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

Julie Shields-Rutyna: [00:00:00] Welcome everyone. Welcome to MEFA’s Webinar, using your U Fund to Pay for college. And we’re so happy today that this is a joint webinar between MEFA and Fidelity. And so let me introduce you to our, uh, great guest. Uh, today’s presenters will be Corey Latham and myself. And Corey is the managing the 5 29 managing director for Fidelity Investments.

And Corey, do you wanna say a few words about what you do and, and a little about Fidelity?

Cory Latham: Yeah, of course. And, uh, thanks so much for having me here, Julie. Looking forward to today’s session. Uh, too much. My name is Corey Letham. I’m one of the 5 29 management directors at Fidelity Investment. I work directly in our college planning group.

In my role, I work directly with our states, provide best in class services and products for our end customers. And I’m fortunate enough to work directly with MEFA on.[00:01:00]

Julie Shields-Rutyna: Thank you, and we’re so happy to have you today. Um, Corey is a wonderful resource and a wonderful partner and, and person to work with. And I’m Julie Shields Rutina, and I am the senior director of college planning, education and training at MEFA. And, uh, MEFA has been around for 40 years helping families and students, um, afford higher education.

We have lots of resources for families and, uh, our website in fact is a wealth of, of information. We have calculators and articles and, uh, we work one-on-one with families as well. So really great customer service and we hope that, um, that you will visit often for any, any questions that you have. Um, after, after this webinar and today.

This will, you know, we have some slides to present, but we’re gonna leave lots of room for questions. [00:02:00] Um, and in fact, um, our colleague Jonathan Hughes from MEFA is behind the scenes and he’ll be, uh, taking care of the q and a and answering some questions, but also, uh, gathering those up to share with Corey and with me near the end.

So any questions you have, put those in the q and a and we’ll make sure they get answered today. And if you want to use the live transcript feature, you can hit the CC button on your screen and you’ll be able to see the words that we’re speaking and the chat is disabled just to keep it organized. So that put everything in the q and a.

And if you need to leave the webinar for any reason, just know that we will send you the recording and we’ll send you the slides, um, later in the week. So what we’re gonna talk about today is really you are, is methods to pay the college bill. So a couple of things we know about you and we’re gonna [00:03:00] ask you a couple more things, but a couple of things we know about you is number one, that you have saved in the U Fund.

And, um, I will say congratulations. And that’s really great and I think if you don’t already feel it today, you will know it over the next, uh, months and years that that was a really good decision to help you pay for college. Okay? But we’re gonna talk about some of the other ways because colleges is a large expense for families, these, these years.

And there are other ways and lots of times families piece together a lot of ways to pay for college, like financial aid and private scholarships, um, along with your savings and then things like payment plans and, and loans. So we’ll talk about that and we will talk about MEFA has. Um, you know, good, good loans for families.

So we’re gonna talk about those and then we’ll talk about the timing of how things are gonna happen over the summer before your student enrolls in the fall and what you can be doing. [00:04:00] So that’s our plan and we’re gonna answer lots of questions from, from you as well. So here’s some questions that we’ve heard that we’re gonna cover.

Uh, people ask, should I continue to save once my child is in college? Should I use all my savings at once or spread it out? What if I don’t use all of my 5 29 money for college? So we’re gonna cover that and more, all of that and more. So quickly again to talk about what are all the methods that people use to pay the college bill, and they include financial aid, private scholarships, and then past income, like savings as you’ve done in the U fund.

Current income where people sometimes pay month to month. And colleges have something called, uh, monthly payment plans that you can join that are not loans. They sometimes cost a small fee and, and you’re able to pay, [00:05:00] spread out the cost. Um, and then future income, again, due to the high cost of higher education these days, a lot of people do end up taking loans and, uh, it’s both federal loans and private loans as well as student loans and private parent loans and family loans.

But I do have a, I have a question that I’d like to ask. I have two questions actually. So I’m gonna ask, I’m gonna put up a poll and I’d love if you could answer these two questions that will help us as we’re, um, speaking to you. So let’s try my poll.

I’m gonna launch the poll. Alright, so tell me, can you all see the poll? There are two questions. The first is, did you apply for financial aid? And we’ll see your answers there. And the second question is, did you receive financial aid? So I’ll give you just a moment to answer those. We have most people are answering [00:06:00] right now.

I’ll give you another moment or two.

So what I’m seeing right now and keep answering if you can. I have almost all of you. Oh, I’m gonna wait ’cause I have all of you. I think answering.

Alright, so what I see, and I, I think I can share it, but I’ll say it before I share, uh, that 88% of you applied for financial aid and 10% did not apply for financial aid. And 2%, um, didn’t apply because you’re not at the right age or stage. And then did you receive financial [00:07:00] aid? 55% of you, uh, say you received financial aid, 43% say you didn’t really receive financial aid and that 2%, you know, you didn’t apply because your student isn’t at the right stage.

So that’s great information. Thank you for doing that. And, and that just shows, you know, uh. A lot of you, 88% applied for financial aid. Um, and less than that received it. So not everyone receives financial aid and, um, again, keeping keeping college expensive. Alright, I’m gonna end the poll and I’m gonna share the results.

I guess I can share them with you. See, you can see them as well. Can everyone see that? Okay. And I’ll stop sharing. So thank you so much for that. That’s super helpful.

All right. So at this stage, probably, [00:08:00] um, May 1st your student decided on a college, and probably as a family you put down a deposit and maybe then you participated in graduation activities. And maybe for a few days you put, you put this college costs in stuff behind you and not, didn’t think about it for a bit.

