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Jonathan Hughes: [00:00:00] Okay. Now before we get started talking about saving for college, and again, thank you for joining me, and we’re gonna talk about why saving for college is important tonight among many other topics, um, related to it. But before we do that, I just wanted to tell you a little bit about Mifa in case you’re unaware of everything that.

That we do. Mifa is the Massachusetts Educational Financing Authority. We were created back in 1982 by the Massachusetts State Legislature, and we have a public service mission to help families to plan, save, and pay for college and career readiness. So anything that your children might do after high school, uh, is something that we want to help you have a plan in place for them to do and to have maybe some savings to help them get a head start.

So, um. You know, we were created initially to offer a loan for college, which is something that we still do. Um, but since 1982, as the cost of college has continued to rise, simply offering [00:01:00] a loan to pay for college really wasn’t sufficient to, to keep meeting the goals of our mission. So we have two savings plans, which we’ll talk about tonight, the Mifa U Plan and the U Fund 5 29 plan.

And a lot of what we do is free guidance, outreach, and education on. Planning, saving, paying for college and career readiness and various career pathways. So all of this is to say that, you know, I don’t know how old, uh, all, all of your, your students are, but between now and. The time that they do whatever it is that they’re going to do after they leave high school.

You will probably have questions about what’s the best way to get that accomplished. Please think of us as we are, which is a free resource for you to consult with any questions that you may have about that process, uh, among other things. So. What we’re going, oh, I should say as well, that if you have questions throughout the presentation, as I’m sure you will, please put them in the q and a, not in the chat, but in the q and a.

And as I [00:02:00] said, my, my colleague Jennifer will be answering those behind the scenes and. Probably, or possibly breaking in, uh, to ask me to address some of the questions that she might be hearing so that everybody can get those answers. So don’t be shy. Um, go ahead and, uh, and do that. The topics that we’re going to be discussing tonight specifically are why savings are important.

And so I, I, I have an idea that you have an idea that they are important because you’re here with me tonight, but we’re gonna talk about exactly why and how important that they are. We’re gonna talk about those two Massachusetts options that I mentioned earlier. So the U Plan, prepaid tuition program, and the Massachusetts U Fund, the 5 29 college investing plan.

I will say, of course, that any way that you save is better than not saving at all. So that the best way that you do save. Is the way that you actually do save. Um, so. Any savings is better than no savings. But there are some programs, uh, that go a little bit further when used for college because [00:03:00] that’s where they’re designed to be used, and that’s what we’re gonna be talking about with these options.

We’ll talk about strategies for savings. So what are some ways that parents, family members, students, themselves, have had success saving for post-secondary education? And so we’re gonna wind up with how families actually do. Pay for post-secondary education and by post-secondary education, I mean anything that they might do after high school.

So college or career training. And you know, I’ve worked at Mifa for a long time, about 25 years or so, and I will say that the most common question. That I’ve received from parents through at that time is how do people do this? Right? So it’s a mystery to most people until they get there. So it’s it, it’s great to know a little bit before you get there, to be prepared.

And part of that is knowing. How families actually do pay for post-secondary education. Okay, so our [00:04:00] first topic is why save? So this is a really important slide. Uh, so we put it right up front, and this has to do with myths surrounding saving for college. And so these are things that we’ve heard over and over again.

I have had. You know, discussions, arguments about this in my own personal life with people, but the things that we hear are my savings will hurt my financial aid. And we’re gonna talk about financial aid in a little bit more detail later on, but you know, a lot of folks have this idea understandable as it is, that if they have money saved, colleges are gonna look at that and say, oh, well you have this money saved for college, so we’re not gonna give you any financial aid.

Or, I see you have. $10,000 saved. That means you don’t get this $10,000 scholarship or grant I was gonna give you. And that’s not really the way it works. So, um, you know, the truth is there’s a lot of financial aid available. Most families qualify for some level of financial aid. You won’t know the exact amount you’re going to receive until you apply [00:05:00] for it, which is just before you go to college.

Uh, but there’s a formula for it. Um. There are two ways to award financial aid. There’s merit based aid, so things like scholarships. Those are based on. Student achievements. So grades, athletics, things like that, your savings really doesn’t take, really doesn’t factor into those uh, calculations at all. Most financial aid is need-based financial aid.

So they do look at your income, they do look at your assets. They do look at what you have saved to pay for college. They. And that goes through a formula, but within that formula, the vast majority of the weight in those calculations go towards income and not assets. Um, so financial aid is a, is a difficult thing to talk a little bit about, but just know that the vast majority of the weight in the calculations for financial aid is ba is, um, based on parent income and so not assets.

So your savings [00:06:00] has a minimal impact on your financial aid. The second thing that we hear a lot is, it’s not worth saving for college if I can’t save the entire cost, although you don’t really hear it, but it is an assumption that people make. And so, you know, I’ll tell you, I’d be very candid about this.

When my son was born 12 years ago now, um, my colleague at the time said, let’s see how much college is gonna be for him when he goes. And, you know, we did a future cost calculator, which we have on mifa.org. So if you want to. Check that out. It’s on mefa.org and we picked a four year private college in the New England area.

