College Planning Essentials - A comprehensive guide to saving and investing inherit the thinking of j.p. morgan
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College Planning Essentials
A comprehensive guide to saving and investing
inherit the thinking of j.p. morgan
Investments are NOT FDIC INSURED | no BANK GUARANTEE | MAY LOSE VALUESection 1 College matters Section 4 Saving and investing
4 Higher education pays 23 Current saving and investing trends
5 More education, less unemployment 24 Comparing college savings vehicles
6 Return on a college investment 25 Investing versus borrowing
7 “Major” differences in salaries 26 Investing for long-term growth
27 Performance pays
Section 2 College costs
28 The benefits of compounding
9 Rising college costs 29 Invest more, pay less
10 Future four-year college costs 30 Tax-efficient investing
11 Tuition inflation 31 Making college savings a family affair
12 The real cost of college 32 Asset allocation provided a smoother ride
13 How college costs affect behavior 33 Staying diversified over 18 years
34 The power of diversification
Section 3 Financial aid 35 Good intentions, unexpected consequences
36 College planning checklist
15 Financial aid overview
16 Financial aid reality check Section 5 Appendix
17 Federal financial aid eligibility
18 The effect of savings on financial aid 38 Sources of financial aid
19 Student loan landscape 39 Financial aid: Types of applications
20 Private loans 40 Federal aid methodologies
21 The burden of debt 41 Federal student aid: A sample of grant programs
42 Federal student aid: Loan programs
43 College-related tax breaks
44 Comparing college savings options
45 The 529 plan advantage
46 Checklist: Choosing a 529 plan
47 529 plans: State tax benefits
48 Index definitions
49 Disclosures
2 | INHERIT THE THINKING OF J.P. MORGANCollege matters
SECTION 1
College matters
The value of a college education is growing faster than 65%
the cost. Today, a college diploma has become a necessity
for anyone seeking increased earning potential, job security
By 2020, 65% of U.S.
and career opportunity. 28% jobs will require a degree
beyond high school, up
from 28% in 1973.1
1973 2020
1. S ource: Georgetown University, Failure to Launch: Structural Shift and the New Lost Generation, 2013.
Common myths and facts
Myth: “ College is too expensive.” Myth: “ Not even college Myth: “ College just isn’t worth
graduates can find a the student loan debt.”
Fact: The return on an investment job in this economy.”
in college is nearly $1 million Fact: college graduate earns
A
more in lifetime earnings. Fact: T he unemployment rate 38% more than a high
Page 4 among college graduates school graduate, even after
is currently just 3.2%. factoring in student loans.
Page 5 Page 6
College Planning Essentials: A comprehensive guide to saving and investingCollege matters
Higher education pays
A college diploma opens the door to
a lifetime of higher earnings.
Average annual earnings by highest degree earned 2
COLLEGE COSTS
degrees of difference $100,000 71+
100+0+X 29
163%
greater
pay
85+15+X
• Bachelor’s degree holders
earn nearly $1 million more
financial aid
over a lifetime than high $80,000 70%
school graduates. Those with greater
pay
doctorate degrees earn nearly
$2 million more.1
$60,000
• People who attend college
but don’t receive a degree
earn only 12% more than
saving & investing
high school graduates.2 $40,000
$20,000
$33,852 $57,616 $89,128
$0
HiGh school graduate bachelor’s degree professional degree
appendix
1. S ource: Bureau of Labor Statistics, 2013 dollars, based on 2013 earnings projected
over a typical work life of ages 25 through 64.
2. S ource: Current Population Survey, U.S. Bureau of Labor Statistics, 2013 dollars, U.S.
Department of Labor. J.P. Morgan Asset Management. Data are for persons age 25
and over. Earnings are for full-time wage and salary workers.
4 | INHERIT THE THINKING OF J.P. MORGANCollege matters
More education, less unemployment
College graduates enjoy Unemployment rates by education level
much better job security and As of August 20144
opportunity, especially during
economic downturns. 18%
COLLEGE COSTS
less than high school diploma
high school, no college
some college
16%
college or greater
14%
Bright Job Prospects
• The number of college- 12%
educated Americans with
financial aid
jobs has increased 9.1%
since the beginning of the
10%
9.1%
Less than high
recession.1 school diploma
8%
• The unemployment rate for
high school graduates aged 6.2%
High school, no college
20 to 24 was 17.9% in 2012, 6%
more than double the rate 5.4%
saving & investing
for young college graduates.2 4% Some college
• A shortage of 5 million
college-educated workers 2%
3.2%
College or greater
is projected by 2020.3
0%
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
appendix
1. S ource: New York Times, College Graduates Fare Well in Jobs Market, Even Through
Recession, 5/3/2013.
2. S ource: TICAS/Project on Student Debt, Dec. 2013.
3. S ource: Georgetown University Center on Education and Workforce, June 2013. Based on
current production rate.
4. S ource: J.P. Morgan Asset Management, Bureau of Labor Statistics, FactSet.
Unemployment rates shown are for civilians aged 25 and older. Data are as of 9/30/14.
5 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Return on a college investment
Even students who borrow for college can expect a
significant long-term return on their investment.
COLLEGE COSTS
Estimated cumulative earnings minus student loan repayment
Bachelor’s degree versus high school diploma
$1,200,000
38% return on investment
financial aid
$1,000,000 In this scenario, a college diploma pays
Cumulative net earnings
for itself by age 36.
The college graduate earns 38% more
$800,000 over a lifetime than the high school
graduate, even when factoring in loan
36
years old
repayment of full tuition costs.
saving & investing
$600,000 Source: College Board, Education Pays 2013. Based
on median 2011 earnings for individuals working full
time year-round at each education level and each age.
Includes only students who complete degrees; excludes
bachelor's degree recipients who earn advanced
$400,000 degrees. Assumes college graduates borrow $14,352
to cover total first-year tuition and fee charges for
Bachelor’s Degree 2011–2012 (weighted average of $8,256 average public
High School diploma four-year in-state and $27,883 private nonprofit four-
year tuition and fees) for the first year and 5% more
$200,000 each of the next three years. Tuition payments and
earnings are discounted at 3%, compounded every
year beyond age 18.
appendix
$0
18 22 26 30 34 38 42 46 50 54 58 62 64
AGE
6 | INHERIT THE THINKING OF J.P. MORGANCollege matters
“Major” differences in salaries
Choice of college major has a significant Average yearly starting salary
impact on a graduate’s starting salary. by college major for the class of 2014
Engineering $62,719
COLLEGE COSTS
Computer Science $61,741
salaries on the rise
Business $53,901
•O
n average, starting salaries
for the class of 2014 are
financial aid
6.6% higher than for the
class of 2012. Health Sciences $51,541
• If salaries continue rising at
this pace, the average child
Communications $43,924
born today would earn
roughly $91,700 in the first
year after college.
saving & investing
Math and Sciences $43,414
Education $40,863
Humanities and
$38,365
Social Sciences
appendix
All degrees $45,473
$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000
Source: National Association of Colleges and Employers (NACE) survey, April 2014.