But now the reality hits it’s summertime and colleges are going to send out their bills if they haven’t already. And many have colleges usually send out their bills in June and July, and bills then are usually due in July or August. And you then, as a family, have to figure out what are the build costs and they’re over there on the left, tuition fees, housing, if your student is going to be on campus food, um, if your student is going to be on campus.

And there’s, um. Most times a health insurance charge, which we can talk about, uh, that colleges need to charge. Um, but it can be [00:09:00] waived if your student has other health insurance. So you put together all the charges. Um, usually bills are fall and spring, so this would be the fall charges. And the college hopefully has already subtracted out any financial aid that you have received plus your enrollment deposit.

And then you as a family are thinking about how are we going to pay the balance due? And one other piece I’ll tell you about that is if your student received, um, in the financial aid offer a direct student loan, which again, they probably did because most students receive, um, that then you’ll see perhaps, um, they received a $5,500.

Direct loan as a student. We think that’s probably when you’re, if you think you’re gonna be turning to loans, that’s probably the best loan to take because it is, um, in the student’s name. So the student is the [00:10:00] sole borrower. There’s no credit check done, and that’s why the student can receive that. It’s based on the fact that the student will go to college, um, come out with a degree and hopefully be marketable for a job and earn, earn enough to pay that back.

Um, it has a fixed interest rate. It changes annually. Right now it’s 6.39% and that loan has two parts. Sometimes, sometimes you can have a little bit of subsidized portion, which just means that the federal government will pay the interest on that loan while the student is in school. Um, if it’s an unsubsidized direct loan or a portion of it is unsubsidized, then interest does begin to accrue right away on that loan.

Otherwise, the loans are, are the same, and there is a fee deducted off the top. And what will happen if the student accepted that loan is the college will direct the student to do some entrance counseling to understand, yes, I’m borrowing a loan, [00:11:00] here are the terms, here’s how I’ll repay online. And then to sign a master promissory note.

And that can all happen online. And, uh, then no payments are due on these student loans while the student is in school until six, uh, months after graduation or separation from the, the school. And there are another reason these loans are the first to take is there are, there are many options for repayment, uh, plans upon graduation.

And the student can learn more about those. So a lot about that. But those loans are usually the first loans taken. And hopefully when you receive your bill, those are subtracted from, from the balance. And then one more thing you might wanna think about is any private scholarships. Maybe your student received an award at at graduation, or maybe your employer has a scholarship that your student could apply for, or your [00:12:00] town or a community group that you’re involved with.

Look into all of those things just to see if there are any. Additional options for your student there? I, I like to tell the story that for years at my dentist office, there was a little sign at checkout that said, um, two scholarships awarded each year for a good community servant. So I had my eye on that for, um, many years before my students went to college.

So sometimes where you least it, I’d say keep your eyes open for things like that closer to home. And then there are also some online searches that you can do. And we’ve listed some websites, um, where you can look and the student could see if there’s still any scholarships available, um, at some of these websites.

And I will say following MEFA on social media and just being in touch with MEFA, we. Publish a lot of information about scholarships that students can apply for. So, um, so take [00:13:00] advantage of that, stay close to us during this process and, um, just know, don’t ever pay a fee to receive a scholarship. Uh, you just wanna be, be careful about that.

But there are some scholarship scams out there, so do not pay a fee. So with that, let’s talk about, I think the most, I’m gonna say the most satisfying way to be able to pay for college, which is to, um, feel good about what you’ve done in the way of savings and using that savings. And so with this, Corey, I’m gonna turn it over to you to talk about this.

Cory Latham: Yeah, hap happy to do so, Julie. Thank you. So there’s a lot of different ways in which you can save. Um, I’ll, I’ll talk specifically a little bit more about 5 29, but there’s obviously other ways that you help pay. For that college expense that you’re gonna see. So there is fund and Julia, touch a little bit more on the plan.

Common thing you’ll see people look at is savings bond of [00:14:00] your child was born. I think that’s a pretty common gift that you’ll see. But things such as stocks, bank accounts, other investments, I’ll say the last one’s always my favorite contribution from other family members. Whenever anybody wants to help pay for my children’s future education expenses, they’ll always get a big thank you from me.

But there’s a lot of ways, and each of them have different benefits for different tax treatments, different ways in which they can be invested. So you do wanna take a look at each one of them and understand that they all are slightly different, but can all be utilized for those same expenses that you’ll see as you’re moving towards those, those college expenses.

Great. I’m more than happy to speak about the fund. I know talked a folks here are familiar with what fund is and what a 5 29 plan is, but I wanna touch on it briefly for what it is. So fund that is the Massachusetts 5 29. [00:15:00] So it’s offered by NEPA and it’s managed by us at Fidelity Investments. I love this next slide that it’s here to help reach your savings goals and child’s education dreams.

’cause it really is, the way that the 5 29 does work is it’s tax advantage account. So what that means that any earnings you have in this account are tax approach. As long as you use it for a qualified education expense, those distributions are gonna be taxable. So that’s a huge, huge benefit. There are other benefits as well.

You see things involved with gift taxes or estate taxes, things such as that, that you’ll wanna do some research. But the biggest goal and the biggest benefit of a 5 29 account specifically with the defund is that. You get that tax deferred growth and as long as you do utilize it for qualified expense, you know, then you do get that tax resistance, which would probably lead to the next question, which would be what qualifies, right?

What’s an educate, what’s a qualified educational expense? So there’s some common [00:16:00] ones, right? I think that most people would think about it’s tuition and fees. That’s what you think the majority of 5 29 savers are gonna go towards, because that’s probably the biggest chunk of what you’re gonna have to pay for when it comes to college.

But there’s other things that it can utilize to pay for as well, right? Housing and food. So I think a lot of folks will think about that as, that’s my on-campus housing. It’s my on campus movement. Did you know that it could be used for off-campus housing or off-campus food? There are certain criteria that has to meet.