And I saw the number for four years of what that would be. And it was a huge number and I was just sort of, you know, heartbroken for a minute. ’cause I thought, oh, I, I can’t save that amount. But the fact is I probably can’t save that amount, but that’s not the amount that I’m going to be charged in all likelihood.

So, um, there is financial aid available. Uh, most families qualify for some level of financial aid, so it’s not the case that you [00:07:00] have to save every dollar. Um, if, if you wanted to pay for college using your savings, but even if you can’t pay for the, the bill after financial aid, everything that you have saved is something that you don’t have to borrow or something that you don’t have to finance at the time.

Um, so. Every little bit will help. Even saving a small amount over time will help, and we’ll see some calculations about that. So don’t let the overall sticker price of of colleges, uh, scare you from start starting to save.

So the benefits of saving for college, it gives you more education options. It familiarizes you with the process of, of applying for financial aid and, and college financing in general. It can put a lot more colleges on the table in terms of costs if you have some savings that you, you might be able to finance.

Really, to me, the biggest thing is it reduces or eliminates, hopefully even the, the need to borrow loans. And so I know student [00:08:00] debt is, is a big. Topic as it should be right now. Uh, so savings is really, you know, the only thing you can do right now to offset that. And as we’ve seen, it has a minimum impact on financial aid eligibility.

So it, it does really doesn’t, um, impact your, your financial aid to the extent that people think it does. And also there’s studies that have been shown that show, uh. Having a, a college savings account for a child. If a child knows that money is set aside for him or for her, uh, they’re much more likely to attend college and much more likely to graduate regardless of the amount that is saved.

Even saving a a very small amount will have an outsized impact on that. And it, it also, um, this works across. The income spectrum, so low to middle income children as well as, um, middle and upper income children, uh, have this increased attendance and graduation. Um, okay, so we’re gonna talk [00:09:00] about two specific Massachusetts options right now.

The you Fund college Investing plan and the you Plan prepaid tuition program. These are programs that Mifa offers, so. Many of you have probably heard of 5 29 plans. They were signed into law back in 1996 by then, president Clinton. Uh, and they were a tax advantaged way, federally tax advantaged for families to save for college.

And so the way that it worked is you put in some money, it was invested in the market, and it grew without taxes. Each state was charged with creating its own 5 29 program, and in Massachusetts it’s the U Fund, which we’ll talk about in a minute, and that is a mifa offering. Um, since 1996, it has really become the college investment vehicle of choice for, for most families.

And as I said, every state offers their own 5 29 plan. And so those 5 29 plans may vary. Uh, some of the features according to which state and and how that plan [00:10:00] is, is, um, designed. So you know, there’s an account limit. You can save in an account that’s gonna vary by, from state to state. The investment options tax policies, you know it’s federally state tax free, but is it state tax free, et cetera.

Those things will, will vary from state to state. And just because you live in a certain state, it doesn’t mean that you have to invest in that state 5 29 plan, though there may be some, um. Benefits to doing so, and we’ll talk about that as well. So that’s what, how 5 29 plans came about, and that’s, that’s what they were when they were created.

Um, as I said, the U Fund is the Massachusetts 5 29 plan. It’s a mifa offering. It is, uh. Professionally managed by Fidelity Investments. So we have contracted with Fidelity, so they handle the investments and they handle the accounts. Uh, so you know, I have a couple of U fund accounts, one for my nephew and one for my son.

And so when I want to know what’s going on with my U Fund account, I’ll call Fidelity. Uh, [00:11:00] and they’re one of only five states with a gold rating. Gold medal rating from Morningstar. So that is a, a, an investment rating that we’re very proud of. So, um, that is the U Fund. Now, as far as specifics of how the U Fund works, it works like this.

You would open an [email protected] slash u fund and so you open the account, you’d put some funds in. Uh, the funds are invested in the market, um, and they grow, as I said, without taxes. When it comes time to use the funds, you withdraw them. As long as they are used for a qualified educational expense, you pay no taxes on the earnings.

So, uh, that’s how the 5 29 plan works specifically, again, for the U plan. Uh, for the U fund. Um, there is no annual account maintenance fee, so what that means is there’s no, uh, fee that you will have to pay out of pocket every year. To use these funds. There are fees associated with every 5 29, [00:12:00] but they’re taken out of the earnings, uh, in the case of the youth fund.

So, uh, you know, to be candid, I, I, I don’t know what my fees are because they, again, they come out of the earnings and I’m not really obsessively checking that. Um, I could be, but I’m, but I’m not. There’s also no minimum investment to get started. So you can open an account with $10, $5, you can open an account with nothing and choose to fund it later.

So it’s just an attempt to sort of. Lower any barriers that might be there that might prevent folks from opening an account. Now, this bullet point is important. It says multiple investment options to choose from, including actively managed portfolios, index portfolios, allocation portfolios, and FDIC insured portfolios.

What I wanna stress in that bullet point is that when you are filling out this application, when you are, say you want to start a youth fund and you’re putting in all your information and all that, you do have to pick how you want those funds to be invested. And I know a lot of folks [00:13:00] don’t feel comfortable making that kind of decision.