7 | INHERIT THE THINKING OF J.P. MORGANSECTION 2
College costs Two-thirds ofcolleges
families have to rule out
because of cost. 1
Saving for college starts with a plan. And a plan starts
with a goal. It’s important to understand college costs
COLLEGE COSTS
so you know how much to save by enrollment time.
1. Source: Sallie Mae, How America Pays for College, 2014.
Common myths and facts
Myth: “ I know how expensive Myth: “I’m not concerned about college Myth: “ I’ll just make a few
college is.” inflation. It has to slow down at compromises to help pay
some point.” for college.”
Fact: Many families underestimate
just how much college costs Fact: T uition continues to rise at a Fact: on-savers often don’t realize
N
and how quickly prices rise. much faster rate than other the sacrifices needed to make
Pages 9 and 10 expenses, so your savings need college affordable.
to keep pace. Page 13
Page 11
College Planning Essentials: A comprehensive guide to saving and investingCollege matters
Rising college costs
College savings need to grow
at a healthy rate to match or
exceed rapidly rising costs. Tuition, fees, room and board expenses
COLLEGE COSTS
$120,000
Projected
$100,000 Annual Costs
for 2032
$80,000 Private
keeping pace Private $98,472
public
Public
• If prices increase 5% each $60,000
financial aid
$44,260
year, the cost of college
will more than double
$40,000
by 2032.
$20,000
saving & investing
$0
2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
TODAY TOMORROW
Private Total Cost $40,917
Tuition and fees 74% Room and board 26%
appendix
Public Total Cost $18,391
Note: Average tuition and fees for the public sector reflect four- Tuition and fees 48% Room and board 52%
year, in-state charges.
Source: J.P. Morgan Asset Management using The College
Board, 2013 Trends in College Pricing. Future college costs
estimated to inflate 5% per year.
9 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Future four-year college costs
The younger the child, the more college is likely to cost. Add up four years per child, and it equals one of a family’s largest expenses.
Projected cost of a four-year college education
Based on child’s current age
COLLEGE COSTS
$500,000
Private
$450,000
Public $424,425
$400,000 $384,966
$350,000 $349,176
financial aid
$316,713
$300,000
$287,268
$260,560
$250,000
$236,336
$214,364
$200,000 $194,434 $190,767
saving & investing
$176,357 $173,031
$156,944
$150,000 $142,353
$129,118
$117,114
$106,226
$100,000 $87,392 $96,350
$79,268
$50,000
$0
appendix
Age 18 Age 16 Age 14 Age 12 Age 10 Age 8 Age 6 Age 4 Age 2 Newborn
Source: J.P. Morgan Asset Management, using The College Board, 2013 Trends in College Pricing. Future college costs estimated to inflate 5% per year.
10 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Tuition inflation
College tuition costs have Tuition versus other expenses
increased faster than any Cumulative percent price change since 1983
other household expense
in recent decades.
COLLEGE COSTS
Apparel 25%
Cars 44%
why costs are rising Coffee 108%
• Colleges are spending more
financial aid
to attract the best students.
Housing 135%
• Colleges are hiring more
to reduce student-to-faculty
ratios.
Sweets 174%
• Colleges are receiving less
financial support from
saving & investing
cash-strapped states. Gas 192%
Medical Care 330%
Tuition 688%
appendix
0% 100% 200% 300% 400% 500% 600% 700%
Source: BLS, Consumer Price Index, J.P. Morgan Asset
Management. Data represents cumulative percentage
price change from 1983 through 2014.
11 | INHERIT THE THINKING OF J.P. MORGANCollege matters
The real cost of college
Net price is the “sticker price” (full cost) to attend a college, minus any grants and
scholarships received. While most families don’t pay the full sticker price, actual costs
vary considerably based on household income and the college’s financial aid policies.
COLLEGE COSTS
Public four-year institutions 1 AFFLUENT FAMILIES
pay more
’03–’04 $9,400
Due to financial aid policies,
’05–’06 $10,370 higher-income families paid 36%
’07–’08 $10,850 more than lower-income families
in 2013–14.1
financial aid
’09–’10 $10,800
’11–’12 $12,000
’13–’14 $12,620 –31.4% $18,390
$0 $10,000 $20,000 $30,000 $40,000
NET PRICE
saving & investing
On average, families paid 31% below Net price Sticker price
sticker price at public colleges and
43% less at private colleges in 2013–14.
High-income families LOW-income families
Private nonprofit, four-year institutions 1 Income $>100,000+ IncomeCollege matters
How college costs affect behavior
To better afford college, many families must choose less expensive schools or change their daily lifestyles.
Elimination of colleges based on cost
COLLEGE COSTS
2009 56%
2010 63% Off the list
2011 64% After reviewing their financial
2012 69% aid package, 67% of families
2013 67% ruled out some colleges based
on cost, up from 56% in 2009.
2014 67%
financial aid
0% 20% 40% 60% 80% 100%
Actions taken to make college more affordable student actions parent actions
Percentage of people taking each action
saving & investing
66%
54% 48% 45%
28% 19% 19%
appendix
Student Student Student Parent Student Parent Student
reduces lives at works reduces accelerates works changes
spending home more spending education more major
Source: Sallie Mae, How America Pays for College, 2013 and 2014.
13 | INHERIT THE THINKING OF J.P. MORGANSECTION 3
Financial aid
Financial aid can help pay for college, but not all aid
is free and not everyone qualifies. The more you More than 7 in 10
save now, the less you may have to borrow later. college seniors
graduated with student
loan debt in 2012.1
financial aid
1. Source: Project on Student Debt, The Institute for College Access & Success (TICAS), December 2013.
Common myths and facts
Myth: “ Financial aid is free money.” Myth: “ I don’t need to save Myth: “ Saving for college will hurt
because my child will my chances for financial aid.”
