similar to retirement savings in that it benefits you to start as early as possible.


So use time to your advantage and we'll have a little bit more on that in just a minute. Um, but even a small amount is going to go so much further. If you start earlier, start with a goal in mind. And again, the goal does not have to be. Four times the most expensive yearly tuition sticker price of that college before eight.


Um, there's a tool that you can [00:34:00] use to sort of estimate how much money you, you might need to put away. I received this call a lot from parents of newborns who want to know how much they need to start saving right away to have college paid for by the time their child is 18. It's really hard. To know that because there are so many variables, but we do have a, a tool that we'll see in just a minute about that, taking advantage of unexpected funds of tax refunds.


Um, I think I feel like stimulus payments are a distant memory by this point, but, um, you know, inheritances, anything like that, uh, save some or all of that in your five 29 using automatic transfers is key. I always tell the story of, you know, You know, receiving, uh, the gift, uh, receiving a college savings gift to open up when my son was, um, just born and opened up his student fund account.


And, you know, when he was nine or 10 months, I said to my wife, Oh, we got to start saving money. We have to start putting that money away in the youth fund. She said, yeah, we've been doing that for like eight [00:35:00] months because it was coming out of my checking account. And I just never saw it. I never see it.


So, um, I didn't know. And so we know people have had success doing that. My favorite in this, get the word out, ask your family and friends to contribute. There is, um, A gifting page, that image that you see here is a gifting page that Fidelity has created for the youth fund. Um, you can decorate it with pictures of your child, when your child is set to enter college, what they may want to be when they grow up.


Um, and what that does, you can create a link and just email that link out to family and friends and they can give money directly into the account. So especially when kids are really young, um, You know, they don't know they're missing out on a toy or a gift or something like that. And it, it just, it's just going to go such a long way.


So, you know, having family and friends contribute to a child's 529, this is huge. I remember I had an aunt who would give me [00:36:00] 25 every time I saw her. You know, I took a picture of it with my phone and mobile deposited it in that way. And it was a, it was a great, easy way to save. And then finally involving your child in the process.


So, you know, show them. This is what they have for college. We know that that has an outsized impact on their, uh, graduation and attendance rates. It's also fun for them to see how much money they have and see the balance go up. Um, you know, they can save some money too. I remember speaking with a college administrator who, you know, Had her daughter, she told me, save half of everything she got, put it in the U Fund first.


And, uh, not only did it help her college savings, as she told me, but it became a habit that she just always saved half of everything that she got. It's became a lifetime habit. So good habit to have. I wish I had it. Um, now this is the tool that I wanted to, to show you, um, about how you can estimate, you know, your, your goal and how well you're doing to meet that goal.


Um, we have a college planning tool on our website called [00:37:00] It's a catchy name, Mephis College Planning Tool. Um, but it's basically a personal strategy to, to pay for your child's higher education. It's going to help you come up with that. And you create a profile for your family. You put in, you know, your, your parent, the parents, you put in the children, when they were born and their age, um, and the colleges that are looking at, you can search colleges, you can search types of colleges, you can search actual colleges and put that in there.


And this graphic that you see here. Um, it measures three key things because part of the, part of the variables here, number one, we don't know where kids are going to go to college when they're younger. Right. And as we'll see, that's a huge variable. Um, we don't know how much financial aid you're going to get huge variable.


And we don't know obviously how much money you're going to have with market forces and things like that. So, um, the first thing they're going to estimate here is the child's [00:38:00] anticipated date of birth. And based on that date, they're going to check how These particular colleges that you vented, or these particular types of colleges, public, private, four year, two year, etc.


What has been the tuition increase rate from year to year? By the time your child is headed to college, what is it likely to be? And that's that big line you see going up there, right? Right up there. Uh, secondly, how much money have you started saving? What have you got? How much money are you continuing to save on an ongoing basis?


And so by the time your child gets there, how much money will you have? And you can fool around with that. You can do that. say, you know, a 5 percent rate of return, a 6%, a 7%, a 10%, whatever it might be. Uh, and it will sort of estimate again, how much money you have. And then finally, you can put in your income and it should give you some idea of how much gift financial [00:39:00] aid you're eligible for when I say gift.


I mean, not including loans or work study, but grants and scholarships, how much money just comes right off that bill. And then you have. Uh, what you're left with, essentially. So in this example here, we have an estimated cost of about 59, 995, and that's for one year. Parents are eligible families eligible for 7, 073 and grants and scholarships.