I’ll tell you very candidly again. I know nothing about investments, so, um, I, I didn’t know, you know, I had no strong opinions on how to invest the funds. Uh, we are not. Advisors at Mifa, so we can’t tell you, but Fidelity can explain. So you can talk to Fidelity if you have any questions regarding the investment options, and they can explain to you how they work.

And you know, you can go from there if you set up an account. And, and you’ve invested in a certain way and you decide that you don’t want to invest to continue in investing. In that way, you can change your investment strategy and, uh, you can go back and move the money that you have invested into a different strategy.

You can do that twice a year on a, on an ongoing basis. You can, you can, um. You know, change your strategy as often as you like. So, uh, nothing is set in stone, essentially, is what I’m saying. So if you go through the [00:14:00] application, you do have to choose an investment option. Uh, you can talk with fidelity, they can counsel you, and nothing is set in stone.

Uh, so savings can be used. The U fund can be used at any accredited college or university nationwide and even some international colleges. So it’s one of its strength is its versatility. So it can be used at any college in the country. If foreign colleges are set up to take US federal funds, you can still use your 5 29 funds at that foreign college and still not be subject to federal taxes.

You actually don’t even have to use it for college and we’ll, we’ll talk about that in a minute. But you can use them for credentialing programs and, and vocational training programs as well. Uh, the annual contribution limit of the U fund is $19,000 per year. So, um, that’s the amount that you can put in before you start to hit a tax, uh, threshold, a gift tax threshold.

Um. And no additional contributions [00:15:00] permitted once the beneficiary has a combined account maximum of $500,000. So that’s the amount that you can have. Once you have $500,000 in your uh, account, you know when your, your funds are growing. You can’t put more funds into it at that point. Now most people don’t have that problem.

It’s a good problem to have. But that is the combined account maximum. And when I say combined account maximum, what I mean by that is this. If I have an account for my son and my mother has an account for my son, both of those accounts together. Could not exceed 500,000 if, if they exceed 500,000, we can’t put any more funds into either one of those accounts.

So it’s based off the beneficiary, the student and not the account. Jennifer, I see a couple of questions there. Is there anything that, um, uh, you want me to addresss or No?

Jennifer Bento: Well, um, so I’m, I’m getting to them here. Um, it’s, oh, okay. There are a couple questions that are around the limits, which I think you just went over.

I think the questions came in [00:16:00] before you address that.

Jonathan Hughes: Okay.

Jennifer Bento: Yeah, there’s a good question. If you invest in a 5 29 and one state, does that investment count against the limit you invest in another state?

Jonathan Hughes: Oh, yeah. That is a good question. You know, and I, I’m not sure I know, I, I, I don’t think so is the answer.

Um, but I can check on that. In, in, in. Uh, follow up. Okay. Yeah. So that’s a good question. I never had that question before.

Jennifer Bento: That’s a good one. Alright, we’ll save that one. Yeah, save

Jonathan Hughes: that one.

Jennifer Bento: Okay. Um, is the, is the $19,000 contribution limit in the you fund across all children? If you have two children, can you invest 38 K?

Jonathan Hughes: Yes. Yep. Uh, that, that is, uh, per account.

Jennifer Bento: Okay. Um, let’s see, what else do we have? Uh, how much can be, is there a, a limit as to how much can be rolled over to another beneficiary from one child to another?

Jonathan Hughes: Oh, right. No, no, no. You can, you can roll over bene uh, accounts to a beneficiary. [00:17:00] That does not count as a, um, as a, a contribution.

Jennifer Bento: Okay. All right. I think we’re good for now.

Jonathan Hughes: Okay. Thank you. Good

Jennifer Bento: questions. Thank you.

Jonathan Hughes: Yeah, they got really good questions, actually. Yeah. Good ones. Right. Okay, so I mentioned before that, um, five 20 nines are, the way they work is as long as you use them, they, they grow tax deferred. As long as you use them for qualified educational expenses.

You don’t pay taxes on the earnings. Um, and so the question then becomes what are qualified educational expenses? So it’s tuition fees, housing and food books, and required equipment. So all of those things fall into. Qualified education expenses, and this is at, you know, accredited, uh, colleges or eligible institutions.

Uh, you can also use, there’s been a lot of expansions in recent years past the higher ed or past the college, uh, purview, right? So there is, uh, apprenticeships you can use, uh, 5 29 funds up to [00:18:00] $10,000 annually for costs related to apprenticeships. Um, recently July 4th. Uh, it was passed that you are able to use these program, uh, these funds for credentialing programs.

So it doesn’t have to be, you know, before it was you could use them at vocational training programs as long as the institutions themselves were, uh, accredited and eligible to take, take US federal funding. Now it’s much more broad. You can use them for eligible credentialing programs and expenses. Um. So this is new, but there’s that, that dramatically expands things.

Um, you can use funds for tuition, books, test fees, tutoring, and therapies for K through 12 education. Right now, that limit is like the, the apprenticeships up to $10,000 annually. But beginning next year, January 1st, it goes up to $20,000 annually. And you can still use these funds for, uh, a one [00:19:00] time you can take $10,000, uh, uh, a $10,000 disbursement for a student loan repayment.

