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

[00:00:00] This presentation is going to be recorded, so you will receive some follow up from me on Monday with a recording of this webinar and the slides that we’re gonna be going through as well, so you have that to refer back to if you have any questions. Um, I’m very happy to be presenting on savings specifically to the Mefa Institute and to, um.

High school counselors or the, the counselors who, who asked for this information to be honest, uh, in the first place. So I was very glad. I’m always very glad when everybody asks about when somebody asks about savings, and I’m especially glad when, uh, college couns, um, high school counselors do that as well.

Uh, I, you can ask any questions throughout this presentation. I’m going to be going through and I’m gonna share my screen right now. So what I’m gonna do is just ask if somebody can say, uh, let me know in the chat. If you [00:01:00] can see the slides. It should say, saving for College Mefa Institute. Okay, so some you can’t see the slide, so that’s good.

Um, thank you very much for, for letting me know. Um, and actually I realize I haven’t introduced myself yet. My name is Jonathan Hughes. Uh, I’m the associate Director of college planning and, uh. Content creation at MEFA. And, uh, I have been working at MEFA for about 20 years at this point. Um, about 15 of those, uh, being pretty familiar with both of our college savings plans, which we’ll get to.

Um, if you have any questions throughout this. Webinar. Um, here’s how you can participate this slide here. Of course, you can adjust your audio settings, you can, um, take part in the chat. It says the chat is disabled. It’s not, but it might be better if you have questions, if you can use the q and a feature ’cause that is easier for me to actually access [00:02:00] while I’m sharing my screen.

Um. Use the raise hand feature if you need to get my attention or, you know, it just said you can put the question in the quest in the q and a and, and I’ll see it. Um, if you want a live transcript and, uh, if you wanna mute me and you can just hear what I’m saying, you can use that. Um, uh. I don’t expect, uh, that there will, that you’ll understand everything that I’m saying right away.

So if you have any questions, if I leave something out, um, or if you have questions on something that I’ve said, please don’t be shy and, and use that q and a feature as I’m going. If I’m about to address a question that comes in, I might just wait until, um, that answer occurs naturally to, to answer it. Um, I also will be available after that.

The presentation for any questions that you may have. It’s not one of the longer presentations that we do, so it should be maybe about 40 minutes, 45 minutes or so. Um, so MEFA is of course the [00:03:00] Massachusetts Educational Financing Authority, where a not-for-profit, uh, authority created by the Commonwealth of Massachusetts back in 1982.

We have a public service mission to help families to plan, save, and pay for college. So when we were initially created, what we were created to do was to offer a loan, and that’s something that we still do. It’s a low, uh, cost, fixed interest rate loan. However, that was 1982 and, and, you know, 40 years ago almost.

And as time has gone on and the cost of college has continued to increase, just offering a loan is is not enough. For us to fulfill the mission that we have. So we added two savings programs, both, which I’ll speak to, to today, the U Plan, prepaid Tuition program, which was created in 1995. And then. The U Fund, which is the Massachusetts 5 29 plan.

And [00:04:00] I’m gonna be talking about that. That was added in 1999. And then a lot of what we do as well in helping families to plan for college is education. So we do, um, well before covid, we would say that we did over 500 seminars throughout the Commonwealth on topics like saving for college, college admissions, college financing, et cetera.

Of course everything now is, is virtual, so we do everything virtually. Um, as I said, this presentation will be emailed to you. The recording and the slides will be emailed to you. Um, and of course, you should know, as families should know that MEFA is a free resource, uh, available to you. So if you have any questions regarding, uh, college finance and college savings, college admissions, and, and you.

You know, wanna ask somebody, you can reach out to MEFA for free and we’ll be able to help you. If we’re not able to help you, we’ll find out who is, uh, and get them in touch with you. So, um, as you know, uh, if you’re here. You can always reach out to us with [00:05:00] questions. So today, what we’ll talk about, um, and this is, this presentation itself is, uh, slightly amended, but it’s generally the presentation that we give to families just explaining the basics of college savings, the benefits of college savings, and, and to particular ways that they can do that.

So the first thing that we’re gonna talk about is why savings. Uh. Are important and, and why it is important to save for college. So we’ll talk about that. We’ll talk about two specific Massachusetts savings options, the ones that I mentioned that MEFA offers, the U plan and the youth fund. Although I’m always careful to tell families that any way that they can save for college is a good way to save for college.

There are certain ways. That, um, have specific benefits attached to them if used for college. And, and that’s the case with some of the mefa with the savings programs for Mefa that we’re gonna be talking about now. So certainly promoting savings in general, um, I, I is, is important. We’ll [00:06:00] talk about strategies for savings.

So why it’s important, how you can do it, but also how do families really maximize their potential for savings? And what are some of the ways that people have found to have success with? Um, and then we’ll talk about how families actually do pay for, for college and for, we say post-secondary education.