Um, they're likely to have 32, 000 saved, which is great. Uh, but it leaves them a shortfall of 20, 920, and then it can give you. Options on how to meet that shortfall. So based on how you feel about this number, there's 20, 920, you know, you can either put more funds into your saving. You can start looking at less expensive colleges.


You can start applying for scholarships and you can do that when your child is really young. There are scholarships I've seen as young as third grade, which is crazy to me, but they are out there. Um, And so [00:40:00] this can sort of help you track how, what, what, number one, determine what your goal should be and then track how you're doing along meeting that goal.


And, um, again, this is all just estimated. Um, but this final number here, I don't know if it's final, but this next number here from the 2024 college savings study, 89 percent of respondents, uh, say they believe that the value of a college education is worth the cost. So, um, you know, the, the, the, it just, that, that other piece of how you're going to finance, it becomes really, really important.


Okay, so strategies for saving. And here we go. Compound interest. Now I am going to try and forgive me if this does not work, but to launch a poll here, it shouldn't [00:41:00] be this hard, but, um, this is a lesson in compound interest and it's about using time to your advantage. And compound interest is how 529s work.


And it's essentially interest accruing on interest. So it's not just what you put away, it's the value that accrues on that. over time. And so for this we have an example. Julie starts saving 50 per month in a 5. 29 account when her child is first born. It's just like the Baby Steps program. Jonathan saves 100 per month in a 5.


29 account beginning when his child is in second grade. Who is going to have more money saved when his or her child turns 18? So how can I do this?


Oh goodness.


Where's my, where's my poll? If you want to just put it into the, uh, [00:42:00] if you want to just put it into the, um, the Q and a, you can do that too. But, um, I'm like frantically looking for the polling here. Oh, here it is.


Yep, I'm gonna launch that poll.


Oh, goodness gracious, ignore the second question. I'm sorry. That's obviously a mistake.


Okay,


yeah, so I'm not really fooling anybody here. I'm ending the poll. Oh, I did fool one person. That's, that's great. Um, it's gonna be Julie. Right. Um, it's going to be Julie.


Oh [00:43:00] goodness. Can I just not do this? Thank you.


Okay. There we go. So thank you for bearing with me through that. Um, so Julie starts saving 50 per month when her child was first born. Um, When she gets to college, her child is going to have 21, 536. This is based on a 7 percent annual rate of return until the child turns 18. So, uh, I do not too bad though.


I'm at 19, 798, but where the difference really comes in is you can see what they contributed in the interest, right? So, uh, Almost half and half in Julie's case It's what she put in and then the other half is the interest Whereas I had to put in much more and earn much less interest. So 13, 200 I had to put in and accrued about 6, 600 of interest whereas Julie put in ten thousand eight hundred and got ten thousand seven thirty six again bearing in mind these hypotheticals But again that just shows [00:44:00] you How important time is and using time to your advantage.


Um, I did want to say one thing and I, I, I'm, I'm, I'm looking for it here. I don't know if it is here and I apologize. This is a new presentation for me. So, um, but in the strategies for saving question, we may get this near the end here. Um, well, I'll wait till the end of the, I'll wait till the end. I apologize.


So. All right, we're going to finish up with how families pay for post secondary education. And so this is taken from data in the College Board publication called Trends in Student Pricing. College Board is the organization that does AP programs, but they also do research into how America pays for college.


And that's what this is essentially. And most of the data comes from this. You know, I want to talk about the cost of college because I think people have this idea that now it's 100, 000 a year to go to college, or it's 80, 000, whatever it might be, because that's the [00:45:00] number, or it's the type of number that you hear in the news a lot.


And, you know, it can be very expensive, and it can be sometimes, uh, those high numbers. But, um, what I want to leave you with is the, there's a lot of different types of school, and there's a lot of different costs. associated with these different types of schools. So let's start with that big expensive one, the most expensive sticker price, meaning no aid, just what it costs, tuition and fees, and all, you know, related costs, which you might see here up in, up in the left.


Um, these costs include tuition fees, room and board, books, supplies, transportation, there's everything all together. This figure is known as the cost of attendance. So, um, first thing is, you know, you may be paying some of these things, you may not be paying some of these things. You may not be paying food and housing costs if you're commuting.


But just including all of this stuff in, these are national averages. [00:46:00] Um, in your, if you're in Massachusetts, in New England, our numbers are unfortunately going to be a bit higher. Um, so these are national averages for one year for a four year private college, 60, 420 per year. And this includes, as I said, food, housing, books, supplies, transportation, and other expenses.