And that’s a one time, that’s not yearly. That’s a one time disbursement. So these are, um, all of these sort of. Qualified education expenses. So you can see there’s quite a lot of them. I remember working here earlier before you had the K through 12, before you had the apprenticeships, before you had the student loan repayments.

It was pretty much just locked into that um, college piece. So there’s been a huge expansion in recent years. Bearing all that in mind, the questions are, you know, what happens if you have to take money out for ineligible expenses? So can you do that? You know, if there’s an emergency or something, you know, you’re not able to use the funds the way that they were designed to be used, and you need to take them out.

If you take them out, then the earnings, you can do that, but there are penalties associated with it. So, uh, and the penalties it should, is important to stress that they are [00:20:00] all on the earnings and not what you put in to the account. So the, the penalty is there’ll be a 10% penalty on the earnings and the earnings will be taxed at the owner’s rate of income.

So that is what happens if you have to withdraw funds and use ’em for ineligible expenses. The only, um, wrinkle to this is there is an exception for the 10% penalty on the earnings, and that is in the case of death or disability of the student, but also scholarship. So again, if that happens, either one of those three things happens.

You can’t use the funds that they, the way that they were intended. You withdraw them, uh, you, you’re not subject to the 10% penalty in those cases, although even in those cases, the earnings will be taxed at the owner’s rate of income. One other expansion that I haven’t mentioned yet, um, and you know, I think people really like, uh, because.

One time when you, sometimes when you’re talking to folks and, and you know they have [00:21:00] young children, so much is unknown, right? So people don’t know if their kids are gonna go to college. They’re not quite sure. And they are, are afraid that if they open up this account and they have to withdraw it, they’re gonna be hit with a tax penalty.

Uh, so there is a new provision that allows. Owners if that happens to transfer 5 29 funds over to a Roth, IRAA retirement IRA for the beneficiary. Um, so. Again, even if they can’t use it for all these new expenses, you can transfer these funds over to a Roth IRA for the student. There’s some stipulations here.

The Roth IRA must be for the same beneficiary as the 5 29. Of course, the 5 29 account itself has to have been open for at least 15 years, so they don’t want folks opening a 5 29 for a short time and then transferring money over to the 5 29. Think about that story that I, that I sort of laid out at the beginning.

You open the account when the child was young. When the child got to college age, you know, it wasn’t gonna be, uh, in the [00:22:00] card. So this is the fallback. The transfer amount must have come from contributions made at least five years prior to the transferring over to the IRA and the amount transferred is limited to the Roth IRA contribution limit, uh, of $7,000 per year.

And then the maximum total amount transferred over cannot exceed $35,000. So we have an article on that. The details on transferring 5 29 funds into a Roth IRA that’s on mifa.org. Um, and so you should go and check that out if you have questions. Although of course, with everything tax related, we are, uh.

Careful to stress that we are not tax advisors or tax professionals, and that you should consult your advisor or tax preparer if you have questions. And I like this little sort of green bullet here. According to the 2024 College savings indicator study, 48% of respondents were not aware that 5 29 funds could be rolled [00:23:00] over to her Roth IRA.

And it’s because it’s pretty new that that is the case. So, uh, once people do find out about it, they’re, they’re quite happy about it. So that’s good news. Um, pausing here to talk about baby steps, and I’m not sure, uh, if you know about this program or not, but, uh, we’re really excited about it. It was launched in 2020, January 1st, 2020.

It is the first statewide seeded CSA program in Massachusetts. So what that means is that, um. Well, I’ll say that the, the treasurer, the Massachusetts State Treasurer and the Office of Economic Empowerment within the Treasurer’s Office, uh, spearheaded this program. It uses the U Fund as its vehicle, and basically it sets aside $50 for every baby born in Massachusetts or every child adopted in Massachusetts, which they can claim by opening a U Fund account.

Within a year of the child’s [00:24:00] birth or the first anniversary of adoption. So, um, you know, you go in, you can, if, if you are having the baby, there’s a form in the hospital that you have to fill out and you can check a box saying you’re interested. From that point on, we’ll, we’ll email you saying, Hey, don’t forget to open up your 5 29 account.

You have $50 waiting for you. Um, and if they do that, their account will be seated $50 through the baby Steps program and hopefully that will. Spur them on to start saving and to keep saving. And you know, it’s. The first year of the baby’s life for the child’s adoption because as we’ll see later on, uh, saving, starting to save early, really pays dividends.

So if you know anybody, um, that this would mean something to, uh, somebody who is adopting or having a child, make sure that they know about it. Uh, and they can go to, uh, baby steps to the, to the page on, uh, the ma.gov site.[00:25:00]

Now the other savings program that Mifa offers actually predates the U Fund 5 29 plan. And it is the U Plan program. And the U plan is a prepaid tuition program. This is again, before 5 29, 20 nines were even created. Uh, so it was it. It’s one of a few prepaid tuition plans in the country. It’s one of the earliest ones.

And. It works in a different way than the U fund. And, and it’s for sort of different, um, not for a different purpose, but, but I’ll explain it to you and you’ll see what I’m trying to get at. Um. Basically it allows you to prepay up to 100% of tuition and fees at participating colleges. All the participating colleges are in Massachusetts.