’cause that may include college, it may include career training. Not everybody has to go to college, of course. And not everybody should go to college. Everybody does go to college. The, the point is that whatever you wanna do, um. To have a good plan in place and to, to have our kids be in a good success, uh, position to succeed when they, when they’re finished with their schooling.

So a lot of the questions that I’ve been asked over 20 years from students and, and from parents really do boil down to. There are people going through this for the first time and they want to know how do families do this? So we’re gonna talk about some ways that some families do pay for college. So the first question, of course, that we’re gonna address is why save?

And this [00:07:00] really is the most important thing, which is why it’s the very first slide. Um, we’ve encountered a lot of myths about college savings that maybe prevent people from saving when. They shouldn’t. Uh, so myth number one, my savings will hurt my financial aid, right? So this is a classic, and I’ve had conversations, I’ve had arguments about this with people, you know, not at work, but in, in real life, in, in my personal life, saying it doesn’t hurt you.

The truth is that. Income is the biggest factor when determining financial aid. Now, as you probably know, there are two ways to, to award financial aid, merit aid, and need-based aid. Um, merit aid, of course, has nothing to do with how much you have sage or how much you make at all. So savings plays no part in that.

And then in, in terms of need-based financial aid, the fafsa, the CSS profile, other financial aid forms, income is the, the main determinant there into how much [00:08:00] financial aid I. You’re gonna be eligible to receive as far as need-based financial aid is concerned. I have more information on that in the next slide, but mainly this is based on income, not assets.

So your whatever savings that you have, you know, people have this idea that if they have $10,000 saved, the college is gonna look at that and say. Oh, you don’t need $10,000 from me. ’cause you get $10,000 here in a, in a 5 29 plan. It doesn’t work out that way. Um, the other thing that people think, and, and this is something that I think anybody can understand in the situation, is it’s not worth saving for college if I can’t save the entire cost.

Every year at the end of the summer, the beginning of the fall, there are the news stories that come out that take the most expensive college in the country or in the region and say. This is how much it now costs to go to this particular college for a year. There are college saving, um, there are college cost calculators like supposed to forecast the cost of college.

We have one on, on MEFA.org and I think it’s [00:09:00] actually linked to in this presentation. Um, but, and they estimate how much college is going to cross cost when your child is. Ready to go. I remember when my 7-year-old was born, my colleague decided, Hey, let’s see how much college is gonna be for, for Malcolm when he turns 18.

And I remember seeing, I think we fixed it for a four year private college in New England, seeing how much the, that, that four years of that particular college would cost and thinking, oh my God, there’s no way I can ever save that amount of money. It’s probably true. Um, but my next thought since I know these things, is that there’s financial aid, right?

And, um, most families, I mean really almost every family is gonna be eligible for some level of financial aid. Uh, so most families will not be asked to, to pay that full cost of college. So, you know, you’re gonna be eligible for financial aid. It’s just a question of how much, and then whatever’s [00:10:00] left, you’re gonna have to wait to find a way to finance.

So every bit that you’ve saved is something that you don’t have to borrow or, or pay out of pocket at the time, um, from, from your, from your salary. So it’s very important to get started and, and to have some savings. Now, I said that I have some. On the expected family contribution. I think that this, um, would be of interest to you in particular if you, if you didn’t know this already, but these are the, you know, aside from.

Household size and number of children in college. The things that they look at on the fafsa, and this is for the FAFSA here, is parental income, parental assets, student income, and student assets. And those are the things in terms of income and assets that they put in through that standardized formula to come up with your EFC, your expected family contribution, which of course determines how much need-based financial aid you’re gonna be eligible [00:11:00] for at different colleges.

So. Just taking a look at these four main sort of pillars of the expected family contribution. You have parental income and assets and student income and assets. Now student income and student assets get charged, get the heaviest weight. Uh, but you know, two students tend to not have much income or, or much assets.

So, um, if you take a look at this. Assuming that this students don’t have assets or they don’t have income over over 6,300, well that’s an old figure I apologize for. That’s closer to about 6,700. Now, uh, if they don’t have income over that, they’re not gonna get looked at at all for, um, being able to contribute for parents.

You see assets there, non-retirement assets, anywhere from three to 5.6% of the total, uh, is gonna get counted. Whereas income, and this is on a sliding scale, anywhere from [00:12:00] zero to 47% of parents adjusted gross income, uh, is gonna be looked at, uh, in terms of what they can pay for college. So, you know, especially if you, if you’re on the higher end there, they may be looking at.

Almost half of your adjusted gross income, they’ll take that and say, this is what you can afford to pay. Whereas you have parental assets, which savings would be a part of, first of all, they’re gonna asset protect a certain amount of that right off the bat, um, somewhere around $18,000. Anything over that, and this doesn’t include retirement for the federal methodology, doesn’t include, uh, the value of your home.

If you own the home that you live in, that’s not looked at. Um, but if you have secondary property, if you have, um, mutual funds or 5 29 plans or anything in your, in your, your bank accounts, they’re gonna take only about three to five point half percent, 5.6% of that, [00:13:00] and that is gonna go into your expected family contribution.