So these are your Colleges like BC and Harvard, just I'm going to do a whole bunch of Massachusetts ones and Emerson and Dean College and Simmons College and Williams College. These are private. Four year colleges, and these are oftentimes, um, you know, the highest sticker prices before eight, but there are other types.


So there are public colleges, of course. And you think about things, if you're in Massachusetts, like Bridgewater state college, Framingham state, and if you, the UMass system, if you go to a public college in the state that you live in. you're going to pay a reduced tuition. Um, so [00:47:00] for in state students, the national average is about 28, 840 per year.


So you can see there's a, that's a big difference, um, from the four year private colleges. If you are going to a public college or university outside of a state that you live in, you're going to lose that in state tuition. tuition discount. But even still, then you can see the average cost 46, 730. It still doesn't quite match that four year private college.


So we have our first examples of differences here. Now, the third level, and this is not the, the number I have here is not from the college board transit student pricing. It is from a publication called value colleges, university community college, or trade school, which may still be. economic sense. It's hard to tell.


So vocational schools. These are non degree programs. Think of things like cosmetology, massage therapy, [00:48:00] HVAC, programs that result in certificates or professional training. There is a huge amount of variety within this field, so it's hard to get a, a, a knowledge. a good figure as to what you might end up paying, but the number that I have here is less than 33, 000 for the entire education.


Now, um, again, that might seem a little high, but it's for the entire education, where these court, these figures in the four year college arena are for Year per year. Um, and then finally we have the two year public community colleges and two year public community colleges. You know, a lot of the vocational training programs that people may attend may be used, uh, may be offered and taken by students at two year public community colleges.


So again, it's, it's hard to say across the board what it may cost, but two year community colleges are typically the least expensive options for students. Certainly before aid it is, uh, the sticker prices are much lower. So [00:49:00] 9, 890 per year. This does not include food and housing. And I think it's important to say that because at least from a Massachusetts perspective, every two year public community college is a commuter college.


So they don't have food and housing, uh, programs available for their students. So they're commuter colleges. So again, lots of different types of schools. Lots of different tuition and fee figures lots of different costs associated. That's the first thing I want to leave you with in this slide. The second thing is that as I've mentioned a few times This is all sticker price meaning no financial aid taken into account.


And as I said earlier most families are going to qualify for some level of financial aid. And so when we talk about financial aid, this is really the first thing that should be part of how families pay for college or post secondary education. And as I mentioned earlier, there are two ways that it can be awarded.


I do want to show the amount granted every year, because that is not as well understood as [00:50:00] the potential cost of college. And sometimes people do have these 60, 000, 80, 000, a hundred thousand dollar costs in their mind. And I understand why. But what isn't as well known is how much financial aid is granted every year.


So you see this figure here, 177 billion in financial aid was awarded to students in 2022 2023, the most recent year that we have figures for. And that is about where it has been. I mean, I've seen it fluctuate between, you know, 175 and 185 billion every year. So that's a lot of money that's granted. Um, and as I mentioned before, merit based aid, So think of things like academic scholarships, athletic scholarships awarded in recognition of student achievement, not finances.


Primarily, this comes from colleges and from outside organizations. Um, a lot of outside scholarships that you may apply for through businesses and, and organizations. Um, you know, people think that again, maybe [00:51:00] they'll get an outside scholarship that's going to fund the entire education of a really expensive school.


It's not likely to happen. Um, you're thinking like 1, 000, a few hundred dollars, maybe 2, 000. That's where most. Outside scholarships are now apply for them apply for a lot of them apply for them as many as you can because you can Get a lot of them, hopefully But a lot of the big Scholarships like 10, etc are offered by the colleges and universities themselves and colleges have really different practices on awarding scholarships, merit scholarships.


Some colleges don't do any Merit Aid. Some colleges give out a lot. It just depends. Um, and this, these are questions that you can ask colleges, or you can go to their website and see if they offer Merit Aid programs. And it is true, as I mentioned earlier, that most of this 177 billion figure is true. is not merit based, but it is need based.


So it's [00:52:00] based on the family's financial need or their financial eligibility, which is determined by the information that you put into the financial aid forms. So the federal form, the FAFSA, and any other institutional forms. Um, so, In short, an overview, how do families pay for post secondary education?