It’s a, uh, sort of more Massachusetts, Massachusetts centric program than the U Fund. Um, it differs in a couple of important ways. You put funds in, the funds are not. Invested in the market, so they’re not subject to the ups and downs of the market. [00:26:00] They are placed in general obligation bonds that are backed by the full faith and credit of the Commonwealth of Massachusetts, and there is a minimum to prepay tuition that’s $300.

Contributions are accepted year round. So you can go and set up a u plan account and put whatever you can put in into it. Uh, you can put it in in a lump sum. You can put it in on a monthly basis, just like the U fund. You can have funds automatically withdrawn every month or, or periodically how, whatever rate you choose, um, there is a bond purchase that occurs.

August 1st. So what they’ll do is, you know, let’s say you go today and you start a U plan account, and you’re putting in, you know, a hundred dollars every month. By the time August 1st rolls around, they’ll take all those funds that you put in, plus whatever interest is accrued on that, and that will be the amount that goes into your bond.

And depending on the amount that you put in this year, that will buy a percentage of tuition. At [00:27:00] each participating college or university in the plan. So let’s say that you put in a thousand dollars this year that is going to buy 10% of tuition at a college that costs $10,000 this year, right? So you put in a thousand colleges, 10,000.

You buy 10%. Let’s say your child goes to college 15 years from now. And they go to that college at which you purchased 10%, but instead of 10,000, that college is now $30,000. Well then you have 10% of 30,000 or $3,000. So as the tuition rises. Your investment rises at that same rate, so you’re locking in a percentage of tuition that you purchased at each participating college and university in the program.

Now, you don’t have to pick the college or university upfront. All you need to do is. Designate, [00:28:00] designate who owns the account, the adult in charge, in charge of the account. And that’s the same, uh, in the U fund by the way. So the, the whoever owns the U fund account has to be an adult. Um, and then the student.

So whoever it is that you’re saving for, how much you’re saving and however you wanna do that, you know, whether it’s one lump sum or you’re putting in every month, et cetera. And most importantly, the year or the years that you want to use the money in. So, um, let’s say, you know, you are saving for your child’s freshman year in college.

You wanna sort of figure out what year that is. August 1st the bond matures. So if, if that’s gonna be 2040, you know, you wanna put, okay, he’s gonna be starting school in 2040 and there are guides to help you out with that. Um. And you can go ahead and do that, and that’s when your funds will become available in that year.

So as the years go on, you can continue to put more funds in and you continue [00:29:00] to sort of buy a percentage of tuition and that can add to the percentage of tuition that you already have. And so you can save up quite a bit. Now this is locking in tuition and fees only, so not. Food and housing or you know, books and supplies, et cetera.

So it’s tuition and it’s fees. And again, it is at the participating colleges, which are all in Massachusetts. So the obvious question that people have is, what happens if my child does not go to a participating college? So you have a couple of options in those cases. The first thing is you can transfer beneficiaries so much like the U Fund, you can take those funds and and, and move them over to another.

Person in the family if that will be an option. If it is not an option, you cash out and get what you put in plus the interest and there are no federal or. Commonwealth state tax consequences for doing that. So you get what you put in plus the CPI now, it typically is worth [00:30:00] more at a participating college.

Um, so it, it typically benefits people to use them in that way, but if they don’t go to college again, you can or don’t go to a participating college. You can cash out and which you put in plus the interest. Um, it is only for use at graduate school. So unlike the U Fund, again, the U Fund can be used for graduate education.

The U plan is only for undergraduate education, and once again, are there tax consequences for cashing out distributions from the U plan, whether cashed out or sent to a college, no Massachusetts or federal tax consequences. So that is the U plan. This is the participant, the list of participating colleges, um, and universities in the plan.

So, uh, the, all the Massachusetts state colleges that are, that are participating, and I’ll leave it here for a minute in case you have, um, you want to just take a look at it. But if you go to mefa.org and, and, and look over the U plan, this list will be here [00:31:00] along with other, other, um, pieces of information and FAQs and things like that.

A lot can be said about the U plan. It, it’s, um. Uh, it’s an interesting program and people have a lot of questions about it, and I, I’ll tell you, I worked, um, with the U Plan accounts. We used to supervise the U plan in-house at Mifa, and I worked with the U plan accounts and when people called and they wanted to check on their U plan accounts, I was the one on the phone or one of the ones on the phone.

And, you know, looking at the accounts. So, um. I feel, I, I feel I understand the U plan very well and I like the U plan a lot, especially if it’s used at a, at a participating college. It, it, it can do quite well for families. Now the other thing is you can use both. You can save in both the U Plan and the U fund.

Um, so you can use the U plan to lock I tuition and fees and then use the U fund for other expenses. That’s an option too. Um, also wanna mention some state tax benefits. Remember I said earlier for the five 20 nines that you don’t have to invest in the, your state that you live in’s plan. Um, if [00:32:00] you wanted to invest in another state, you could, but there might be some reasons.