So the, the, you know, the amount that it. Increase your expected family contribution is not nearly, uh, to the extent that it would cancel out any benefit of having the savings. I would say if you have $10,000 saved and they’re gonna take 5.6% of that, that’s only gonna increase your contribution by about $560.

So definitely nowhere near, um. You know, coming close to wiping out the benefit of actually having that money to, to spend on college and not having to borrow it. So college savings is helpful. It will help. And I say this all the time, I. In my 15 years working with savings customers, I have never had anybody say that they wish that they didn’t have this money saved.

Um, you know, they, they maybe wish that they had more saved, but nobody regrets saving. So, uh, it, we always tell parents that it can [00:14:00] provide choices, you know, they have some money saved. It may increase the range of. Colleges that they can apply to may help them to pay for programs that might fall out of the typical school budget, like study abroad.

To me, the biggest thing is that it can reduce and hopefully eliminate the need to borrow. So, uh, we’re gonna talk about that later on. But that’s, that’s a huge thing. And um, as we’ve already said, seen it has a minimal impact on financial aid. Now that’s strictly in terms of paying for college, but you know, there’s a lot of research being done on the benefits of college savings and.

Specifically 5 29 plans. And so there are benefits that come with these programs that actually don’t have much to do with paying for college. In particular, this study that we reference here is, uh, a Washington University study that was done that shows that 5 29 plans, [00:15:00] regardless of the amount that’s saved, if a child knows that, uh, money is being set aside for him or her.

For college, they’re much more likely to attend college and much more likely to graduate. This figure here on the right shows the percentage of low to middle income, that’s LMI, low to middle income children who graduate from college and how much they have saved. So with no savings account, no specifically designated college savings and a 5 29 plan, there’s a 5%, um, graduation.

Graduation rate. Anywhere from $1 to $499 that goes up. Five fold to 25%, and then over $500 goes up to 35%. So it doesn’t really matter the amount of money that is saved. Having a 5 29 with some money in it has shown to have a disproportionate effect on graduation from college. So it, it’s a powerful motivator to, [00:16:00] to children.

There’s all sorts of other research that’s being done that shows that it, you know, increases. Um, uh. School attendance and, and early, uh, literacy levels and, and, um, you know, maternal wellbeing and things like that. Um, those are all ancillary benefits that, that have been shown in some studies. But I think that this is really the important one, that no matter how much you have saved, it’s going to boost the chances of, of your child enrolling in college and graduating.

Now when we talk about specific options to save for college, the first one I wanna talk about is the U Fund, which the Massachusetts 5 29 College investing plan. Now, 5 29 plans are probably the most popular. Education savings vehicles that there are. So they’ve been around since about 19 99, 19 97 I maybe is when the law was passed.

[00:17:00] But the youth fund in itself has been existence since 1999. So it’s a federal program, 5 29 plans. But each state was tasked with creating their own 5 29 plan. And Massachusetts has the U Fund. And so how the U Fund works, you know, you put funds into your U Fund account. Um, it’s invested in the market and those investments are handled by Fidelity Investments.

That’s who we have chosen, uh, as the provider and, um, account holder of the 5 29, the you fund, 5 29. So that money is invested by fidelity in the market. It grows without taxes, so you don’t pay taxes on the earnings when it comes time to use the money, as long as you use those funds for a qualified educational expense.

You pay no taxes on the earnings. So it’s a tax advantage savings vehicle for, for education. So what are qualified educational expenses? Um, when he gets college? Tuition [00:18:00] fees, room board, books, supplies and equipment. So it can be used for a lot of things where they draw the, the one I, where I know we have reached the line is transportation.

Because people sometimes ask, can I use it to buy a car? Can’t, so I know transportation’s not part of that. Otherwise, you know, cost of attendance items are, are, are there, so savings can be used at any accredited college or university. It does not have to be a specific set of schools for our other plan.

The U plan it does, and I’ll get to that, but for the, for the 5 29 plan can be used for any accredited college in the country. It can actually be used for international colleges as well, as long as they’re eligible to accept US federal funds. You can use your 5 29 money at that college and not be subject to, to tax on the earnings for that.

Um, actually doesn’t. For colleges, it can be career training certificate programs. [00:19:00] Um, as long as they are eligible to receive US federal funding, you can use that. Um. Somebody wants to know if you could use that as a down payment on an apartment or a condo. Um, I don’t think I would recommend using it for a condo.

It’s possible it could be used for off-campus housing if that off-campus housing is part of the cost of attendance, uh, as recognized by the college. So, um, if you use. If you take a withdrawal from your 5 29 and you use it to pay for something that this, uh, you consider to be, uh, uh, uh, expense related to college, a qualified expense.

If you’re audited, you just have to be sh you have to be able to say, this is what I spent the money on and this is why it’s qualified expense. Um, so if, if, if it’s an apartment off campus living. You know, you, you [00:20:00] wanna be in touch with the financial aid office. That, that they have an off campus, um, housing item or budget in the student’s cost of attendance and you don’t wanna exceed that amount.