It’s usually within whatever the allotment is of that university that you have to stay at or below that. It doesn’t just have to be for on campus. If you happen to live off campus, you can still utilize it through those expenses, books and supplies. I know we’re like, maybe moving past books kind of breaks my heart a little bit.

I’m a book guy, so I hope that they’re still gonna be using ’em when my kids get to school. But you think about books and supplies, if the books they can absolutely used for that technology, I think the [00:17:00] most common thing you wanna think about is getting that brand new laptop, or just sending your rising freshmen to college and getting that experience.

But there are other technology use that can provide for that. So a broad array of what eligible expenses are for that. So we’ll then talk about how you’re gonna use it. I, I’ll touch on the youth fund piece. Julie, I’ll turn it back over to you to discuss the plan, but I’m not gonna read that whole link.

But if you go through that link right there on fidelity com, it’s gonna give you the different options you have of how you can use those savings, how you can pay for those expenses. I’ll touch on a few of ’em a little bit later, but just know that when you go there, there’s things such as utilizing a form.

We’ll talk about bill pay. I do wanna highlight that number right there. That number will get you directly to dedicated college planning specialists that we have at Fidelity. You can help you understand how to utilize any one of the options that you wanna have, and they’re available to really help you in really any aspect that you’ll need when it [00:18:00] comes to.

So Jill, did you wanna touch on the U plan?

Julie Shields-Rutyna: Yeah, and I’ll just say if any of you, um, the U plan is MI a’s prepaid tuition program and some of you may also have money in the U plan. If that is the case, um, you would log into your account to request a distribution and if you aren’t online, then you can complete the U plan distribution request form.

And that was mailed to you in April. And again, there’s a telephone number with any questions, so you can. Easily request your funds and have those, um, distributed to you when you need them.

Cory Latham: So what are some other ways that you could use? Right, and I know we have some what if questions coming up, we’ll touch on that. But there are additional research for 5 29 beyond just the ones that we talked about for eligible expenses. They’ve become a lot broader. I will start it by saying, I know there’s been recent legislation passed that could [00:19:00] impact some of this, amend it, increase, some of it.

I think we’re still waiting to figure out what that’s gonna look like. So there may be some changes involved to this. But what I wanted to focus on today is where we stand right now. So those things that you could use today, if you wanna utilize their refund. So K through 12 expenses of up to $10,000 per year.

So you can pay tuition for K through 12 expense. That’s, that’s 10 K in the year. Here is a student loan repayment option, that’s 10,000 lifetime. So the K through 12 is per year. The student loan is just 10 k for, for the lifetime trade schools and apprenticeship programs. This is becoming increasingly more popular.

I think we all understand that there’s a need in the trade, hear about it all the time, and maybe some kids when they’re getting outta school, like heading towards that or thinking maybe college isn’t where they wanna be, wanna work with something else. Well, trade schools and apprenticeship programs are a great option and they’re able to be utilized with 5 29 as [00:20:00] well.

So as it’s becoming a need in the environment, 5 29 plans are becoming a little bit more flexible of how, so definitely use it for that. This is the, the most recent one we’ve heard of. I think that’s probably generated a little bit of the most buzz. It’s really that Roth IRA transfer that’s allowed for that 35,000.

Still kind of a waiting final, finalized regulations of what it’s gonna look like. But as of right now, here’s how it stands. So the account has to be open in the name of the beneficiary. 15 years, can’t use any funds that would’ve been contributed anytime within the last five years. You do have to stay within those Roth IRA limits each year.

So for an IRA, you can’t, a certain amount, couldn’t do all 35 months. You have to do within the limits. Time. Time. So that’s crazy too. You can always change a beneficiary. That’s a big thing. So the owner of the 5 29 account would be participant, typically would be parent. If something was to come up in the [00:21:00] beneficiary for any different reasons, you can always change it to another old family member.

That’s a pretty common option that we’ll touch on. And then, you know, if you get a scholarship, you tap into attend a US military Academy. There are other caveats there within that, that we restrict the limit, your delayed penalty or other things. So they understand that those things happen. Making sure that you know, if you don’t go to school, if you don’t do the typical four years.

A lot that you can. Excellent. Yeah. Alright.

Jonathan Hughes: Cory, I don’t know if, um, y you said that we’re gonna touch on this later. Yeah. But somebody had a question about what the process actually is to transfer beneficiaries. Is that something that you’re gonna go through? Or,

Cory Latham: I can go through it right now.

Jonathan Hughes: Okay.

Cory Latham: That wasn’t, that wasn’t one of my, uh, one of Yeah.

You just, you usually just fill out a form. Typically you would just do that with us. We would go Right. [00:22:00] Fidelity Associates, they could walk me through it, but it’s as simple as just filling out a form and changing into that. You gotta fill out the form. It’s more than just giving us the name to do it. As long as you do that, that’s all they

Julie Shields-Rutyna: And

Cory Latham: co can

Julie Shields-Rutyna: they

Cory Latham: get that form on the

Julie Shields-Rutyna: Fidelity

Cory Latham: website?

Yeah. Course Right. Initiate the process on. It’s a, it’s a pretty simple process to be able do so, but yeah, so more important to contact number dedicated.

Jonathan Hughes: Thank you. And, and I have a couple other questions too. I don’t know if now is a good time for them, and I think they might be Julie questions. So, um, I’ll ask you, so somebody wants to know, is it true that if 5 29 funds are used for a loan repayment, then it must be repaid in the year the loan was taken?

Julie Shields-Rutyna: Ah, actually I’m gonna ask Corey too, but I, no, I, I don’t, I don’t believe, no, in [00:23:00] fact, I don’t believe so because the loan would be taken, you know, say freshman year, sophomore year, and then you would repay the loan later. No, I believe it’s 10,000 lifetime per student. Not in the same, that’s, that is an exception.