To invest in your state’s plan. And so this is where we come to it here, there, there is a state, uh, tax deduction for contributions to the U fund and the U plan. So if you are in those plans and you are making contributions to your children, um, you are able to deduct up to $2,000 for, uh, um, of your contributions.

Uh, if you’re married filers or $1,000 of your contributions if you’re an individual filer. Uh, and so limits are per filer, not per account. So if you have three kids and you’re doing 2000, 2000, 2000, you can still only deduct 2000. Um, but it is, you know, something that a lot of states offer and we’re glad that we offer it as well.

Uh, and state policies will differ from state to state. Um, but um, just an extra spur to sort of help folks. To start saving for college. So according to that same study that we cited earlier, 66 respondents said they would [00:33:00] be more likely if Massachusetts offered a tax deduction, apparently unaware that we do offer a tax deduction.

Um, so we do, uh, I. Okay. Any other questions? Jim? Gym.

Jennifer Bento: Um. So, yeah, no, I think, I think we’re got ‘

Jonathan Hughes: em all think good. Yeah. I’m

Jennifer Bento: working on the last one. Okay,

Jonathan Hughes: good. Just checking in. That’s okay.

Jennifer Bento: Yeah, no, it’s, uh, yeah, there, there were some good ones, but I think I tack and you answered quite a few of them as well.

Okay. Um, during a presentation, so. Great.

Jonathan Hughes: Great. Okay, so going to strategies for savings. So what are some ways that we know people have saved and have saved, saved successfully? Um. A couple of ideas here. Number one, start saving as early as possible. Uh, so I would never say it is too late ever, but it’s kind of like saving for retirement.

So the earlier you start, uh, the, the, the better it’s going to be. So use time to your advantage. Start with a goal in mind and we’ll [00:34:00] talk about how you can sort of. Uh, have some idea of what your target goal might be for saving for college, taking advantage of unexpected funds, whether that’s tax refunds or, or, you know, um.

Inheritances or anything that, you know, an unexpected kind of windfall, uh, you can save or save some of, in your, your savings account for your children. Use automatic transfers. That’s a really big one. Of course, you know, that is that you can set up an automatic withdrawal from a, a, a bank account every month or every couple of months, or again, however often you want it to do.

So we know that people do. Who do that do tend to save more. I know I probably wouldn’t be as, as successful in saving as I am if I hadn’t done that. Um, it is worth it though, I’ll say at a certain point, rather than to set it and forget it. You can forget it for a little while, but. Revisit it, uh, every so often.

So, you know, as you get raises, as things change, you know, you might be able to [00:35:00] put some more funds in. My favorite one. Get the word out. Ask your family and friends to contribute. Uh, this image that you see on the right here is a gifting page that was set up by Fidelity. So again, there are you fund, um, account manager.

So you, if you have a u fund account, you can set up a gifting page and you see this here, you can put a, a picture of the child, their date of birth, their name, what. The age they, what date they’re likely to, uh, go to college and what they wanna be when they grow up. And then you can just take a, a, a link and gift that link and send that link out to people and people can gift directly through that link.

Um, so, you know, that is a, a huge deal I think for a lot of families. I know, you know, I have an aunt who every time I saw her, she would give me. $25 in a check to the U fund for my son. And, um, we didn’t do it this way, but there are a lot of ways you can do it. You can, you can use this link. Somebody can give you a check.

They can send a check into the U fund. If they give you the check, you can [00:36:00] just take a picture of it with your phone and mobile deposit it in that way if you have the, if you have the app. So, uh, they made it very easy for folks to. Gift money directly in, because this isn’t something that parents need to do all on their own.

They don’t have to take this on by themselves. And then finally, involving your child in the process. So kids like to know that they have money. Um, we mentioned earlier that it’s important that they know if you want them to go to college, uh, that they have much higher rates of doing so if they know that money is set aside for them and they like to see their balances go up too.

Um, we also have a savings calculator that you can use, and I don’t know if you can see this here, but there’s a, there’s a, a QR code that you can scan and just go straight to it. Um, where you can estimate, you know, sort of your rate of savings, what you have, what you’re putting in on a regular basis, how old your child is, and sort of the rate of return and, and sort of they’re gonna estimate.

How much you’re putting in, what the interest might be. Again, this is all hypothetical and this is based on, uh, a return on [00:37:00] investment of 7%, which is, I think that comes to us from Fidelity. Uh, so not again promising that this is what it’s gonna be, but just to give you some sort of estimate so you can use that college savings calculator.

And there’s another tool that we have that was more in depth that we’re gonna go over in just a minute. Here it is. So this is MI a’s college planning tool. And this really is a personalized strategy. So I love this because, you know, I used to get, before we had this tool, I would be sort of frustrated because I would get calls from parents, particularly of very young children, newborns even.

Um, and they’re very driven and optimistic and they wanted to say, they would often say to me. I just had a baby. Uh, I wanna know what I need to start putting away for her every month so that college is paid for by the time she gets there. And that’s really hard to to tell, right? There’s a lot of things we don’t know yet, so we don’t know.

