What are the top three tips for families seeking to efficiently save and pay for college from the perspective of the Finance Authority of Maine?
This article features an interview with Eva Giles, College Savings Program Manager for the Finance Authority of Maine (FAME) which administers the NextGen 529 plan among other college financial planning roles. The goal of FAME is to help lead the creation of good paying jobs for Maine citizens by working at the nexus between economic and workforce development. Based in Augusta, Maine, Eva graduated from St. Joseph’s College with a bachelor’s degree in Natural Sciences and from University of Southern Maine with a Masters in Adult Education. Prior to FAME, she was the Adult Education Director for the Lewiston Adult Education School which seeks to provide quality learning opportunities that promote individual and community growth. Last but not least, thank you Eva for your time, insight and support for working with me on the article. Please read the question and answers to learn about her perspective on 529 plans and college financial planning, and hope that the article provides you with an opportunity to learn more from your peers.
Question 1 (Paul Curley, Editor of the 529 Dash): How do you support families in college financial planning?
Answer 1 (Eva Giles, College Savings Program Manager for the Finance Authority of Maine): The Finance Authority of Maine (FAME) is a one-stop shop for college planning, access, and affordability for the citizens of Maine. We have made a financial commitment to provide human resources as well as print-based and online tools that provide key information about money management, saving and paying for college, choosing the right college, completing the financial aid application process, and managing student loans.
FAME’s College Access Counselors provide outreach and financial education to families across Maine. This team focuses on college savings, college aspirations, financial aid, financial education and debt management. They advise students of all ages on how to become informed consumers of higher education. FAME’s College Access Counselors also build college aspirations by playing the classroom game, Claim Your Future®, with elementary and middle school students.
FAME also administers Maine’s Section 529 college savings program, the NextGen College Investing Plan®, providing both Client Direct Series and Client Select Series options nationwide. FAME also partners with a private philanthropic foundation, the Alfond Scholarship Foundation, to offer the innovative Harold Alfond College Challenge. Since 2013, the Alfond Scholarship Foundation provides a $500 grant to every baby born a Maine resident*. Maine families can use the Alfond Grant to open a NextGen account and begin investing for college. FAME and the Alfond Scholarship Foundation are dedicated to helping Maine children have the financial resources to make college success a reality. FAME and the Alfond Scholarship Foundation are committed to building college aspirations in Maine children and creating a culture of savings in the state. (* Children born as Maine residents since January 1, 2013 or who are Maine residents at account opening and under the age of one. View the Terms and Conditions of Maine Grant Programs at NextGenforME.com for other conditions and restrictions that apply.)
NextGen offers generous matching grants to eligible Maine accounts with either a Maine resident account owner or student (beneficiary). These grants are real investments in Maine students and encourage a college-savings culture.
FAME administers the Maine Loan and the Maine Medical Loan, private education loans and provides loan insurance through the Maine Private Education Loan Network, a group of Maine financial institutions that offer private student loans and consolidation of student loans. FAME also administers a number of loan and grant programs on behalf of the state that address Maine’s workforce needs and provide financial support for students and families pursing higher education. FAME staff provide telephone and online answers to questions about all of FAME’s education-related products and services.
All of FAME’s educational programs support FAME’s vision: The Finance Authority of Maine will help lead the creation of good paying jobs for Maine citizens by working at the nexus between economic and workforce development.
Question 2: What are the top three tips for families seeking to efficiently save and pay for college?
1. Start saving early and contribute regularly and automatically.
If families have been hesitating to open a NextGen account because there’s not much money to spare, or maybe because college expenses seem too overwhelming or too far in the future to tackle, taking the first step and opening an account can really help. Every dollar invested in an account, when used for qualified higher education expenses is a dollar that doesn’t need to be borrowed and repaid with interest.
Once the NextGen account is open, account owners can arrange to have contributions made automatically through savings or checking accounts or by using payroll deduction. Having an account also creates the opportunity for family and friends to give meaningful gifts and contribute as well.
2. Understand the concept of Net Price and do a thorough college search to find the schools that are a good fit academically, socially and financially.
Before applying to college, students should research schools to find the ones that will be the best fit. Students should look for schools that meet academic, social, extra-curricular, budgetary and geographical needs. In addition to campus visits, students can use tools like the US Department of Education’s College Navigator and BigFuture by The College Board to search by location, major and school type.
Students should also research college costs to find schools that might be a good financial fit. Instead of focusing on the “sticker price,” they should focus on the “net price” – the price after grants and scholarships have been factored in. Students can use the school’s Net Price Calculator (usually found on the school’s financial aid webpage) to estimate and compare the net prices at multiple colleges.