Fact: early 40% of federal aid
N receive a scholarship.”
comes in the form of loans Fact: S avings generally have
that must be paid back Fact: nly 0.3% of college students
O little impact on financial
with interest. actually get a full ride. aid eligibility when the funds
Page 15 Page 16 are held in parents’ names.
Pages 17 and 18
College Planning Essentials: A comprehensive guide to saving and investingCollege matters
Financial aid overview
Most college students require
financial assistance of some kind,
but 37% of all aid comes in the Undergraduate student aid by source and type
form of loans that must be paid in billions, 2012–13
total aid in 2012–13
COLLEGE COSTS
back with interest. Federal work study
$0.9 (College matters
Financial aid reality check
Many families expect more free money
Grant reality 2013–14
from grants and scholarships than they
are likely to receive.
COLLEGE COSTS
43 % Percent of total costs covered by grants
more applications, less aid
4-year 2-year
Financial aid of total families received Private
Public Public
• Financial aid applicants include expectations 3 a grant, with an average 23%
26% 30%
85% of middle-income families amount of $6,6431
financial aid
and 65% of high-income
families. The more people
applying, the less aid there is to
go around.1
61%
61% of parents
who are not yet Scholarship reality 2013–14
saving & investing
saving for college
expect scholarships
or grants to cover
0.3% the costs.
44%
of college students receive Percent of total costs covered by scholarships
enough grants and scholarships
to cover all costs.2
4-year 2-year
of total families received a Private
appendix
Public Public
scholarship, with an average 37%
amount of $8,0251 24% 20%
1. S ource: Sallie Mae, How America Pays for College, 2014.
2. S ource: finaid.org. Based on full-time students at four-year colleges.
3. S ource: Sallie Mae, How America Saves for College, 2014 and The College
Board, Trends in College Pricing, 2013.
16 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Federal financial aid eligibility
The Department of Education processes the Free Application for Federal Student
Aid (FAFSA) to determine the Expected Family Contribution (EFC). This is the amount
parents and students are expected to pay directly from their income and savings.
COLLEGE COSTS
Federal aid
TOTAL COLLEGE EXPECTED FAMILY Financial In 2013–14, 81% of families
COSTS EACH YEAR CONTRIBUTION (EFC) Aid Eligibility with a college-bound child
applied for federal aid.1
financial aid
how efc is PARENTS STUDENTS TOTAL EFC
calculated 2
A family’s current Income Assets Income Assets
annual income, including
the student’s, counts far Up to Colleges use the EFC to
calculate the total cost of
more in the formula than
savings and investments,
22%–47% + 5.64% 50% + 20% attendance — tuition, fees and
of adjusted gross of non-retirement of income of all assets in other expenses — which then
especially when they’re
saving & investing
income above assets above above protected bank accounts, determines how much financial
held in the parents’ names. the protected protected amount, amount of $6,260 CDs, UGMAs/
amount3 including 529 plans, UTMAs and any aid is available to a student.
investments and other savings
savings
0%
of income and assets considered in federal financial aid formulas.
GRANDPARENTS/ However, withdrawals for college by grandparents or others may be
OTHERS considered student income and must be reported on the following
appendix
year’s financial aid forms. Such income can reduce the amount of
aid by 50%.
1. Source: Sallie Mae, How America Pays for College 2014.
2. Based on federal methodology for 2014–15 school year.
3. Protected amount for parents is dependent upon a number of factors, including household size and number of students in college.
17 | INHERIT THE THINKING OF J.P. MORGANCollege matters
The effect of savings on financial aid
Savings actually count far less than current income when calculating your
Expected Family Contribution (EFC) for federal financial aid purposes.
COLLEGE COSTS
Big difference in college savings, little difference in financial aid
Federal financial aid for two families earning the same income and sending a
529 plan advantage
child to the same college costing $30,000 per year 1
• When a 529 account is
owned by parents, it has $30,000
financial aid
EXPECTED FAMILY CONTRIBUTION
much less impact on federal $11,848 $13,771
FEDERAL FINANCIAL AID
financial aid eligibility than
custodial accounts.
$20,000 The Smiths have $75,000
5+95T
$18,152 more in savings but
$16,229 get just $1,923 less in
saving & investing
Maximum parental savings financial aid.
5.64% considered in federal financial
aid formulas.
$10,000
$0
Smiths Wilsons
$75,000 saved in No savings
appendix
529 plan
1. S ource: J.P. Morgan Asset Management and finaid.org.
Assumes both families earn $100,000 annually and 529 plan is owned by the parents.
Does not include non-federal financial aid opportunities such as scholarships.
18 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Student loan landscape
Student loan debt has soared in recent years, putting an increased
financial burden on college graduates and their parents.
COLLEGE COSTS
Issuance of federal and private loans
Selected years, 2012 dollars in billions1
$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110
2005–06 t$87.6
financial aid
2007–08 t$99.7
2009–10 t$113.9
2011–12 t$113.4 In 2012, 71% of college
seniors graduated
2012–13 t$110.4 with student loan debt
saving & investing
averaging $29,400.2
Subsidized Unsubsidized Parents PLUS Perkins Grad PLUS Private
Stafford Loans Stafford Loans For parents only. For students with For graduate Education Loans*
For undergraduate For undergraduate high need at some students only. Offered by private
students with and graduate institutions. lenders, they can
documented financial students regardless either supplement
need. The government of financial need. The or replace federally
pays interest while the government does not guaranteed loans.
appendix
student is in college. pay interest while the
student is in college.
*Note: Private education includes loans to students
1. S ource: The College Board, 2013 Trends in Student Aid. from states and from institutions, in addition to
private loans by banks, credit unions and Sallie Mae.
2. Project on Student Debt, The Institute for College Access & Success (TICAS), December 2013.
19 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Private loans
With college costs rising faster than the
availability of federal aid, many families
are choosing to fill the growing gap
with private loans. Private student loans
Outstanding loans (in billions)1
COLLEGE COSTS
2005 2007 2009 2011 2013
Private loans at a glance
• Americans currently owe more
than $165 billion in outstanding
private student loan debt.2
financial aid
• Outstanding private loan debt has
nearly tripled since 2005.