Number one, where the child is going to be attending college. Different colleges cost different things. Uh, we don’t know what the [00:38:00] market’s gonna be doing. We don’t know, uh, how much financial aid that they may be eligible for. So it was really hard to, to give somebody an answer to that, but you wanted to.

And so with this, this is a way that that person could have some idea of what they needed to be putting away every month. So, um, you can create, uh. A profile for a family in Mifa college planning tool. Um, you put in, you know, family members ages and it will estimate, you know, when a child will be entering college, what year.

It will estimate based on the increase intuition over the years, over the past years, what it will be in the future. And they have different colleges listed. They have different types of colleges listed. So it’s gonna be based on real statistics. Um. So we’ll have some sort of idea of what college may cost.

They’ll ask you to put in what you already have [00:39:00] saved and what you are saving or plan to save between now and then, and it will estimate. What you are likely to have saved to pay that cost of college. And you can change the rate of return, 6%, 5%, 7%, whatever it may be. Um, and so get an idea of what you may have.

And then finally, if you put your income in, it will give you some idea of your gift aid in terms of financial aid, which is grants and scholarships, which is things you don’t have to repay. So it just comes right off the bill. So we can see here in this example. That this family has a cost, a one year cost of college of 59,995, that they’re eligible for 7,073 in gift aid, and that they’ll have about $32,002 saved for college, leaving them a shortfall for one year of $20,920.

So they’ll be able to tell at this point, I need to start saving [00:40:00] more money. I need to start looking at some less expensive colleges. Uh, I need to apply for scholarships, which is something that they can do through the site as well. Um, so, and they can track their colleges and track their progress and do all that stuff, so, um.

It’s just a really, really valuable tool. It does a lot more than that, but to me that is the heart of it. So if you want to take advantage of that, again, that is Mifa s college planning tool on mefa.org. Uh, again, this green bullet here, 89% of respondents from the 2024 CSI, I believe the value of college education is worth the cost.

So that’s something to keep in mind. You know, we’re talking a lot about the cost of college and how you can finance, but there is value and you do get return on investment, um, for your college education. All right, so. I’ve mentioned this a couple of, oh, I mentioned this a couple of times, which is taking advantage of compound interest.

And compound interest is essentially interest growing accruing on interest. And so this is gonna show you the benefit of starting [00:41:00] early. So let’s say Julie starts saving $50 a month when her in a 5 29 when her child is first born, Jonathan saves a hundred dollars per month in a 5 29 account, beginning when his child is in second grade who will have.

More money saved when his or her child turns 18. And I’m gonna launch a poll here if I can. Oh yes. So go ahead, answer this question. Who do you think is gonna have more by the time their child turns 18? Julie or Jonathan?

All right. I’m, I’m gonna end the poll because I, I seem to be losing quite lopsidedly and, and rightly so, because, uh, 85% of you said, Julie, you were correct. It is going to be [00:42:00] Julie. Julie starts saving $50 per month in a 5 29 account when her child is first born. Uh, again, bearing mind. The 7% return over, over that time, um, she’ll have 21,536 to pay.

Now I’ll have 19,000 7 98, so I don’t do too bad. But if you look, actually, it’s interesting to see what. What amount the interest accounts for that. So for Julie, she’s contributed 10,800. She earns almost that much, 10,736 in interest, whereas I have to put in 13,000 and gain 6,598 in interest. So a lot, I have to work a lot harder to get, uh, where I was.

I see a hand raised there. I’m not sure, um, how to. You, but if you could put your question in the q and a I can help you. Uh, I wanted to draw attention to, uh, a card that we have, [00:43:00] the, uh, uh, a Mifa branded Gift of college card. This is a gift card that you can buy, uh, and. For, for a gift and, and put in 25 to $200.

Uh, and it can be gifted to somebody and they can use that to put funds right into their U fund. Their U plan or their attainable account, which is a 5 29 A, um, that is, uh, another 5 29 account that maybe offers, and instead of being used for college only, it can be used for, uh, expenses related to, uh. Well for individuals with disabilities.

Um, so this is available at CVS Cumberland Farm and stop and shop stores across Massachusetts. In addition to the uses that I mentioned, uh, it can be used to pay student loans as well. So just something here. I know a lot of people, even though you can gift money in through the, the link virtually, I know people, some people like to have an [00:44:00] actual sort of, um.

Tangible gift that they can give folks. Okay. We’re finally gonna end up with how families pay for post-secondary education. And this is really important. So, um, a lot of times people think it costs. An exorbitant amount of money to go to college. Full stop. I mean, every year there is a news story in late summer.

It now costs X amount of dollars to go to this college. And we’re, we’re close. We’re, if we haven’t hit a hundred thousand, we’re very close to the first a hundred thousand dollars per year college. And so, um, you know, when people hear that. It has a kind of chilling effect on them. Right. So, and I’m not saying that it’s not true that college is expensive or can be expensive.

It certainly can be, but there’s a more complicated picture that I, I want you to be aware of. So, um, this information that I’m going to talk about comes from the college board. Trends in college pricing. And so the college board is the organization that does the [00:45:00] SAT and they also do, um, research projects like this.