I, now that you say it that way, John. But yes. And I, Corey, I hope I’m right there, but I understanding as well. Yes, yes. And,

Jonathan Hughes: and then one more, and there’s something you did kind of touch upon earlier, but um, with a little bit of a added detail here, somebody wanted to know, they have a commuter student who’s gonna be living in an off-campus apartment.

Uh, and they know that, you know, you can use that for five, you can use five 20 nines for that. But they wanted to know what type of documentation, if any, is required when 5 29 funds are used for off-campus rent and or food expenses in addition to tuition.

Julie Shields-Rutyna: I, I think the best could be the college usually has a student cost of attendance budget that they use and that’s [00:24:00] what financial aid is based upon.

And, um, all of that. And so the colleges usually have an on-campus housing allotment. An off-campus housing allotment. And so if you have that for the year that your student is, um, in college, that that just puts some limits on it so that someone, um, you know, a student maybe doesn’t go out and rent a penthouse and expect that maybe the 5 29 will pay for it.

I think you’re, you’re covered if you show what the college required for that off-campus housing for, um, for the year that, that amount, again, it’s between the family and the IRS. Um, but I have seen that’s what, uh, that’s what families usually do is make sure they keep a record of what that off-campus housing allotment is.

Cory Latham: I don’t have anything specific I could say keep this document. In that document. Our best advice is to keep detailed records and make sure [00:25:00] that you keep documentation of what you paid, who you paid for. The more that you have, the better it’s gonna be. But I don’t have like, just this, that. Just wanna make sure that if you’re gonna be doing something off campus, that’s not typically like through this school, just make sure you can detailed documentation of what was paid for, how was paid for.

So of course I should have said that. And keep the record of what you paid too. So I’m, uh, I feel like I’ve said that many, many times in my life. Yes. Not to share that.

Jonathan Hughes: Okay. Thank you. Feel, feel free to proceed now. Thanks.

Cory Latham: Yeah. Well, I’m excited to talk about this job. Excited to talk about paying for it. So, Julie mentioned you’ve done a lot to get there to where you’ve been able to save in your 5 29 plan when you’d be able to save in your new you fund.

And then it is an account that’s designed to be used. What I wanna talk about today is how you can use this is the newest thing that we have here. Fidelity. It’s the newest thing that we’re able to offer to [00:26:00] customers. And the easiest, quickest way to be able to pay for it is just through a direct deck.

This is brand new. It’s something that we just offered, um, in the last few months. So what this means that you pay your educational institution directly from a five point gap, right? So it’s faster processing, it’s fewer steps, and it’s just this single transaction. I’m gonna touch on some other ones, which will involve multiple steps, but this is the only one that is just a single step.

So I’m sure everybody’s done in eCheck or is familiar with what direct debit is, but here’s how it works. You have your A BA number, you get your Fidelity account number. Now it does contain a prefix, but that’s easy to find on fidelity com. We see that you’re able to grab that and what you do is through the educational institution, you’ll enter in that information and it will directly debit from your 5 29 plan to that institution.

I think this is, it’s really great. Like there’s a lot of stress going to school. There can be a lot of stress with payments. This takes a lot of the stress out of it. It can also [00:27:00] be done depending upon the time of day. It can actually be done same day. So if. Having to forget to pay the bill and needed to get paid today before they could register for classes.

This would give you an option to do it same day, but it, it is really revolutionary way to be able to making it much easier and quicker and cleaner for those to be able to pay for school. So, really excited to talk about that. We wanna go to the next side. I’ll talk about what some of the other options we have are.

Um, again, these all work and you wanna do what’s ever best for you. It’s your call. Whatever works for you and your personal situation, please feel free to do that. But one of the options is transferring between Fidelity accounts, which you move from a 5 29 to another Fidelity account to make there. And electronic funds transfer the same way.

You would just move it to say, a bank account somewhere else. From there, you do have bill pay, which I’m that a lot of people would be familiar with, where either schedule a onetime or a recurring payment to go out at a certain date at time. That does [00:28:00] involve a physical check. So you wanna allow for about 10.

You can do a bank wire from your bank to get the money there, but that can involve fees from the bank. You wanna check on that? You could also pay the school directly. I mentioned that form earlier. You could call us up again. That would involve a physical check. So you’d wanna allow for yourself for 10 business days.

Think the important thing to know here is that there’s a wide variety, right? A wide array and a wide variety of ways that you can pay for school. Which whichever’s gonna be best for you. You know, we just wanted to highlight that there are different options for you to think that all.

Julie Shields-Rutyna: That’s great. Yeah.

Thank you.

Cory Latham: Now let’s go to the what ifs. So this is where it gets, uh, a little bit tougher. These are the questions that we get a lot. First one I’ll start out with that we hear a lot of is what happens if my child gets a scholarship? Say that is a parent’s dream. We all hope that our children get scholarships.

I think that’s gonna be the. So what you can do is, there’s a couple different things. You’ll, you’ll hear me say this very often. You can always [00:29:00] to change the beneficiary. So if it’s a full scholarship, it’s all paid for, no need for use of 5 29 funds, you can change the beneficiary. Um, you can also withdraw up to the scholarship amount without penalty.

So whatever that scholarship amount was, you could also use it to pay for other expenses that aren’t covered by the scholarship. It’s a partial scholarship, so you can always use it that, besides not to go to college. You know, I, I would say are they not going to college? But are they gonna be continuing their education in other ways?

Right? So that’s where the trade schools in the apprenticeship program it, you can look at situations like that. You could also always change it to another eligible family member would be that change of beneficiary there as well becomes disabled or passes away. So if somebody becomes disabled, you would get that 10% penalty for the withdrawals.