Um, so that, I, I think you’d have to work with the financial aid office, the college to, on that question. It’s possible. Um, I would have questions about the, the condo one, but, um. But that, that’s would be, and we’re of course not tax professionals, but, but that’s how that would be treated, as long as it’s part of the cost of attendance, if they have an, uh, off-campus housing, um, budget for the student.

Good question. Thank you. Um, so the combined account maximum is $500,000. That means that a student’s account cannot exceed $500,000, um, or. If there are multiple accounts for a student, so if I have one for my son and my mother has one for my son, those two accounts together with the, the same student as the [00:21:00] beneficiary, cannot exceed that $500,000 for contributions.

So it’s not, not in the interest of contributions. Um, so that’s a relatively high amount. I mean, I think it’s probably around the ceiling that you might be. Paying for if you, you know, if you’re paying for everything out of pocket for the most expensive college, you, you might be a little below that, I would imagine.

Uh, so not a, not, not a bad problem to have. If you have a. $500,000 and, and you, you need to save some more and you know you’re running into that problem. Um, there’s no annual account maintenance fee, so you have to pay out of pocket, uh, or, or there’s no minimum investment amount so you can open an U Fund account.

With $5 or $10 or, or no money and just fund it later, you can do that. There are fees associated with every 5 29 plan. So there, there are fees that are associated with the U Fund too. And so I’m a U Fund customer and [00:22:00] I, I pay some fees, but they come out of the earnings of the account. So it’s not something that you pay out of pocket ever.

And to be honest, the only time I ever really encountered any que uh. Issue with the fees at all. I got a notice from Fidelity saying that the fee structure was changing, my fee was actually going down. Um, but it’s something that they take outta the, outta the earning, outta the earnings. Um, somebody wants to know if you can use money from an account for a specific student, for a sibling if you have money left over in the account.

So the great question, and yes, you can do that. So here’s what you can do, and this sort of gets to the point of. You know what, what happens if you have a student that doesn’t go to college or can’t use the money or all of the money in the way that it’s intended, you can change the beneficiary over to another person in the family.

Um, so that is an option. Um, if you have to. Ash out. Like let’s say if you have an older, an oldest [00:23:00] child who’s not going to be using your 5 29 plan, you have younger children that may, you can transfer that money over, uh, to, to another child. If. It gets to a point where, you know, you’ve done that and, and you have money left over, or there are no other siblings and you have to cash money out and use it for an ineligible um, expense.

The penalty for that is there is a 10% penalty on the earnings, and the earnings again, are also taxed at the owner’s rate of income. So you never pay a penalty or taxes on your contributions, but on the earnings. So the 10% penalty, there are three exceptions to that, and two of them are tragic, which are death and disability of the student.

The third one is scholarship. So if a student is, if awarded a scholarship and then cannot use their 5 29 funds. Because they, they, you have a scholarship and they don’t have that cost anymore, [00:24:00] then their 10% penalty is waived for that amount of the scholarship. Um, but if you have to take money out, no matter what, for an ineligible expense, um, the earnings will be taxed at the owner’s rate of income always.

So, um, since this is an investment vehicle, you do have to, when you’re going through the. Application. You do have to choose your investment. So I always tell people that we are not investment professionals, don’t give out investment advice. I don’t wanna give out investment advice. I don’t really know anything about investments.

So that’s where Fidelity comes in. It’s one of the areas that they can, they can address. Um, and so we always tell people that they are available all the time. 1 805 4 4 2 7 7 6. Um, when I, oh, and I always tell this story too, I have two youth fund accounts myself. I have one for my son and one for my nephew.

The first one that I opened up was for my nephew. And, um, I had some questions and, and I called on a Saturday morning around [00:25:00] 10 o’clock in the morning. Was able to get somebody in Fidelity to answer my questions. So they’re available all the time, um, to help people out. And there, uh, there’s a specific.

You fund group that MEFA trains twice a year. Um, and it’s a, it’s, we’ve been partners with them for many, many years. So, um, we’re, we’re very happy and I’m personally was very happy to be able to say, I called Saturday morning, got somebody to answer my questions and they were great. So that’s a 5 29 plan and you know, you can.

As I say, open this account. You can fund it, you can have money taken out, taken out automatically every month if you wanna do that. Um, there’s lots of different ways to, to contribute to a 5 29 account to make it very easy to do

so the next. Plan that we have, which is actually the first plan that we instituted is called the U plan. So we have the U fund and the U plan. It can get confusing even to our customers [00:26:00] sometimes. Sometimes they’re not quite sure which one that they have. Um, but the U plan was be, was started in 1995. It is not a 5 29 plan per se, like, like the U fund is.

It is a prepaid tuition program. And so how this program works is. It allows families to prepay tuition at up to 100% of tuition and mandatory fees at participating in colleges. So these, this is the program in which there are participating colleges. There’s over 70 participating colleges and they’re all in Massachusetts.