• Private student loans tend to have
higher interest rates and less $55.9 $101.1 $133.0 $140.2 $165.0
flexible repayment options than
federal loans.
saving & investing
Private loan defaults
as of 2012
$8 billion 850,000
appendix
in defaulted private loans distinct loans in default
1. S ource: Private Student Loan Report 2012,
Consumer Finance Protection Bureau.
2. S ource: Consumer Financial Protection Bureau, Mid-year
snapshot of private student loans complaints, July 2013.
20 | INHERIT THE THINKING OF J.P. MORGANCollege matters
The burden of debt The debt impact
Percent of student borrowers who said loans had this effect 5
Families that don’t save enough for
college often have no other choice than
to borrow. Today, a record four in ten
households owe student loan debt.1
COLLEGE COSTS
27% 75% 29% 43%
Harder to buy Harder to Put off Delayed starting
necessities buy a home marriage a family
drowning in debt
• Student loan debt more than
quadrupled to $1.1 trillion between
2004 and 2014.2 Debt balances
financial aid
by type of consumer loan 2
• The average student borrower
owes over $29,000 in loans.3 $1.2 trillion
Student loan
• Student loan defaults are at a Credit card
In 2010, student loan debt
20-year high, affecting over Auto loan
surpassed credit card debt
7 million borrowers.4 home-equity loan for the first time in history.
$1.0 trillion
saving & investing
$0.8 trillion
1. S ource: PEW Research Center. October 2013 Survey.
Households headed by a person younger than 40.
$0.6 trillion
2. S ource: New York Federal Reserve, Household Debt and
appendix
Credit Report, 2Q 2014.
3. S ource: The Institute for College Access and Success (TICAS),
Student Debt and The Class of 2012, December 2013.
4. S ource: U.S. Department of Education, September 2013. $0.4 trillion
5. Source: American Student Assistance, Life Delayed: ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14
The Impact of Student Debt on the Daily Lives of Young
Americans, 2013.
21 | INHERIT THE THINKING OF J.P. MORGANSECTION 4
Saving and investing Only 29% of families saving for
college invest in 529 plans.1
Choosing the right savings plan and following time-tested
investment strategies can help you reduce taxes, increase
growth potential and accumulate more for college.
1. Source: Sallie Mae, How America Saves for College, 2014.
Common myths and facts
saving & investing
Myth: “ All college savings plans Myth: “I’ll just take out a loan Myth: “It’s too early to start saving
are the same.” if I don’t save enough.” for college.”
Fact: College savings plans Fact: It costs more to borrow Fact: S tarting early and
differ in a variety of ways, and pay interest than to saving regularly helps
including investments, tax invest and earn interest. you maximize the power
benefits and flexibility. Page 25 of compounding.
Pages 24 and 30 Page 28
College Planning Essentials: A comprehensive guide to saving and investingCollege matters
Current saving and investing trends
Half of U.S. families aren’t saving for college. The other half often
choose vehicles that don’t maximize their growth potential, such
as CDs, taxable investments or accounts intended for retirement.
COLLEGE COSTS
Percentage of families using:
Ugma/Utma 10% On average, those parents with a
529 plan save 68% more than those
simply using a savings account.
Trust Fund 11%
financial aid
Coverdell Education
Savings Accounts 13%
Prepaid or Guaranteed State
College Savings Program 14%
CDs 16%
saving & investing
Retirement Savings Accounts 18%
families using a families using
529 plan a traditional
Investments 20% savings account
Checking Account 24%
Families don’t fully
maximize growth potential
529 College Savings Plan 29%
More parents—45%—save for college
appendix
with low-yielding savings accounts than
General Savings
Accounts 45% any other method.
0% 10% 20% 30% 40% 50%
Source: Sallie Mae, How America Saves for College, 2014.
23 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Comparing college savings vehicles
Understanding the different tax benefits and features of college savings
vehicles can help you choose the right one for your needs.
COLLEGE COSTS
529 college savings plan Custodial account (UGMA/UTMA) Coverdell Education Savings Account
financial aid
• Tax-free investing and withdrawals for • Funds must be used for the child’s • Tax-free investing and withdrawals
any qualified higher education expense* benefit, not necessarily for college for any level of education*
• Account owner control for • Portion of investment earnings taxed at • Income limits on contributors
the life of the account child’s and parents’ rates • Age limits on beneficiaries
• No income limits on contributors • Child assumes control at age of majority, • Maximum contribution of $2,000
usually 18 or 21
saving & investing
• High contribution maximums annually per beneficiary
• Low impact on financial aid eligibility • High impact on financial aid eligibility • Low impact on financial aid eligibility
27+73+U
29%
of parents own
529 plans
5+95+U
10%
of parents own UGMA/
UTMA accounts
7+93+U
13% of parents own
Coverdell accounts
appendix
*Earnings on non-qualified withdrawals may be
subject to federal income tax and a 10% federal
penalty tax, as well as state and local income taxes.
Source: Sallie Mae, How America Saves for College, 2014.
24 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Investing versus borrowing
It costs less to invest now than to College savings plan versus student loan
Initial investment of $1,000 plus
borrow later. When you borrow for monthly investment of $3002
college, you pay interest. When you
invest, you earn interest and other $200,000
COLLEGE COSTS
forms of investment returns. $167,553 Investment growth
$150,000 Out-of-pocket cost
$119,143
it takes a plan $100,000 $101,753
out-of-pocket difference
• Without a plan, families run $65,800 with 529 plan
$50,000
the risk of not saving enough
financial aid
and borrowing too much. Yet
43% of high-income families $0
and 61% of middle-income College savings plan College loan:
families don’t have a plan to over 18 years principal and
interest
pay for college.1
1. Source: Sallie Mae, How America Pays for College, 2014.
saving & investing
2. S ource: J.P. Morgan Asset Management. The investing
illustration assumes an initial lump sum investment
of $1,000, subsequent monthly investments of $300 A burden for
thereafter for 18 years, and assumes an annual investment Average loan debt at graduation everyone
return of 6% and federal tax rate of 28%. Investment
losses could affect the relative tax-deferred investment for parents 3
advantage. Each investor should consider his or her The average parental
current and anticipated investment horizon and income debt load has more than
tax bracket when making an investment decision, as the 1993 $7,500 doubled in a decade to
illustration may not reflect these factors. The borrowing
illustration assumes an interest rate of 7.21% and a $33,800 in 2012, while
payback period of 10 years. This hypothetical illustration 2003 $15,000
the average debt faced by
is not indicative of any specific investment and does not
students was more than
appendix
reflect the impact of fees or expenses. 2012 $33,800
The chart is shown for illustrative purposes only. Past $29,000 in 2012.4
performance is no guarantee of future results.