Like that could be waived. You could transfer it to another family member. I will also say, Julie, as I also like to work very closely with the at Obtain claim as well, you do have the [00:30:00] option to take a 5 29 account and roll it into an ABLE account, which is a tax advantage account for those with disabilities.

To pay for qualified disability expenses offers the attainable savings plan. You can do that. There are certain restrictions apply as to whether you can open it, how much you can bring in, but it’s absolutely an option for people to look at. Um, so you could do that. Then if somebody passes away again, that 10% penalty would be, the participant would still have ownership of the funds.

So what they would be able to do then is change the beneficial problem. So that would be an option if they graduate without using all the money in the account, they’d like to refer to that as, that’s a really great problem to have. I don’t even know if it’s really a problem. I think it’s a great situation you can run into.

You mentioned that Roth transfer that you could do, this would be a situation where you could book with that as an option for you. Other things, you know, the change of beneficiary, but also [00:31:00] what did they, do they, are they looking to further their education to go to grad school or something along those lines.

There’s a lot of different options you could have for that one. And then if they have any assisting UGMA or UT a account, I would say that doesn’t prohibit you from having a account account as well. Um, there’re different accounts, right? So I think that they have different tax treatments, different ownership requirements, different investments that they can have.

You could transfer UGMA or UTMA into U GMA or UTMA 5 29. There are certain tax consequences that would come along with that. So you absolutely need to look into that before you do that. Um, but you know, they do a different usage, so you could have both. It doesn from having a 5 29, so it’s not really an either or.

It could definitely be a both situation looking at.

Julie Shields-Rutyna: Right.

So now I guess what I’ll, [00:32:00] I’ll just turn and talk about a couple of the other ways you can also, uh, pay for college. And of course I congratulated you at the beginning and I mean it so sincerely. Um, but I also know I, I have talked to many families over the years and I also know that most families aren’t able to save everything.

Um, and you know, I even talk to families who sometimes feel badly about it. I, I share that. No, most families piece together a number of resources to pay for college and hopefully savings is a part of that as it is with you, all of you. So some other ways that you can look into right now when you’re thinking about how to pay that bill.

Um, is one is college payment plans, monthly payment plans through the college, and maybe your college has sent you information on that already. Usually they, they do that at this time of year. If they haven’t, you can feel free to reach out to their bursar’s office, their financial aid [00:33:00] office and ask about that.

And most colleges offer these and they allow you to pay the bill instead of more typically once in the fall, once in the spring, over the course of five to 12 months, depending upon the, the type of plan. And again, these are not loans, so there’s no interest charges, uh, for this. But there is usually a fee, you know, I don’t know what the fee could be, $60, $75.

You join the monthly payment plan and then you just pay that bill monthly to spread out the cost. So look into that if that’s something that you might be interested in. Um, and again, all colleges usually have, have this option. And then let’s talk about loans. We talked about the student loans, um, that were a great option for the student, but you saw that for our freshmen, um, the maximum federal student loan was $5,500, and that for a sophomore at $6,500 and a junior or [00:34:00] senior, $7,500.

So, uh, probably the best loan to take, but many times not enough to cover, um, cover the bill. So then families think, okay, now, now what? So let’s also say, I mentioned that the, the federal student loan did not have a credit check. Any other loans that we’re gonna talk about from now on, um, require, um, a credit check.

And so an important piece is to know your credit history. Have an idea of what your credit score is. Um, and just a few things to keep in mind are, borrow only what you need, because sometimes, um. You, you lenders would allow you to borrow more than you need. So you wanna try to minimize that in every way by really looking at all of your other options.

You definitely wanna think about the total enrollment, four years, for example, two years, four years, five years, um, and the total debt that that might be for [00:35:00] you. Um, and just have a sense, once you start researching all of this, what a post-graduation monthly payment would be. Um, so that you just keep on top of affordability for the student, for you, and for the student’s side of that they might want to consider.

Many students don’t know what major they’re going to end up being in, but many do. And so if they have a sense of their major and their career and employment rates and starting salaries for those, um, majors and careers, good to get a sense of that. That might help if someone knows they’re gonna graduate as an engineer and someone else knows they’re gonna graduate as a teacher, they might have slightly different thoughts about debt levels.

And then you wanna understand just some regular financial terms, like fixed or variable interest rates. So a fixed interest rate is one that will stay the same for the life of the loan. And a variable one will vary. [00:36:00] Um, and it’s usually tied to an index, um, and a national index and could go up and down with, um, you know, as, as things change over over time.

Um, also important to understand or the repayment timeline, number of years you’ll be repaying. And what is the responsibility of all the borrowers? So I, I also mentioned that a student could borrow a student loan, a federal student loan with no credit check, and they can borrow it on their own with no co borrower, but any of these other loans.

That we talk about will need a co borrower. Um, and so just keeping, keeping all of that in mind, and there’s this term that we talk about that we tell people well shop around. You wanna get the best rate and terms. And one important thing to know is that if you shop for like, types of, uh, loans within a finite period of time, anywhere from 14 to 45 days, but we like [00:37:00] to be conservative and say do it all within 14 days, um, then credit bureaus then count that as one, one hard poll, one hit to your credit rather than multiple.

It’s sort of the same with car loans and mortgages. If you’re shopping within a two week period, then that can count as one inquiry. So when you’re doing this research, you know, sit down and be ready to do it and take care of it in a short period of time. And then what you’ll see out there once you begin looking for loans and uh, private educational loans is you’ll see, uh, a lot of marketing about this is the best loan.