3. Understand the required forms and processes and meet all deadlines.
Deadlines matter. Deadlines are important because some types of aid are limited and may only be awarded to those who meet the priority financial aid deadline.
Families should complete the Free Application for Federal Student Aid (FAFSA) as soon as possible. Starting in the 2017-2018 academic year, the FAFSA will become available on October 1 of each year instead of January 1. The required income information will be from the prior tax year. All schools require the FAFSA to determine eligibility for federal financial aid. Many schools use the FAFSA to award state and institutional aid. Some schools require additional forms, such as the CSS Profile, to award institutional aid. Student should be aware of, and adhere to, each school’s deadline for all aid application materials including tax forms and other required documentation.
Once students have been accepted there are still deadlines to be met:
• Student Loan Entrance Counseling and Master Promissory Note
• Housing Forms and Deposits
• Health Forms and Waivers
Question 3: What trends do you see in college financial planning?
Answer 3: It has become more difficult for families to pay for college. The costs have increased and financial aid has not kept pace.
There are many myths that prevent people from saving for college. We work hard to de-bunk these myths. Here are some of the most common myths we hear and the messages we share:
1. If we save for college, my student won’t receive any financial aid.
Assets and college savings rarely have a significant impact on financial aid eligibility. A family’s primary residence and retirement accounts are excluded from consideration. For most families earning under $50,000, all assets are excluded. Even when savings are included, the federal financial aid formula has a built-in Education Savings and Asset Protection Allowance that may shelter a portion of assets. Of the assets that remain after the Asset Protection Allowance, no more than 5.64% of parent assets are considered available and impact federal aid eligibility.
2. My student is already in high school. It’s too late to start saving for college now.
It is true that the earlier you start saving, the more you are likely to accumulate. However, even short term savings can be beneficial when paying for college. Saving enough to pay for books and supplies can help students limit borrowing. Every dollar available from savings is a dollar that doesn’t have to be borrowed and repaid with interest!
3. We can’t possibly save enough! We don’t have enough money to save what is needed to really make a difference.
Very few families can save enough to pay for college completely from savings. For most, paying for college is a piecemeal approach – grants, scholarships, loans, student earnings, tuition payment plans and savings when used in combination may make it possible to pay the bill. When it comes to savings, even small amounts saved consistently over time can make a difference. Many people find they don’t miss $10 to $15 per week, especially when they automate their contributions. Consider payroll deduction or automated transfers to a savings account.
4. My student is going to take responsibility for paying for college.
Most students are no longer able to earn enough over the summer to cover tuition. According to The College Board, the 2015-2016 average cost for tuition and fees alone was $9,410 for an in-state student at a public school and $32,405 at a private school. Even if students are willing to borrow loans to make up the difference, federal student loans are limited and private loans are credit based and typically require a co-signer. The federal government and schools view paying for college as a family responsibility. Saving will make it easier for families to meet those expectations.
5. We are just going to borrow, because you can borrow for college but you can’t borrow for retirement.
Although true, the cost of borrowing exceeds the cost of saving and getting the benefit of compounding earnings over time. It may be necessary for many families to borrow as part of their plan for affording college, but any savings that can occur in advance reduces the amount of borrowing, helps with cash flow, and increases options for paying the bill.
Question 4: Why is it so important to FAME to have the state of Maine be #1 in educational savings and the lowest in student loan indebtedness by 2030?
Answer 4: FAME works at the nexus of economic and workforce development. We do this in a state that is experiencing an increasing shortage of skilled labor. High college costs and limited financial aid leaves families with significant higher education gaps, often resulting in very high levels of student loan indebtedness. If Maine is going to have a sufficient skilled workforce needed for future economic prosperity, there need to be more Maine students successfully completing post-secondary programs. FAME is making the commitment to help people become informed consumers of education. We are looking for innovative ways to support all Maine citizens to have a plan and the tools needed to afford college and decrease student loan borrowing, so families can afford to make Maine their home.
Editor’s Final Note: Thank you Eva Giles for your time and insight for this article. Also, I would like to provide a special thank you to the readers for learning from your peers, for your support and your engagement.
Disclosure: NextGen is a Section 529 plan administered by the Finance Authority of Maine (FAME). Before you invest in NextGen, request a NextGen Program Description from your Merrill Lynch Financial Advisor or Maine Distribution Agent or call Merrill Edge at 1-877-4-NEXTGEN (877-463-9843) and read it carefully. The Program Description contains more complete information, including investment objectives, charges, expenses and risks of investing in NextGen, which you should carefully consider before investing. You also should consider whether your or your designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s Section 529 plan. Merrill Lynch, Pierce, Fenner & Smith Incorporated, a registered broker-dealer, member SIPC, is the program manager and underwriter.