They do it first, hopefully with financial aid, get all the financial aid that they're qualified to receive. And then once that's taken into account, and there's a balance to do, there's really only three ways to pay. So past income, meaning any savings that you may have had, any assets that you can use to fill that Present income, a lot of colleges go through outside providers to offer monthly payment plans, interest free monthly payment plans.


So if you figure that you can pay a few hundred dollars every month against tuition, you can set up one of those plans, and then every dollar of those couple hundred dollars that you're paying is going against tuition. That can knock off some money here and there, uh, especially used in conjunction with aid and with savings.


The only thing left after [00:53:00] that is future income or loans. And so one of the things that, um, you should know well in advance of this, we have this idea that students can borrow whatever they may need to pay for college in their own names, uh, as long as they promise to pay it back, and that just really is not the case.


They can do that through a federal loan program called the Federal Direct Student Loans. These are the loans that have been in the news a lot. recently with forgiveness and then not forgiveness and then, uh, you know, monthly payment plans and then not monthly payment plans. Um, but those loans have limits associated with them.


So they're not going to be able to borrow a, you know, Oftentimes, the full cost of education, and they're already part of the financial aid package. Um, so any loans that come after that, any private loans, any loans from banks, any federal plus loan, which is a parent, a federal loan for parents, they're going to be based on credit [00:54:00] approval, and most students just don't have credit approval.


The ability to be credit approved and so need a co applicant, which is typically, but not always apparent. Um, so whatever it is that you are going to be taking on as a co applicant will be your responsibility. So the monthly payment, make sure that you can safely afford it or comfortably afford it. The best way to do that now is to start saving.


Um, yeah, okay. Here it is. This is what I wanted to mention earlier. Um, and this is a new program, so I'm excited to talk about it. Uh, this really sort of dovetails with the gifting page that I mentioned earlier. Um, You know, this, that is, that works in a way where account owners can email out a link and people can give money directly in.


We also have just released, uh, teamed up with the gift of college to offer a gift card, uh, for you fund and you [00:55:00] plan contributions. It's, it's, it's, um, it's branded with the U fund, but it can be used for, for the U plan as well. And so you can buy a gift card. They're available at CVS, uh, locations throughout Massachusetts.


Almost most CVS's will carry them and you can put anywhere on the card from 25 to 200 and give it as a gift. It can be given to an expectant parent or the parent of a child, young child, or maybe even a child on the cusp of going to college. And they can redeem that and put that in a college savings account for the child.


It can also be used to pay student loans. Uh, or to contribute to an able account, which is, uh, another 529 account used for individuals with disabilities. So, it is a huge opportunity for [00:56:00] people, for us to expand gifting and for people to be able to go to a, Christening or, uh, birthday or, uh, some kind of holiday or milestone with a gift card in the hand to give for, uh, for college, uh, it makes it so much easier.


So, um, we're really excited about that. If that's something that you, um, If there's somebody in your life that you, you know, would appreciate that they can be found at CVS's throughout the Commonwealth I think all but a few should carry those. So next steps start or continue to save So the best thing you can do now is to start saving if you haven't started saving and to look at if you can save More if you are currently saving.


Talking to your child about college is huge Um, you know, try to foster that, whatever interest that they [00:57:00] might have. Talk about colleges. I talk about college with my son a lot. Um, that of course to him now it's just more school. So he's not that interested, but trying to, trying to get that in there.


That's different from school that he's in now. Um, you can use online tools to turn, to learn more about college. Like some of the ones that we went over earlier, sign up for our emails, look at what we're offering for webinars. Go in and follow us on, um, social media. This is our information here. Um, and check out our podcast.


Certainly we talk a lot about college savings, uh, our YouTube channel. We do a lot of our videos and, uh, visit our website, contact us with any questions that you might have. This is what we're here for, a not for profit agency to help you plan, save and pay for college. So I see, I have a Q and another question here.


Um, Yeah, hopefully I answered this question. So what happens if a child decides not to go to college for whatever reason? Can you not use the money or can you move it to? Yeah, you can move [00:58:00] the funds to another child's account on both of the programs that we talked about. Um, and then if you have to take funds out, there are some, um, sort of penalties associated with that and the you fund and not so much the plan.


Any other questions that you have that I can help you with? Um, I'll hang up for a minute. If not, Um, thank you for, for coming and, uh, you'll be getting the recording and the, the slides and good luck to everybody.


Well, thanks everyone. Have a good night.




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