And you’ll see what are called teaser rates. You know, borrow this loan for as low as okay, and in fact, in front of you, you can see some of the as low as rates of some lenders out there. But what’s really [00:38:00] important to know is that, um, the lowest rate is usually given to, you know, those with perfect credit and who borrow certain types of loans.

And we’ll discuss that. Um, because the rate you receive is really gonna be based on your credit and the type of loan that you’re borrowing, which includes how long it’s gonna take to pay it back. The shorter the loan term, the lower your rate probably will be. Um, and so what you really wanna pay attention to.

Is not just that teaser rate, but the rate you’re actually gonna get. And let me just show you the spread of rates for these different lenders. Okay? So MI a’s loans go from 3.29 to 8.89, that is the spread of all MI a’s loans. And you can see some of these other companies have low teaser rates, but the spread is large.

And so as your credit [00:39:00] goes down a little bit isn’t as good, or you take loans that have longer repayments. It’s possible with some other lenders that you could be paying a much higher interest rate. And, um, so I guess I share that today because we’re actually very sort of, I personally am excited and proud, um, of MEFA spread there, knowing that families will, you know, receive a loan in that.

And, um, so anyway, that’s what I wanted to show you.

And so it’s good to look at that upfront as you’re shopping and seeing what loans, you know, might have the best rates and terms for you so that you can apply for those. And then it is important to apply because you don’t wanna see what the average is or what the spread is. You do wanna see that, but you also wanna see what is the actual loan.

What are the actual loan terms that are being offered to us, [00:40:00] to us as a family to me? So what you wanna wait to to receive is the application and solicitation disclosure. And that is going to provide all the details about the loan, terms of the loan that’s being offered to you. And then it will include estimated total loan cost estimates.

You know, if you take 20 years to pay off this loan, this is how much you’re going to repay all kinds of very detailed information. That’s critical. And what you’ll find is that differences in loans and loan interest rates and terms can make a big difference in the amount that you’ll actually repay. So just do your homework there and um, find out what are the interest rates, what are the fees, and what’s the total cost of borrowing?

Um, and important to know, I mentioned the co borrower that. A co borrower, you know, signs the loan along with the student borrower. Um, it has equal responsibility. [00:41:00] So it’s just good to know that, that, uh, we always talk about kitchen table conversations, sitting down with your student, making a plan. Some parents will say, we’ll help you while you’re in school, but after you graduate and you start working and you’re earning a good income, we, we hope that you’ll take some responsibility.

And that’s one family. And it can be different for every family, what the level of responsibility will be. Some families will say, student, you take care of the federal loans and we’ll, we’ll take care of the private. I’ve heard all of it. Um, but just know that. Iron that out upfront. And, um, know that if you are a co borrower and a loan, it’s equal responsibility, um, in the application process.

Um, adding another co borrower can, can increase your chances for approval and possibly interest rate as well. And there are options out there on different loans, um, of having a co [00:42:00] borrower release option. Some families feel comfortable having the kitchen table conversation with their student and others might like something that’s a little more, um, you know, legally finding.

Alright, a few more things about me loans. Um, I shared the interest rates. They go between 3.29 and eight point. Eight, nine. Um, there are fixed interest rates, set monthly payments, and you have choices of different repayment options. Um, so I’m gonna share a chart with you in a minute and go over these immediate interest only and deferred.

We do have a cobar release option and an important thing to know about mefa loans is there are no origination or application fees, um, and there is an instant decision, um, on a completed application. So this process can happen pretty quickly. You’re watching this webinar at the right time, um, and there is a QR code there that will take you to the page on the [00:43:00] MEFA website to, um, get this process started.

Uh, but another important point I like to share with families is that when you receive your financial aid offer, either at that time or shortly after colleges will let you know about another federal loan that is the plus loan. It’s called the parent Loan for undergraduate students. And so they share that because that happens.

The process with that happens like that direct student loan as far as going online and, and, uh, signing the master promissory notes. So the school will let you know about that, and that’s great that they let you know of an option. But I think what’s most important is to know that that is just an option.

And depending on the interest rates from year to year, it can be a better or worse option. And I would say that this year, um, that may not be your best option. So you can see right here the [00:44:00] meth loan interest rates that have that low. Low beginning rate and, and small spread. The Direct plus loan is 8.94 fixed for the loan.

That’s it. Just that plus, uh, the direct plus loan charges a 4.22% fee off the top, which means that the a PR, you know, when you take into consideration fees and all of that is higher, again, not the best option. Um, the one thing that some families, like, some families don’t is that the student is not on the loan.

On the Direct Plus loan. It is just a parent loan. Um, there is no cobar or release option. Um, and families can pay immediately or defer the plus loan. Um, and you have to have filed the fafsa. So you have to have applied for financial aid to be eligible for the plus loan. So. Pros and [00:45:00] cons. But again, I would say look at your options.

Look at the terms and pick, choose a loan that will be best for you. And it might be a little extra work, but don’t just accept because you heard about the plus loan first, and this is MI a’s Undergraduate Loan Payment Calculator. I love this calculator and when families call me, this is the first place I go because when you go into the MEFA website to, um, to apply for a loan, I.

I say, do the calculator first, and so here’s the QR code to the calculator, and you can just type in, I need $15,000. My student has four years to go before graduation and my credit is exceptional. And calculate, and this will show you very transparently and, and so you can plan everything. It will show you for the five options of types of loans, what your in-school monthly payment will be, what [00:46:00] your after graduation monthly payment will be.

What the total cost of the loan will be if you pay it out over the full repayment term, what the interest rate is and what the a PR is. And I think that’s clear as day there. And I, I really like this as a calculator, so I think wherever you borrow from, this is a good exercise to make sure you understand all this information.

And one more thing that, I always get this question, so I bet one of you is gonna ask it right now, is, can you prepay these loans without penalty? And the answer is yes, anytime you can prepay without penalty and you can lower the overall cost of the loan.