And they, they do this publication every so often, trends in college pricing, which they sort of take the averages of what. College costs. And so these are national averages. So just to be aware of that. In New England, in Massachusetts, we’re gonna be higher than the national average on some of this. Um, but for a four year private college, a yearly cost for four year private college, and those news sort of worthy tuition figures are private colleges for the most part.

Um. This cost includes tuition fees, housing, food, books, supplies, transportation, everything related to the cost of attendance at a college for a four year, one year for a four year private college. The most expensive type of college. The national average is $62,990 per year. So that’s everything included, as I said.

So food and housing, et cetera. But there are [00:46:00] public colleges and universities as well. And if you attend a public college or university in the state that you live in, you get a discounted tuition rate. So the average cost, yearly cost for a four year public college or university is $29,910 for an in-state resident.

So you can see already that’s quite a difference. So for your four year privates, think about things like in Massachusetts. You have, you know, Boston College, Harvard, um. Holy Cross, Emerson Williams College. But there’s a lot of private colleges in Massachusetts, but we also have a public university program, very strong one with UMass Bridgewater State, Framingham State, et cetera.

Um, and so if you live in Massachusetts, you’re going to pay a discounted tuition. So, uh, our. Figures are probably closer to the national figures here, but 29,910, if you go to a public university outside of your state of residence, you lose that discounted tuition. Uh, but you can see the [00:47:00] average is still significantly cheaper than the private college of 49,080 per year.

Now, a vocational school is a little tricky. This doesn’t come from that same, uh. Publication that the college board does. This comes from best colleges. How much to trade schools cost, so this is 15,070 for tuition only. Vocational school can be really varied, so there’s lots of different vocations, there’s lots of different costs associated, but um, but this is the best information that we have.

15,000, 70 for tuition only, and then often the least. Expensive options are the two year public community colleges. So this says 20,570 per year. That, um, seems. High. And I think the reason that that seems high is because that takes into account room and board, which is probably about 10,000 per year, but most two year community colleges, all of them in Massachusetts in fact, are commuter colleges.

So you won’t [00:48:00] be paying that room and board cost of that food and housing cost. So they’re, they’re likely to be much less expensive than that. And in fact, in, in Massachusetts. Um, most, many can go to community college for free. Uh, so, uh, I, I want you to take two things from this slide. Number one, yes, college can be expensive, but there’s lots of different types of colleges and they have lots of different cost levels.

The second thing that I want you to take from this is that this does not take into account financial aid. This is what is called the sticker price that is, uh, looked at before financial aid. And as I said. Most families, most students will qualify for some level of financial aid. Now, I mentioned the two types earlier, merit-based and need-based.

Um, but just to give you an idea of how much money is granted in financial aid every year, uh, the most recent year for which we have data, $190 billion in aid was awarded to students. And that’s, that’s [00:49:00] not like, uh, an, an aberration or, or a, uh, you know, a fluke that is kind of where it, it lives typically, um, or has lived typically throughout the years.

So there’s many billions of dollars granted in financial aid, um, throughout, in the course of a year. So again, merit based, awarded in recognition of student achievements. So when you hear about academic scholarships, artistic scholarships, athletic scholarships. This is merit based aid and that really for the most part comes from colleges and universities themselves.

And colleges and universities have really different practices in how they do merit based aid. Some colleges give out a lot of merit based aid, some don’t. Um, it really depends. It’s a question that you can ask colleges. Most of that $190 billion figure though, is need-based financial aid. And that is based on the information that you put in your income and your asset information, et cetera, on the financial [00:50:00] aid forms.

Um, and so again, parent savings, uh, have a very, very minimal effect in that calculation. So hopefully you got a good financial aid offer. Once you do get that financial aid offer and you have a balance due to pay, there’s only three ways that you can use to pay past income, meaning any savings that you have.

Present income, the salary that you’re earning while your student is in college, and you can go to, uh, a, uh, outside provider, a third party provider for, um, to use a monthly payment plan. So you can, whatever you can afford to pay on a monthly basis can go against tuition. You wanna maximize all the avenues that you can before you get to borrowing.

Um. The fact is, is that many, if not most families will have to borrow something to get through four years of college. That’s not necessarily a problem. The problem is if you borrow more than you can afford to [00:51:00] pay back or comfortably pay back. Okay? Uh, so next steps. Start saving if you haven’t started to save.

Uh, if you have started to save, you can continue to save and, and take a look and see where you are with your goals. Talk to your child about college. That’s a really important one. So, um, you know, it’s an uncomfortable topic I think for, uh, a lot of families as to what students expect and to what parents expect.

And if those things aren’t shared, it can result in, um. You know, decisions being made that are not based on, uh, on. Logic, but, but sort of emotions and, and that can be a problem. You can use our online tools to learn more about college costs, and you can go to mefa.org and go to Saving for college for that.

You can sign up for more webinars at mefa.org/webinars, and you can sign up for our emails [email protected]. Here is our social media [00:52:00] information. Uh, I know Wendy is raising her hand, but I don’t know how to, uh, get to you there. Wendy, can you submit your question through the q and a and, and we can, uh, address it?

Um, and yeah, if you have any other questions, please let me know. Otherwise, I’m going to stop sharing and stop the recording.