So it’s a much more Massachusetts centric plan than the, than the 5 29 plan is. Um, although you don’t have to be a resident of Massachusetts to use it and. If you don’t attend to participate in college, you still get your money back plus interest. But the way the program works is, you know, uh, unlike the u, well, first of all, like the U fund, you can start it at any point during the year.

You [00:27:00] can sign up online, you can get, um, your contributions automatically taken out every month. But the way the program. Says your contributions are not invested in the market. Uh, these are invested in bonds that are backed by the full faith and credit of the Commonwealth of Massachusetts. And, uh, this bond per, so it’s not subject to the, to, to the market, so it doesn’t go up and down with the stock market.

How we do this is there’s a bond purchase that occurs every year. It’s in August that it occurs, and so we take all the contributions that people have made to their accounts throughout the year, and then at the, in the middle of July. Sort of put a lid on things for the year, and then in August we do the bond purchase.

Now, whatever you have saved throughout this year goes into purchasing a bond. So if I’m a customer and I put in a thousand dollars, my $1,000 then goes into a bond [00:28:00] where it does. Gain interest throughout the year at CPI, but that’s not really the point of the program. The point of the program is whatever I save this year, my $1,000, my hypothetical $1,000 corresponds to a percentage of tuition at every participating college in the program.

So I put in a thousand dollars that’s gonna buy 10% of tuition at a college that costs $10,000 this year if my son goes to school. In 10 years. Um, and college at that point, that particular college that was 10,000 is now 20,000. Well then I have 10% of $20,000 or $2,000. So my, my 10%, my $1,000 became $2,000 because 10%, um, became $2,000.

So as tuitions rose at these particular colleges. So did the value of 10, my 10%. [00:29:00] So, um, you know, people can do this in a number of ways. They can invest in one year at a time. If they wanna do that, they can invest in four years at a time. So what they wanna do is invest a certain amount, and whether that’s a one time investment or a.

Monthly investment, however they want it to do that, they pick that and they pick the year or the years that they want to use that money in. So one or more of the years that their student is going to be in college or projected to be in college. So, um, they don’t have to pick the college upfront, but you know, they can have one in mind.

Just so they can, some, what some people do, for example, is some people might say, okay, I wanna be able to say that I paid for four years of UMass Amherst, so I’m gonna say, you know, I wanna buy a hundred percent of, of UMass Amherst. And over the years that they, they can do that. [00:30:00] So, um, and you can continue to add money every year and continue to add to your percentage that you have purchased when the time comes.

For the child to go to college, they can get in touch with us or, you know, if they don’t get in touch with us, we’ll get in touch with them and let them know you have certificates, tuition, certificates that are maturing. What do you want us to do with that money? And so we would send us to the college if they, if they’re going to participate in college, they’d say, oh yeah, my, my, um.

My son is going to UMass Amherst, send my money there, and we would have that percentage of tuition sent there. So what we do is we send the money to the college, uh, and they’re credited their amount of the student bill. If a student ends up not going to a participating college or university, they like the U fund, can transfer the beneficiary over to another student.

That’s an option. Uh, if it’s not an option, they can always cash out and get what they put in plus the interest. [00:31:00] So it’s, um, what they put in plus the CPI interest. So usually not worth as much that way as it is sent to a college for a percentage of tuition, because tuition usually increases higher than, uh, the interest accrues.

But, uh, they can always do that if that’s an option. And there’s no tax, that doesn’t trigger any tax consequences for us. So. State of Massachusetts, you don’t pay tax on those earnings, nor do you federally if a, if a owner lives in another state, you know, they may have different laws. Um, but that’s the way the U Plan works.

And those are the two college savings programs that MEFA offers. Um, in terms of 5 29 plans, there have been some expansions throughout the years, and it used to be that, you know, people could save when it was first created. Taxes were not taken out when, when the funds were appreciating value and investments, but when they were withdrawn, they were [00:32:00] taxed, um, that was eliminated and made permanent in recent years.

It’s the uses for 5 29 plans have expanded past college, so you can now use 5 29 plan money tax free to pay for expenses related to private and public K through 12 education up to $10,000. Um, you can also pay for exp expense expenses related to apprenticeships and repaying student loans. You can repay student loans of 5 29, paying money up to $10,000, um, and not pay taxes on, on your earnings for doing so.

And as I say, the trend has been towards the expansion of 5 29 uses. Um, but those are the most recent ones. Um, something that you may or may not be aware of, but um. Programs like this have been sort of popping up throughout the country here in this. So [00:33:00] we are really excited in Massachusetts to be able to take part in this program, which is the Baby Steps plan.

This is a program by Mefa and by the Office of Economic Empowerment through the Massachusetts State Treasury, uh, to set aside $50 in a U Fund savings account for every child born or adopted. In Massachusetts, this program began in 2020, January 1st, 2020. Uh, and children have, or parents have one year, so they have until their child’s first birthday or first anniversary of adoption.