3. S ource: The Wall Street Journal, Parent Trap: What to $0 $10,000 $20,000 $30,000 $40,000
Know Before Taking a College Loan, FinAid.org analysis of
Department of Education data, March 24, 2013.
4. S ource: The Institute for College Access and Success
(TICAS), December 2013.
25 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Investing for long-term growth
Starting a college savings plan early allows more time to
hold investments with higher return potential.
COLLEGE COSTS
Growth of one dollar
December 1978 to December 2013
$100
s&P 500 Stocks outpace
college tuition and fees tuition inflation
t$52.23
U.S. 30-day treasury bills While short-term investments
financial aid
consumer price index grew more slowly than
tuition costs, stocks
delivered high returns to
help beat college inflation
and achieve savings goals.
t$12.05
$10
saving & investing
t$5.50
t$3.45
Source: J.P. Morgan Asset Management.
Past performance is no guarantee of future results.
Hypothetical value of $1 invested at the beginning of 1979.
Assumes reinvestment of income and no transaction costs
or taxes. This is for illustrative purposes only and not
appendix
indicative of any investment. An investment cannot be
made directly in an index.
$1
DEC ’78 DEC ’83 DEC ’88 DEC ’93 DEC ’98 DEC ’03 DEC ’08 DEC ’13
26 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Performance pays
Even small increases in investment Investment growth over 18 years
returns can make a big difference when Calculations assume an initial investment
of $100,000 at birth
it comes time to pay for college.
$450,000
COLLEGE COSTS
8% annual return
7.75% annual return
$400,000 t$399,602
7.5% Annual return
7.25% annual return
$350,000 7% annual return
t$337,993
Seeking higher returns
$300,000
• Be an investor, not just a
saver in low-yielding bank
financial aid
$250,000
accounts.
• Stay invested for the $200,000
Difference of
long haul to avoid the risk $61,609
of being out of markets
$150,000
during upswings.
• Reduce taxes to keep more
saving & investing
$100,000
of what you earn. 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Slightly higher returns can pay for a full year of college1
7% 7.25% 7.5% 7.75% 8.0%
1. S ource: J.P. Morgan Asset Management using The College
Board 2013 Trends in College Pricing. This hypothetical $337,993 +$14,501 +$29,587 +$45,282 +$61,609
assumes an investment of $100,000 over an 18-year period.
Initial Investment covers a year of covers a full covers a full covers a full
appendix
Different assumptions will result in outcomes different from
this example. Investment losses could affect the relative tax- of $100,000 tuition at a year's cost at year's cost at year's cost at
deferred investing advantage. This hypothetical illustration Public College Public College Private College Ivy League College
is not indicative of any specific investment and does not (in-state) (out-of-state)
reflect the impact of fees or expenses. Such costs would
lower performance. Each investor should consider his or her
current and anticipated investment horizon and income tax
bracket when making an investment decision.
27 | INHERIT THE THINKING OF J.P. MORGANCollege matters
The benefits of compounding
The sooner you start saving, the more time you may
have to grow your college fund through the power of
long-term compounding. Even small contributions add
up over time.
COLLEGE COSTS
Start early, small savings add up
Total amounts accumulated over 6, 12 and 18 years1
Start early, accumulate more
$200,000
$100 monthly contributions
$185,434
$250 monthly contributions
$500 monthly contributions
financial aid
If you start saving $500 per month $150,000
when a child is born, you'll earn
$84,214 more
$101,220
$92,717
than if you start at age six.
$100,000
saving & investing
$50,610
$41,852
$37,087
$50,000
$20,244
$20,926
$8,370
1. S ource: J.P. Morgan Asset Management. This hypothetical example illustrates the
future values of different regular monthly investments for different time periods.
Chart also assumes an annual investment return of 6% and a federal tax rate of
appendix
28%. Investment losses could affect the relative tax-deferred investing advantage.
This hypothetical illustration is not indicative of any specific investment and does $0
not reflect the impact of fees or expenses. Such costs would lower performance. Total Total Total
Each investor should consider his or her current and anticipated investment horizon accumulation accumulation accumulation
and income tax bracket when making an investment decision, as the illustration may in 6 years in 12 years in 18 years
not reflect these factors. A plan of regular investment cannot assure a profit or
protect against a loss in a declining market. The chart is shown for illustrative
purposes only. Past performance is no guarantee of future results.
28 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Invest more, pay less
Some savings vehicles, such as 529 plans, allow large contributions that can help you
pay for much of college from your investment earnings instead of your pocket.
COLLEGE COSTS
Investing versus paying out of pocket
Amounts needed to fund four years of private college in 12 years
$0 $100,000 $200,000 $300,000
financial aid
Lump-sum
Save 51%
$154,437 on out-of-pocket costs
investment
Annual
Save 32%
$217,019 on out-of-pocket costs
investments
saving & investing
Out-of-pocket
payment $316,713
Average private
college cost
Investment growth Out-of-pocket cost $316,713
appendix
Source: College Board, 2013 Trends in College Pricing. Based on tuition, fees and room/board costs for 2013–2014 school year. Costs estimated to inflate 5% per year.
This example is hypothetical and assumes a 6% annual rate of return and an annual lump sum contribution of $18,085 over a 12-year period. This example does not represent the
performance of any particular investment. Different assumptions will result in outcomes different from this example. Your results may be more or less than the figures shown.
Investment losses could affect the relative tax-deferred investing advantage. Each investor should consider his or her current and anticipated investment horizon and income tax
bracket when making an investment decision, as the illustration may not reflect these factors. These figures do not reflect any management fees or expenses that would be paid
by a 529 plan participant. Such costs would lower performance.
29 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Tax-efficient investing
A tax-advantaged account, such as a 529 plan, has
the potential to grow faster for college than a taxable
investment earning the exact same returns.
