Academic plan, estimated edu cost, estimated financial resources, identify and analyze unmet need
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path_to_graduation.pdf
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Creating A Financial
Path To
Graduation
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Why is Creating a Financial Path Important?
Creating a Financial Path to Graduation is intended to help you map an academic and financial course through the completion of your program.
After completing these seven steps, you will have:
A practical timeframe in which you can expect to graduate
A realistic picture of your educational costs
The cost of borrowing and how it will affect your financial future Bottom line: You will be in a position to make better financial choices regarding you
education. The calculations you make will be unique to your situation. The financial path is meant to estimate your educational costs, not to provide definitive calculation. The financial path consists of seven steps. Each step is important; if you skip a step, you will not have a full picture of your real educational cost. Step 1 Chart Your Academic Plan
What will my major be? How many credits will I need to graduate? Will go straight through school, or will I take time off for study abroad, volunteer and humanitarian service, etc.?
Step 2 Estimate Educational Costs
How much will tuition be for a year? Book costs? Insurance? How much will it cost me to commute—or will I be living on campus? Are there costs I can eliminate?
Step 3 Estimate Financial Resources
Will I be working? Do I have scholarships? How much can my family help me?
Step 4 Identify and Analyze Unmet Need
What is the difference between my educational costs and my financial resources?
Step 5 Establish Your Maximum Debt Limit
How much can I borrow and not jeopardize my future with excessive debt?
Step 6 Identify the Costs of Borrowing
How much interest will I pay? How much must I earn to pay back my student loans without jeopardizing my future?
Step 7 Make a Financial and Academic Commitment and Monitor Your
Progress Am I meeting my academic goals? If not, how will this affect me financially?
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Step 1: Chart Your Academic Plan
There are several things to consider before making your academic plan. 1. Do you know what your major will be?
Think about what you want to do after you graduate. Do you have a talent or skill that provides a great deal of satisfaction? Is it something you would like to do for the rest of your life? One of the first steps in choosing a major is self-inspection. The following are free assessment tools to aid in the exploration of your personal interests and talents, with the end goal of finding and fulfilling career path to match.
Self-Perception Profiling System http://personal.ansir.com/test.htm Personal Style Indicator http://www.improvenow.com/Assessments/CRG/PSI/indec.cfm?action=self Temperament Sorter http://www.advisorteam.com/temperament_sorter/register.asp?partid=1
Many websites also offer advice on how to select a major: http://quintcareers.com/choosing_major.html http://www.careerkey.org/english/ http://www.career.arizona.edu/students/choosing/majors/majors.asp http://career.missouri.edu/holland/ http://www.bls.gov.oco 2. Do you have to decide on a major right now?
No, but eventually you will. Colleges and universities require students to explore and learn from a well-rounded core curriculum called general education (GE). Initially you will be able to fill your schedule with GE classes while you examine your options for a major. You must complete GE classes in addition to classes from your major before you can graduate.
3. How many credits will you need in order to graduate?
The number of credits required will vary. When you have this information you will be ready to begin your academic plan.
Beginning with Year 1, make your academic plan for the degree you are currently seeking.
If you don’t know your major, you can still make your academic plan. You may not be able to write in the exact classes, but you will be able to estimate the number of hours you need to take each year, including general education, major, and elective credits that you identified earlier.
See the example before you begin.