It’s a statewide program to claim this $50. So we’re really trying to do is to foster a a, a more. More awareness of, of college savings, the importance of college savings, and really trying to instill a college going culture and college savings culture in [00:34:00] Massachusetts. As I said, there’s been programs like this in, uh, San Francisco, in St.

Louis, I believe in Rhode Island in Maine. In Boston in particular, there’s a program called Boston Saves. It does something very similar. Um, and, and the research that I mentioned earlier on about low to middle income kids and the benefits that they received from, from having any money at all on a 5 29 plan.

It was sort of not sure which, which was first the, the research or, or the programs. I think, you know, as time goes on they feed off one another as they see all the benefits that come out. But, um, this is a very. Sort of fertile ground right now. A lot of, a lot of cities, a lot of states, a lot of areas are starting what they call a college savings account, child savings accounts, because, you know, they know how important these things are.

So we’re really excited to be able to offer this program and, and the first year was the real success. So, uh, hopefully that continues. [00:35:00] There are also some tax benefits. Now, sometimes people ask, since every state has a 5 29 plan, um, you know, people wanna know, do I have to, if I’m a Massachusetts resident, do I have to use the 5 29 plan from Massachusetts?

You don’t. Uh, people can invest in any state, 5 29 plans that they want. Um, one reason. Perhaps to use the Massachusetts plan if you are a Massachusetts resident, is that there are tax deductions that you can claim for your contributions to those plans. So if you pay Massachusetts state income taxes, you can deduct up to $2,000 if you’re a married filer.

Or $1,000 of your contributions if you are an individual filer, uh, for either contributions to the U plan or the U fund or, or both. And so limits are per filer, not per account. So, you know, if you, if you contribute over to this 2000 or $1,000 depending on your filing status, um, you’re, [00:36:00] you’re not gonna get additional, um.

Credit for, you know, deductions that that’s your tax limit deduction. But this is another, um, thing that Massachusetts was one of the, in the minority, I think, of states that didn’t offer this before we started to offer it. And, uh, it’s just, it’s another incentive for people to open up savings accounts and start to save for college.

And that’s been seen to, to be effective as well. So those are the particular programs. Moving on then to strategies for savings. Um, you see here a picture on the left here. This is Kevin. This is a. Gifting page. And this is something that Fidelity offers, um, for their, their 5 29 customers. And this is something that, um, you can do, set up a gifting page for your child.

You see here Kevin is two. See how old this particular graphic is because he is entering college in 2024, being two years old. But anyways, um, and he wants to be a [00:37:00] doctor. Generally, you know what this is, is you can set this up, put a picture of your child there, put this information in, and you see that in there.

Give a gift. You can email this link out to family friends. If there’s a birthday, if there’s a milestone, like a, a baptism or a bar mitzvah or whatever it might be, send this link out. People can gift money directly into your child’s account. It’s great. One of the things we tell people, you don’t have to do this by yourself.

Get your network involved, get your family and friends involved. Um, if you, there’s other ways to do this as well. I always talk about my, my aunt when I would see her, she would gimme $25 and a check for my son’s U Fund account and they have that mobile deposit option where I could take a picture of the check and, and deposit it into my account.

That way they make it very easy for, um, people to be able to gift money into this program. So. Definitely that’s a, a strategy that you wanna take advantage of. Start saving as early as possible. Now, I would never [00:38:00] tell anybody that it’s too late to save, of course. But it’s kind of like saving for retirement.

You want to use time to your advantage and starting early is, is the best way to do that. Um, that’s why the savings program, the statewide. Baby Steps program that we have, we start people off at birth. Um, so when moms are in the hospital giving birth and there’s a form that they have to fill out as part of the social security number and, and birth certificate and all that, there’s a check the box right on there that says, remind me about information about the baby Steps program.

Um, you can start with a goal in mind. Um, I have, we have a tool to help you with that goal, which we’ll talk about later on. But, um. You know, that that can be a little tricky because so much is unknown. But we do have a tool for that, and we’ll talk about that soon. Take advantage of unexpected funds. So tax refunds.

I mean, I know there’s been a lot of unexpected funds coming for a lot of people recently. Um, you know, inheritances, things [00:39:00] like that, uh, as well as as stimulus and things like that. Um, but, um, using automatic transfers, so. You can use automatic transfers. We know that people who use automatic withdrawals from their checking account, um, tend to save more.

And so that is something that I. I was saying, I always talk about, tell this story. I was telling my wife about nine months after my son was born that we have to start, we have to start, uh, saving in his, in his youth fund. And she told me that we were saving and it was coming out of my checking account every month.

I just didn’t know it was happening. And, um, oh yeah. I think a lot of people are like that. If they don’t see it, they just forget about it. They don’t know that they’re, they’re saving or they, they, there’s not a temptation to use that money. And then involving your child in the process. So I’m just starting to kind of show my son his, his, uh, youth fund balance and, and, you know, it’s a [00:40:00] lot of money to him and, and a lot of money to, to kids when they see it and they like to see the balance go up.