So a few last comments about timing. Uh, we mentioned that bills may be coming maybe out now, maybe coming out soon, June, July, and usually due in July and August. And so this timing is good. Uh, we mentioned that. Actually, [00:47:00] the loan process can be very short. Um, especially with MEFA. It can be very fast, but just in case there’s an extra document that’s needed or something happens, uh, between, um, you applying us, contacting the school, asking them to certify the loan, which they do because they have to certify.

Yes, this student is going to enroll. Just if there’s anything that slows that up, I like to advise that you allow a couple of weeks just to make sure that that happens. And, um, you may apply for the loan at any time, but, um, if, if you need, you know, you’re gonna need the loan for the year, you would apply and you would apply for the full year.

And then it’s dispersed half in the fall and half in the spring, um, rather than semester by semester. So. So a few other things. You can register. MEFA is holding a hotline on July 15th at five to 7:00 PM you would log [00:48:00] onto a Zoom call like this and we would pair you with an expert so you could get one-on-one help, um, to talk about, okay, here’s my bill, here’s what I have in savings.

I’m thinking about this loan, and we can walk you through how to make sure you pay that bill and make sure you’re thinking about all of your options. Additionally, you can also always call MEFA and request a virtual one-on-one appointment with the MEFA team. So that’s, that’s always on. And here are some follow up places that you can go, uh, to speak with a Fidelity education specialist.

And as Corey said, these people are trained, um, in in college planning. Um, you can call Fidelity, you can go to the Fidelity website, and you can also call a MEFA college planning expert and go to college [email protected] with short questions, long questions. So I’ll [00:49:00] be sending the, uh, slides, so you don’t need to write any, write any of this down now.

And I guess we’ll ask, um, are there some questions that have come in John, uh, that you might like to ask us?

Jonathan Hughes: There are, there are. Um, and I’m gonna,

Julie Shields-Rutyna: I’m gonna stop the share here. I think that’s a better way to see us. Okay. Okay. Yeah.

Jonathan Hughes: Uh, so, uh, the, the first couple I think are for Corey and, um, they’re about.

The sort of nuts and bolts of distributions from the U Fund. So somebody wanted to know, they, they’re looking on their account page. Um, and the, the direct debit, the pay schools with direct debit page has an available balance that’s less than the total balance of the account. And what does that do to,

Cory Latham: yeah, so it’s a great question.

So because it is an invested balance and it’s in a portfolio, it’s gonna change its value every day at four o’clock. So if you [00:50:00] initiate that during the day, we couldn’t do a to do either all of it, or we let you do up to 95% because we don’t know what that overall balance could be. So say if the market took a significant dip that day and you put in for an amount that was above what your balance will be at the end of that day, that’s why we have a 95% balance that you do that.

Right. So we build that little, we build that little buffering just based upon market circumstances.

Jonathan Hughes: Excellent. Yes. And then somebody has another question of, uh, are there any transaction fees associated with any distributions?

Cory Latham: Should have mentioned that up front. There are no transaction fees involved with the directly.

Okay. Shoulda have brought that up. It’s a great question. Thanks for asking.

Jonathan Hughes: No, no. I never would’ve thought of it. Um,

Cory Latham: yeah.

Jonathan Hughes: And now Julie, somebody wants to know, does a federally subsidized student loan help a student to build credit history?

Julie Shields-Rutyna: It does. [00:51:00] Yes. And actually, what a great way to build credit history.

So when a student graduates and six months after graduation, they start repaying. Yes. That then helps them build credit. And, and I, I do know from both my kids, um, that that was a, that was a, a good thing. I mean, for that reason. Yes.

Jonathan Hughes: And then one more long question, um, someone wants to know about the co borrower release option.

Does that mean that the parent can drop off of the loan at any time?

Julie Shields-Rutyna: Um, so there’s a specified time. Um, I’m gonna throw this out and say I, I think it’s a couple of, I think it’s two years. But what it means is that the parent, essentially, the parent needs to, uh, the student needs to run through a credit check at that point to make sure that the student is able to pay and then the co borrower can be released.

That’s how that works.

Jonathan Hughes: Okay. I think it’s actually, if I, I think it’s actually 48. [00:52:00] Monthly payments or, yeah.

Julie Shields-Rutyna: Thank you John. And I, I thought that, but then I heard some. Okay, thank you.

Jonathan Hughes: Unless it’s changed, but yes, that, that’s my understanding at least. But yeah, the, so there is that, that period. Yeah. Thanks.

Julie Shields-Rutyna: That’s great. And again, that’s why I’ll, I’ll say one more thing about that Cobar release because that always sounds nice. Mm-hmm. Um, and it is, and it, you know, I’m sure that is early for, um, parents who might be nearing retirement in retirement and just want to feel relief from that. Um. When you look at that loan chart from MEFA and you can see all of the different options, probably.

You noted that that Cobar release option had a slightly higher interest rate. So sometimes I’ll talk with families about the fact that, do you feel comfortable having that conversation with your student and making, again, a kitchen table plan about that? Or, because you could save on the interest rate and you could get a slightly lower interest rate?

Or do you feel [00:53:00] like, and you, you all know your students better. Do you feel like you wanna have something a little more formal? So you’ll, you can think about that.

Jonathan Hughes: Thank you. That’s it.

Julie Shields-Rutyna: That’s great. Um, I’ll ask the question, um, that was asked at the beginning, Corey, I, ’cause sometimes I get this question, um, can I keep saving in the U fund even while my student is in college?

Cory Latham: Of course you definitely can. That’s what we talked about, that it’s not just for college, it’s for education expenses. So that some folks education journey can move well beyond just their initial college years, such as grad schools or future, um, future other educational trainings that you wanna be able to take as an individual.