COLLEGE COSTS
Lower taxes equal a larger college fund
Investment growth over 18 years1
State tax benefits
• Many 529 plans offer state tax $0 $30,000 $60,000 $90,000 $120,000
benefits in addition to federal
financial aid
tax-free investing.2 See the
Appendix on page 47 for
more information. Taxable
account $103,666
Tax-free
$15,477 more
$119,143
529 plan
saving & investing
with a tax-free
529 plan
1. S ource: J.P. Morgan Asset Management. Illustration assumes an initial $1,000 investment
and monthly investments of $300 for 18 years. Chart also assumes an annual investment
return of 6% and a federal tax rate of 28%. Investment losses could affect the relative
tax-deferred investing advantage. This hypothetical illustration is not indicative of any
specific investment and does not reflect the impact of fees or expenses. Each investor
should consider his or her current and anticipated investment horizon and income tax
appendix
bracket when making an investment decision, as the illustration may not reflect these
factors. These figures do not reflect any management fees or expenses that would be
paid by a 529 plan participant. Such costs would lower performance.
The chart is shown for illustrative purposes only. Past performance is no guarantee of
future results.
2. E arnings on non-qualified withdrawals may be subject to federal income tax and a 10%
federal penalty tax, as well as state and local income taxes.
30 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Making college savings a family affair
Getting family, friends and students involved in college
savings can increase the size of your account and reduce More contributors equal a larger college fund
your share of the expenses. Investment growth over 18 years2
COLLEGE COSTS
Don’t go it alone
Total $294,604
Parents expect only 5% of college $36,906
Family and friends
costs to be paid with contributions $1,000 annually
from grandparents, friends
and family.1
Grandparents
$72,264
$2,500 annually
financial aid
5%
talk to children
• Nearly half (47%) of college
savers have discussed
education costs with
children, compared to just
28% of non-savers.1
saving & investing
Parents
$185,434
$6,000 annually
1. S ource: Sallie Mae, How America Saves for College, 2014.
2. S ource: J.P. Morgan Asset Management. This hypothetical example illustrates the future values of
appendix
regular monthly investments by the account owner and annual investment by other contributors
over an 18-year period. Investment losses could affect the relative tax-deferred investing
advantage. This hypothetical illustration is not indicative of any specific investment and does
not reflect the impact of fees or expenses. Such costs would lower performance. Each investor
should consider his or her current and anticipated investment horizon and income tax bracket
when making an investment decision, as the illustration may not reflect these factors. A plan of
regular investment cannot assure a profit or protect against a loss in a declining market. The
chart is shown for illustrative purposes only. Past performance is no guarantee of future results.
31 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Asset allocation provided a smoother ride
A diversified portfolio of many
different asset classes fluctuated
less than any one on its own. Asset class performance
Ranked in order of annual returns, 2004–13
COLLEGE COSTS
e
ed
iv
iz
at
al
ul
04
09
06
08
nu
05
07
13
10
12
11
m
20
An
20
20
Cu
20
20
20
20
20
20
20
REITs MSCI REITs MSCI Barclays MSCI REITs REITs REITs Russell MSCI MSCI
EME EME Agg EME 2000 EME EME
31.6% 34.5% 35.1% 39.8% 5.2% 79.0% 27.9% 8.3% 19.7% 38.8% 197.7% 11.5%
MSCI DJ UBS MSCI DJ UBS Cash MSCI Russell Barclays MSCI S&P Russell Russell
EME Cmdty EME Cmdty EAFE 2000 Agg EME 500 2000 2000
26.0% 21.4% 32.6% 16.2% 1.8% 32.5% 26.9% 7.8% 18.6% 32.4% 138.3% 9.1%
financial aid
MSCI MSCI MSCI MSCI Market REITs MSCI Market MSCI MSCI REITs REITs
EAFE EAFE EAFE EAFE Neutral EME Neutral EAFE EAFE
20.7% 14.0% 26.9% 11.6% 1.1% 28.0% 19.2% 4.5% 17.9% 23.3% 128.5% 8.6%
Source: Russell, MSCI, Dow Jones, Standard & Russell REITs Russell Market Asset Russell DJ UBS S&P Russell Asset S&P S&P
Poor’s, Credit Suisse, Barclays Capital, NAREIT, 2000 2000 Neutral Alloc. 2000 Cmdty 500 2000 Alloc. 500 500
FactSet, J.P. Morgan Asset Management. 18.3% 12.2% 18.4% 9.3% –24.0% 27.2% 16.8% 2.1% 16.3% 14.9% 104.3% 7.4%
The “Asset Allocation” portfolio assumes the Asset Asset S&P Asset Russell S&P S&P Cash S&P Market MSCI MSCI
following weights: 25% in the S&P 500, 10% Alloc. Alloc. 500 Alloc. 2000 500 500 500 Neutral EAFE EAFE
in the Russell 2000, 15% in the MSCI EAFE, 5% 12.5% 8.3% 15.8% 7.4% –33.8% 26.5% 15.1% 0.1% 16.0% 7.9% 104.1% 7.4%
saving & investing
in the MSCI EMI, 25% in the Barclays Capital
Aggregate, 5% in the Barclays 1-3m Treasury, S&P Market Asset Barclays DJ UBS Asset Asset Asset Asset REITs Asset Asset
5% in the CS/Tremont Equity Market Neutral 500 Neutral Alloc. Agg Cmdty Alloc. Alloc. Alloc. Alloc. Alloc. Alloc.
Index, 5% in the DJ UBS Commodity Index and 10.9% 6.1% 15.2% 7.0% –35.6% 22.2% 12.5% –0.6% 11.3% 2.9% 100.1% 7.2%
5% in the NAREIT Equity REIT Index. Balanced
DJ UBS S&P Market S&P S&P DJ UBS MSCI Russell Barclays Cash Market Market
portfolio assumes annual rebalancing. All
Cmdty 500 Neutral 500 500 Cmdty EAFE 2000 Agg Neutral Neutral
data represents total return for stated period.
9.1% 4.9% 11.2% 5.5% –37.0% 18.9% 8.2% –4.2% 4.2% 0.0% 62.7% 5.0%
Past performance is not indicative of future
returns. Asset allocation does not guarantee Market Russell Cash Cash REITs Barclays Barclays MSCI Market Barclays Barclays Barclays
investment returns and does not eliminate the Neutral 2000 Agg Agg EAFE Neutral Agg Agg Agg
risk of loss. Data are as of 12/31/13, except for 6.5% 4.6% 4.8% 4.8% –37.7% 5.9% 6.5% –11.7% 0.9% –2.0% 56.0% 4.5%
the CS/Tremont Equity Market Neutral Index,
which reflects data through 11/30/13. “10-yrs” Barclays Cash Barclays Russell MSCI Market Cash DJ UBS Cash MSCI Cash Cash
returns represent period of 1/1/04–12/31/13 Agg Agg 2000 EAFE Neutral Cmdty EME
appendix
showing both cumulative (Cum.) and 4.3% 3.0% 4.3% –1.6% –43.1% 4.1% 0.1% –13.3% 0.1% –2.3% 17.1% 1.6%
annualized (Ann.) over the period.