And also, you know, as I said, to let them know that they’re, they’re having, that they have money set aside for them for college. Uh, it’s going to, uh, to, to, to motivate them. Okay, so this is the tool that I was talking about our college playing through. This is really, um, I was so glad that we have this because I used to get this question from parents all the time that said they, they wanted to know how much money, um, was being, they wanted to know how much money they would need to save every month in order to pay for college by the time a child got to college.

Oftentimes the parents of very young children, and it’s very difficult to know that because. There’s just so much that’s unknown, right? We don’t know what college they’re gonna go to. They don’t know how much financial aid they’re gonna be eligible for. They really won’t know their costs until very shortly before they begin college.

But what this tool does [00:41:00] is really help you to estimate that. So you can visit the college planning tool and you can, um. Open up an account. Basically start, start a profile for you and your family. And so you put in some information, um, how much money you have saved, how old your, your children are. So based on how old your children are, they’re gonna estimate when they’re gonna start college, right?

And then there, there’s a, uh, a future college cost calculator that’s gonna show you how much college is going to cost at particular colleges. So you can add specific colleges or you can search by type. Um, and it will estimate about how much cost before aid, uh, that college is going to be. Then, um, if you put in your.

Savings amount, how much you have saved now, and how [00:42:00] much you’re saving every month or every, you know, couple of months, whatever it might be. It’s going to estimate how much you should have in savings by the time your child is going to be entering college, and then if you put in some income information, household size information, things like that.

It’ll do an EFC calculator and show you how much financial aid you may be eligible to receive all estimates, of course, but it’s going, should give you an idea. You can see this right here. It’s gonna say, okay, this is the cost 59,995. By the time the student is ready to go to college at this particular college, wherever it may be, it’s gonna be about $60,000 a year.

Based on the income that was, uh, information that was listed, um, this, this family should be eligible to receive about $7,073 in, um, gift aid. And then they should [00:43:00] have about $32,000 in savings, leaving them a shortfall of $20,000. $20,920 actually, that they need to finance or find some way to finance. So, um, you would know then by this point, that you either need to increase your savings or look at less expensive colleges and start adding those into the mix.

So it’s a, it, it’s a, a very good comprehensive tool. Families, can you explain? It does a lot of other things too. I mean, there are yearly sort of tasks for students to do every year starting very young and, and you know, of course when the student’s younger, it’s gonna be things like I. You know, take this, take this quiz or do this, you know, find out what you might wanna be when you grow up.

As the student starts to move through high school. It’s gonna be things like, you know, take the PSAT or, or, um, visit colleges or [00:44:00] get your letters of recommendation or, and, and then it will also. Um, give you guidance on meeting any shortfall. So tips on borrowing information and, and how to cut costs and things like that.

So, it’s a very comprehensive tool, but to me, the biggest thing that it does is it does give families some idea of what they, where they are and, and, and what they might need to do to stay on track, to be able to pay for college or pay for a good amount of college costs by the time a student gets there.

Now finally, we’re gonna talk about how families pay for post-secondary education. And once again, I, I will say post-secondary education means college and career. Um, so these are our post-secondary options. Now, these, this is from a publication from the college board that you may be familiar with called, uh, transit and Student Pricing.

And so these, this is a national survey that’s done every year. So these are national numbers. So, um, [00:45:00] you know, particularly for the four year private colleges, what that means is that this five 50, $4,880 per year number, um. In New England, in Massachusetts, probably gonna be a little bit higher than that.

Higher than the national average. But this is all before financial aid. So these are, we use this in our savings presentations like this to, to let families know. ’cause they do, I did talk about it earlier and they do. Hear those news stories of this particular college now cost $70,000 a year, whatever it may be, um, to show them that it’s not quite as simple as that.

There are different types of colleges, different types of education. Those high profile numbers that they’re hearing belong to the four year private colleges, once again, before aid. We’ll get to that. But, um, this is a national number for four year private colleges per year. Costs include tuition. Room and board fees.

So this is for a student who’s living on campus [00:46:00] books, supplies. Transportation and living expenses. So nationally, the average for a four year private college, $54,880 per year. Uh, four year public colleges. Of course, if you’re an in-state resident going to, uh, a public college. You are going to be paying a significantly discounted tuition.

So you see in-state, uh, costs for a, um, for an in-state resident going to a public college four year, it’s about half of that 54,000. Actually somewhat less than half of that. So it’s 26,820 in Massachusetts, and those are much closer to the national averages for the, for the public colleges. So, um. 26,800 hundred and 20 per year.

If you go to a public college outside of your state of residence, you’re gonna lose that discounted tuition and it’s gonna go up to about 43,280 per year. Those, again, national averages, [00:47:00] as they say, your mileage may vary, but it’s around this. And then vocational schools, you know, this is really difficult to, um.