So like yeah, absolutely.

Julie Shields-Rutyna: And I’m gonna see about those other questions that I had. Um,[00:54:00]

Cory Latham: I’m having trouble reading

Julie Shields-Rutyna: it.

Cory Latham: Let’s see. I know one of the ones that comes up is, do I spend it all at once to do, I spread it out? Like I think we get that all the time. And all I can really say there is, it’s your own personal choice. There’s no one way, one size fits all. Um, you. It’s covered a lot of different ways in which there’s different aspects in which college would speed with the 5 29 1 of them.

There are other different factors that are gonna come into play. Just need to find out what’s best for you. Figure out what works for you in your own personal situation, but it’s not a one size fits all of saying, yes, you should do it, or no, you should not. You’ll know your situation. You wanna have those kitchen table conversations that you mentioned and then figure out what’s best for, to totally individual personalized decision for you and your own situation.

That’s

Julie Shields-Rutyna: great. Jonathan. Anything else? Jonathan? [00:55:00]

Jonathan Hughes: Um, let’s see here. We seem to have gotten a few of them in the, in the past minute or so. Um, oh yeah. Uh, so can 5 29 be used for semester abroad? That’s one. Oh. Uh, can it be used for graduate school and. Uh, can Cory talk about the Massachusetts tax deduction related to, it says you plan contributions, but it could be either you plan or you fund, of course, right?

Cory Latham: Yeah, so I can, uh, I can cover it briefly. I’ll, I’ll say that there is, if say, tax deduction for, uh, contributions refund, so it’s thousand dollars for an individual filer, it’s $2,000 for a joint filer, and that is within the year that the contribution is made. So that does exist for Massachusetts filing. I mean, yeah, as long as it’s being used.

The, the other questions about, um, for [00:56:00] as long as you’re using it as an eligible tool for this eligible expenses definitely can use it. You always wanna make sure though. I would all, I would recommend that whatever you’re gonna be using it for, because I mean, grad school can be different for a lot of different folks and just make sure.

Do the research, understand an eligible institution, this would be an eligible expense. So there can be a little bit of research needing to be done, but I always wanna recommend that you’re checking in on that before just assuming that it is. But in general, grad schools definitely for other programs as well.

Julie Shields-Rutyna: Yeah, and I’ll even say if you Google federal school codes. Yeah. Um, then you’ll see, you can put in your state and it will list and it will let you know all of the schools that qualify. Um, and that where you can use your 5 29, which then goes into, there are some international schools on that list. So if you happen to be attending a school abroad that has a [00:57:00] federal school code, you can use them.

And then other study abroad programs, sometimes I think it’s very common that you actually pay through your US College and. Are able to study abroad through your US college. And so they def those funds can definitely be used for that as well. Yeah.

Jonathan Hughes: Um, so there’s a, a, another question here. Someone wants to know.

I, apparently they had a issue sending a payment directly to a college last year and, uh, this particular college, uh, I guess they had to take a, uh, distribution directly to them and they couldn’t receive direct payments. Does that sound familiar? Corey, do you know what that refers to? Or, um, what, do you know what might be a reason for that?

Cory Latham: Just I’d have to look at the individualized [00:58:00] situation.

Jonathan Hughes: Okay. So, uh, what I would say then is I can reach out to this person and we can, we can figure that out. Um. Uh, someone wants to know how, okay, so back in the beginning of the slides, you listed some questions that you were going to back to use all the five 20 nines at once, for example, or spread it out.

And do, you can keep contributing. Do you recommend splitting ’em up, splitting up a monthly payment and supplementing the 5 29 savings? I think this person is, you know, looking for some guidance on how you can use your funds in conjunction with direct payments from your own, you know, pocket or, uh, from a student loan.

So I don’t know if you wanna speak to that or not. Julie or Corey? Yeah,

Julie Shields-Rutyna: I, I, I’ll say that I, I have, uh, worked with a lot of families who do that. So, you know, you have that balance due, you see what you owe, um, for the fall and spring. You decide how much of your savings you, you wanna use, you feel comfortable using.

And then if there’s an amount left [00:59:00] over. You can sign up for the monthly payment plan to be able to split up the rest of that cost. And um, definitely I have seen families utilize that strategy. Yes.

Jonathan Hughes: Then finally, somebody wants to know, it sounds like a relatively simple question, how do you pay for a laptop with a 5 29? I think it would just be a distribution to the owner. Is that right?

Cory Latham: Yeah, so they can, this could be, this is, this is where we talk about the keeping your records. Mm-hmm. It’s really important.

So I think what you could do is attribute it to an account and pay for it stuff back is one way that I think a lot of folks would do that take it out and then directly pay outta that account distributed to, so as long as you’re able to show the record that they were X distribution and that that would cost laptop and it all matches up, that’s what we’d wanna be able to do.

But there isn’t like a direct way from a five laptop. We need to take [01:00:00] that additional step, which is why we recommend keeping those keeping much record that it ever did come up. We can prove that this is one.

Jonathan Hughes: All right. A rush of questions at the end there, but I think they’ve, uh, subsided for now.

Julie Shields-Rutyna: Well, Corey, thank you, Jonathan.

Thank you. Um, and to all of you, thank you. These were great questions and um, we all wish you good luck piecing this together and good luck to your student. It’s exciting rolling in this new phase of life. And please know that you have, uh, resources and help with us. You know, you can, you can call Fidelity any kinds of questions about your, your you fund, and you can call Mefa with anything else that comes up during college.

And, uh, we’re so happy to, to help you through this. So, um, with that, I hope you all enjoy your afternoon. Thanks. [01:01:00]

Jonathan Hughes: Thank you.