Cash Barclays DJ UBS REITs MSCI Cash Market MSCI DJ UBS DJ UBS DJ UBS DJ UBS
Please see disclosure page at end for index Agg Cmdty EME Neutral EME Cmdty Cmdty Cmdty Cmdty
definitions. 1.2% 2.4% 2.1% –15.7% -53.2% 0.1% –0.8% –18.2% –1.1% –9.5% 9.0% 0.9%
*Market Neutral returns include estimates
found in disclosures.
32 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Staying diversified over 18 years
Compare the best, worst and average annual returns for
different investments over a rolling 18-year period. 18-Year Rolling Returns
Annual Returns, 1978–2013
COLLEGE COSTS
20%
Highest
Return
WHY DIVERSIFY? 18% Average
Stocks
Lowest
• A balanced portfolio 17.4% return
delivered higher returns 16% 50-50
than bonds with lower Portfolio
volatility than stocks.
14% 14.8%
financial aid
• Even in its worst 18-year
period, the balanced Bonds
12.0%
portfolio outperformed 12% 12.2% 11.1%
average tuition inflation.
• Even in its best 18-year 10% 9.4%
period, short-term cash
underperformed average 8.0%
saving & investing
8%
tuition inflation. 7.2% 6.9% Cash 7.1%
Increase in
6% 6.7% college tuition
4.1%
4%
2% 1.6%
appendix
0%
Source: Barclays Capital, FactSet, Robert Shiller, Strategas/Ibbotson, Federal Reserve,
BLS, J.P. Morgan Asset Management. Rolling returns shown are based on calendar year
returns from 1978 to 2013. Data are as of 3/31/14. Past performance is not indicative
of future results. Diversification does not guarantee investment returns and does not
eliminate the risk of loss.
33 | INHERIT THE THINKING OF J.P. MORGANCollege matters
The power of diversification
A more diversified portfolio has historically
provided higher returns with lower risk.
Portfolio risks and returns
COLLEGE COSTS
1999-2013
Traditional portfolio More diversified portfolio
4%
8%
26%
30% 8% Barclays Agg.
financial aid
S&P 500
MSCI EAFE
S&P 500
8% Russell 2000
MSCI EAFE
REIT
Barclays Agg. 55% Commodities
Equity Mkt. Neutral
9%
saving & investing
MSCI EM
22%
15%
13%
Return Return
5.23% 6.85%
Standard Deviation Standard Deviation
10.88% 10.28%
appendix
Source: J.P. Morgan Asset Management. Indexes and weights of the traditional portfolio are as follows: U.S. stocks: 55% S&P 500, U.S. bonds: 30% Barclays Capital Aggregate, International
stocks: 15% MSCI EAFE. Portfolio with 25% in alternatives is as follows: U.S. stocks: 22.2% S&P 500, 8.8% Russell 2000; International Stocks: 4.4% MSCI EM, 13.2% MSCI EAFE; U.S. Bonds: 26.5%
Barclays Capital Aggregate; Alternatives: 8.3% CS/Tremont Equity Market Neutral, 8.3% DJ/UBS Commodities, 8.3% NAREIT Equity REIT Index. Return and standard deviation calculated using
Morningstar Direct. Charts are shown for illustrative purposes only. Past returns are no guarantee of future results. Diversification does not guarantee investment returns and does not eliminate
risk of loss. Data as of December 31, 2013.
34 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Good intentions, unexpected consequences
Saving for college is one of a family’s top financial priorities,
but common mistakes can keep them from achieving goals.
COLLEGE COSTS
Why save for college1
Strongly agree Somewhat agree
89%
56%
of parents are not
An investment in confident about meeting
financial aid
60% 29% college costs.1
child’s future
83%
Child will earn
51% 32%
more money
saving & investing
80%
Part of the
47% 33%
Possible reasons why:
American dream
• Not having a plan • Overestimating financial aid
77%
• Investing too conservatively •U
nderestimating college costs
College degree is • Starting too late • Not getting others involved
51% 26%
more important now
•U
sing taxable or retirement
appendix
accounts
1. S ource: Sallie Mae, How America Saves for College, 2014.
35 | INHERIT THE THINKING OF J.P. MORGANCollege matters
College planning checklist
Set a goal Get started
COLLEGE COSTS
What type of college should we consider? Open an account and select investments
What costs should I expect? Set up a schedule of monthly contributions
What is my family’s financial outlook?
How much of total costs do I want to pay?
financial aid
What can I afford to save?
What does my financial advisor recommend?
saving & investing
Create your plan Review and adjust
Compare and choose college savings options Review plan annually
Understand my risk tolerance Make adjustments based on life changes
appendix
36 | INHERIT THE THINKING OF J.P. MORGANSECTION 5
Appendix
Financial Aid Resources
Parents and others can learn more about obtaining
financial aid for college through the following websites:
fafsa.ed.gov How to apply for federal financial aid
finaid.org Guide to grants, scholarships, loans and other aid
irs.gov Guide to federal income tax benefits for education
IRS Publication 970,
Tax Benefits for Education
ed.gov/finaid.html Options from U.S. Department of Education
collegeconfidential.com Resources to help pay for college
collegesavings.org Information about 529 plans
savingforcollege.com Comprehensive guide to college funding
appendix
iefa.org Aid for students studying in a foreign country
College Planning Essentials: A comprehensive guide to saving and investingCollege matters
Sources of financial aid
TYPES OF FINANCIAL AID DETAILS
Grants and scholarships
In addition to aid from the U.S.
U.S. federal
COLLEGE COSTS
Loans Department of Education, scholarships
government Work study
and loan repayment may be available
to qualified students through additional
Allows qualified students to earn government entities.
money for college expenses TYPES OF FINANCIAL AID
Grants and scholarships are free
Grants and scholarships gifts that generally don’t have to
Example: New York offers a Math and Science
May be available even if families Teaching Incentive Scholarship to eligible be repaid. Grants are typically
States aren’t eligible for federal aid students in approved programs that lead to need-based while scholarships
financial aid
math or science teaching careers. are merit-based. Loans must be
paid back with interest.