To estimate, to find, to find good information on. Um, I have here less than $33,000 for the entire education. So this, once again, the 54,000, 26,000 numbers, those are per year. So $33,000 for the entire education for voco vocational for less than that. Um, but you really, there’s such a wide variety of, of, uh, courses and programs, certification.

Uh, that it makes it difficult to say it, it depends on the type of program, depends on where it’s being offered. A lot of times there, these programs are done at community colleges. Um, so 33,000 or less than 33,000 is, um, may, may sound high. Um, but again, one thing to consider is the entire [00:48:00] education, and I think that’s a, a high number.

Um, it, it’s usually. Less than that. Just such a wide variety in different programs. Two year public community colleges, most often the most effective, cost effective options that there are, um, you know, about 9,470, not including room and board for two year public community colleges. Um. And so in Massachusetts in particular, there are no community colleges that have dorms, so I don’t think anybody’s paying room and board at Massachusetts Community Colleges.

Uh, so our, our community colleges are, are around this, this figure as well. So, um, there’s lots of different options, lots of different. Types of colleges and educations with lots of different price tags, and these are all national averages and before any kind of financial aid is granted now financial aid, of course, is gonna [00:49:00] take a a, a good amount or hopefully will take a good amount of people’s.

Uh. Costs here. And so what people don’t always realize, people do sort of think of college as being expensive, at least the potential to be very expensive. What they don’t always realize is how much financial aid is available, right? So in 20 19, 20 20, there are about $183.8 billion awarded to students in financial aid And.

Over the past 10 years or so, every year that we do this presentation and update these numbers, it’s in the 180 something range. So there’s a lot of money every year that gets, um, spent on financial aid and, and so as I mentioned earlier, there’s two ways to do this merit-based aid like scholarships.

Whether or not scholarships come from outside, outside organizations or from colleges and universities? There’s a lot of money that’s given out every year, uh, in grants and scholarships from, from colleges and universities, and that’s merit aid, need-based aid. [00:50:00] Most financial aid grants, um, federal work study, federal student loans.

If these things are need based aid, most financial aid, most of these dollars that are given in a year, um, are given in a need-based aid realm. So in terms of how families actually do pay for college, um, financial aid hopefully will take a good portion of that. Once financial aid is offered to a student and accepted and they have a balance due, there’s really only three ways that can be used to pay for that remaining balance.

Past income, meaning savings. Or any assets that you may have to leverage, um, present income, meaning your salary, what you’re earning at the time that the student goes to college. Now, I don’t know many people who can afford to pay a year or a semester out of their salary as they go. Um, but if you can pay something.

Um, towards [00:51:00] tuition. It’s good to do that. So colleges offer tuition free, I’m sorry, interest free monthly payment plans where you can pay every month and whatever you pay. Whatever your agreed upon amount is that you’re paying every month. Let’s say if it’s $200 a month, that you’re paying every dollar that is going towards tuition.

So over 10 months, let’s say if you’re paying $200 a month, that’s $2,000 that you’re paying over the year. It’s $2,000. You don’t have to pay interest on $2,000 that you’re not borrowing, uh, because once you’ve exhausted financial aid savings. Um, and your salary, the only thing that’s left is to borrow.

So past income, present income, future income. And so when you get to this point, the student has probably already taken their federal student loans. So that’s part of that financial aid package. And so if, if you’re looking to borrow to finance your remaining balance or some of your remaining balance, [00:52:00] um.

Whatever loan is going to ha be approved at that point is gonna have to be based on credit or credit and income, and most students are going to need a parent co-applicant or somebody to COA to, to co-sign a loan for them. Um, and that co-applicant is just as responsible as the student app applicant. So something to consider.

Um. For families when they are looking at borrowing that, you know, lots of times parents don’t realize that they’re gonna have to be co-signing a loan. Um, and don’t understand once they do sometimes that they are going to be responsible, uh, just as responsible as a student for repaying it. Um, so now things to do.

Register for upcoming Mefa Institute webinars, um, and complete this, um, lesson to and complete lessons to earn PDPs. Um, you can share our resources with your families, of [00:53:00] course. Visit our page. Um. Oh, sorry. Yeah, you connect with us on social media in particular. I think for scholarships, we are always sort of posting information about scholarships, various agencies or organizations, um, contacting us, asking us to promote, and we do that on our, our social media pages.

Um, now if you have questions, I’m happy to stick around and answer those. Um, once again, I will send you the, the slides and the, um. Um, recording of this presentation. If you have any questions, please feel free to email us. Uh, you’ll have my email because I’ll be emailing you the information on Monday, uh, the presentation information.

Uh, so feel free to reach out to me personally with any questions that you may have. Um, other than that, um, if anybody has any questions, I’m gonna stop sharing my screen now and I’ll check the chat.[00:54:00]

No. Okay. You’re all good. Okay. Thank you. Um. Well, uh, that, that’s it. Then, I guess, if nobody has any questions. Thank you for attending and, um, as I said, you’ll, you’re hearing from me later. Thanks.