Aid may be available for attending
Grants and scholarships a particular college and/or studying
Colleges specific majors.
saving & investing
Possible sources include charitable
foundations, religious and community
Non-profit or private Grants and scholarships
organizations, local businesses, ethnicity-
based organizations, students’ and parents’
organizations employers, and civic groups and professional
associations related to a field of study.
appendix
Tend to have higher interest rates and
Banks, credit unions Private loans less flexible repayment options than
or other lenders federal loans.
Source: www.studentaid.ed.gov (U.S. Department of Education).
38 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Financial aid: Types of applications
There are over 250 institutions that require students to submit the CSS/Financial Aid PROFILE in addition to the FAFSA.1 The PROFILE is an
online application that is administered by the College Scholarship Service, the financial aid division of the College Board. The PROFILE is
used to determine students’ eligibility for need-based institutional scholarships, grants or loans and is a more detailed assessment of the
student’s and parents’ income and assets when calculating EFC.
COLLEGE COSTS
CSS/Financial aid profile2 FAFSA
financial aid
Need-based institutional aid Need-based institutional aid
College-specific application Standard, universal application
Required by about 250 institutions in addition to the FAFSA Required by every institution
saving & investing
Majority of schools tend to be specialized,
highly selective or private schools.
Looks at assets and income at a high level and
uses a standard EFC formula for every applicant.
Considers a deeper level of income and assets when calculating EFC
Applicants may be asked to report additional assets or income such
as home equity, business income and assets under a sibling’s name.
appendix
1. Source: College Board, Participating Institutions and Programs.
2. S ee financial aid office or net price calculator at your desired institution for more information about what is used to calculate awards.
39 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Financial aid methodologies
These factors are considered when determining the Estimated Family Contribution through both the
Federal Methodology for federal aid and Institutional Methodology for individual institutional aid.1
COLLEGE COSTS
Federal Methodology - FAFSA Institutional Methodology - CSS/FINANCIAL AID PROFILE
Income and Assets Allowances and Expenses Income and Assets Allowances and Expenses
Nontaxable income (including social Number in household Nontaxable income (including social Number in household
security, child support, and worker’s security, child support, and worker’s
compensation and disability) compensation and disability)
Number of family members enrolled in Number of family members enrolled
financial aid
college at least half-time in college at least half-time
Interest and dividend income Interest and dividend income
Federal income tax Federal income tax
Cash and savings Tax credits and itemized deductions
State tax State tax (including sales tax)
Investment and other Cash and savings
real estate net worth
FICA tax FICA tax
Investment and other
saving & investing
Business or farm net worth (only if real estate net worth
more than 100 full-time employees) Employment expense Medical and dental expense
Business or farm net worth
Student trusts Income protection allowance Employment expense
Home equity
Annual education savings allowance Income protection allowance
Parents’ assets held in siblings’ names
Child support paid Annual education savings allowance
Student trusts
Private, elementary and secondary
school tuition for siblings
appendix
Noncustodial parent information
Child support paid
1. Source: College Board, FM and IM Differences.
40 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Federal student aid: A sample of grant programs
2014–2015 Award Year
DETAILS ANNUAL AWARD LIMIT1
up to
COLLEGE COSTS
Federal Pell Grant Generally awarded to undergraduate students who are in financial need $5,730
Awarded to undergraduate students with exceptional financial need
Federal Supplemental Federal Pell Grant recipients receive priority up to
Educational Opportunity Not all colleges participate $4,000
Grant (FSEOG)
Funds depend on availability at the college; apply by college’s deadline
financial aid
For undergraduate, post-baccalaureate or graduate students who are taking or will be
taking coursework necessary to become elementary or secondary teachers
Teacher Education Must attend a participating college and meet certain academic achievement requirements up to
Assistance for College $4,000
and Higher Education Must agree to serve for a minimum of four years as a full-time teacher in a high-need field,
serving low-income students
(TEACH) Grant
F ailure to complete the teaching service commitment results in grant funds being converted
saving & investing
to a Federal Direct Unsubsidized Stafford Loan that must be repaid
Non-need based, this grant is available to any undergraduate student who is not eligible for
Iraq and Afghanistan the Pell Grant and whose parent or guardian died as a result of performing military service
in Iraq or Afghanistan after the events of 9/11 up to
Service Grant $5,500
Must have been less than 24 years old or enrolled at least part-time at the time of the
parent’s or guardian’s death
appendix
1. A
wards are subject to availability of funds, and
recipients must meet certain eligibility requirements.
This is for informational purposes only.
41 | INHERIT THE THINKING OF J.P. MORGANCollege matters
Federal student aid: Loan programs
LENDER ELIGIBILITY INTEREST RATE 1 ANNUAL LOAN LIMIT
up to up to
$5,500 $8,000
Federal Individual
Undergraduate and (undergraduate) (graduate)
5%
COLLEGE COSTS
graduate students enrolled
Perkins Loan college
with financial need Loan amount based on financial need
and availability of funds at college
4.66%
Direct Subsidized U.S. Department
Undergraduate students
enrolled at least half-time and Student not charged $3,500–$5,500
Stafford Loans of Education
demonstrating financial need interest while in
school and during
depending on year in school
financial aid
deferment periods
4.66% $5,500–$20,500
for undergraduates
Direct Unsubsidized U.S. Department
Undergraduate and
graduate students enrolled 6.21% (minus any subsidized amount
Stafford Loans of Education
at least half-time for graduate students
received for the same period),
depending on year in school
Student responsible for and dependency status
saving & investing
interest during all periods
Direct PLUS
Parents of dependent students
enrolled at least half-time 7.21%
U.S. Department Cost of attendance minus any
of Education Parent responsible other financial aid received
Loan for Parents Parent must not have negative for interest during
credit history all periods
1. Interest rates apply to loans first
Graduate or professional disbursed between July 1, 2014,
Direct PLUS 7.21%
appendix
degree students enrolled and June 30, 2015.
U.S. Department at least half-time2 Cost of attendance minus any 2. If students have not requested the
Student responsible
Loan for Graduate or of Education Student must not have for interest during
other financial aid received annual maximum Unsubsidized
Stafford Loan amount for which
Professional Students negative credit history all periods they are eligible, the school must
notify them of this eligibility and
give them the opportunity to apply.
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