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EXAMPLE Fall Enrollment Credits Spring
Enrollment Credits Summer
Enrollment Credits
ENGL 150 3 HD FS 239 3
MATH 140 .5 COM S 103 3
HD FS 102 3 SOC 134 3
HD FS 283 ELECTIVE 3
LIB 160 3 HUMANITIES 3
HD FS 110 3
TOALS 14.5 15
YEAR 1
Fall Enrollment Credits Spring Enrollment
Credits Summer Enrollment
Credits
TOALS
YEAR 2
Fall Enrollment Credits Spring Enrollment
Credits Summer Enrollment
Credits
TOALS
YEAR 3
Fall Enrollment Credits Spring Enrollment
Credits Summer Enrollment
Credits
TOALS
YEAR 4
Fall Enrollment Credits Spring Enrollment
Credits Summer Enrollment
Credits
TOALS
YEAR 5
Fall Enrollment Credits Spring Enrollment
Credits Summer Enrollment
Credits
TOALS
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Step 2: Estimate Educational Costs
Now estimate your costs of going to school. These estimates should reflect the cost of attending school for one semester (four months). Direct School Costs Utilities Tuition _________ Gas _________ Books _________ Electricity _________ Supplies _________ Water/Sewer _________ Class Fees _________ Subtotal _________ Subtotal _________ Food Transportation Groceries _________
Car Payments _________ Fast Food _________ Gasoline _________ Restaurants _________ Licensing _________ Snacks _________ Auto Repairs Subtotal _________ Campus Permits _________ Recreation Airfare _________ Babysitting _________ Insurance _________ Movies _________
Subtotal _________ Cable TV _________ Telephone Dating _________ Local Service _________ Video Rentals _________ Long Distance _________ Subtotal _________ Internet Service _________ Gifts Cell Phone _________ Charity _________ Subtotal _________ Weddings _________ Housing Birthdays _________ Rent/Mortgage _________ Holidays _________ Insurance _________ Subtotal _________ Property Taxes _________ Clothing Subtotal _________ Dry Cleaning _________ Personal Expenses Laundry _________ Beauty Care _________ Purchases _________ Haircuts _________ Subtotal _________ Hygiene _________ Savings _________ _________ Long-term Goals _________ _________ _________ Emergencies _________ _________ _________ Retirement _________ Subtotal Subtotal _________ Medical Expenses Miscellaneous Health Insurance _________ Child Care _________ Prescriptions _________ Child School Costs _________ Co-Pays _________ _________ _________ Doctor/Dentist _________ _________ _________ Eye Care _________ _________ _________ Subtotal _________ Subtotal _________ Add up all of the subtotals to come up with your estimated educational costs for one semester. Estimated educational costs for one semester $___________
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How to Determine Total Estimated Educational Cost Suppose your estimated educational costs for one semester calculate on page 4 are $5000. Year 1, you will be attending 2 semesters $5,000 X 2 = $10,000 Year 2, you will be attending year round $5,000 X 3 = $15,000 Year 3, you will be attending year round $5,000 X 3 = $15,000 Year 4, you will be attending 2 semesters $5,000 X 2 = $10,000 Year 5, you will not be attending $5,000 X 0 = $0 For your total estimated educational cost, add up all of the years = $50,000 Inflation has not been accounted for in this example. If you would like to figure your total cost adjusted for inflation, multiply each year by the current inflation rate or, if you do not know it, use 5 percent (0.05). Add that amount to the yearly total, then add all the years together. Example: Year 2 would be $15,000 X 0.05 = $750. $15,000 + 750 = $15,750 total. You can now estimate your total educational cost. Using your estimated educational costs for one semester (calculated on page 4) and your planned yearly semesters (page 3), calculate your total estimated educational cost.
Year Cost per Semester
Times Number of Semesters
Equals Total Yearly Cost
1 X =
2 X =
3 X =
4 X =
5 X =
Add the yearly costs to get your total estimated educational cost = ___________
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Step 3: Estimate Financial Resources
The purpose of this section is to help you discover how much you will have in personal resources to meet your educational costs each year. It will give you a clear picture of how much you may need to borrow. In determining your resources, explore and maximize all sources that might be available to you: work, institutional and/or off-campus scholarships, family funds, taking as many credits as you are able to successfully complete per semester to lessen the amount of semesters required to graduate.
Total Estimated Financial Resources
Resources Year 1 Year 2 Year 3 Year 4 Year 5
Personal Savings and Investments
Employment Fall/Spring
Employment Summer
Help From Parents
Help From other Relatives
Scholarships
Grants
Work-Study
Vocational Rehabilitation
Social Security Benefits
Veterans/GI Benefits
Other
Totals
Add all of the yearly totals to come up with your Total Estimated Financial Resources__________________
As you begin to look at ways to pay for school, keep in mind that these are only suggested resources. Fellow students are your best source for new ideas. If you see something that works for someone else, try it!
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Step 4: Identify and Analyze Unmet Need
To begin, compare your total estimated educational cost (page 5) with your total estimated financial resources (page 6). Then use the worksheet provided to help you identify your unmet need—the amount of money you will be lacking to pay for your education and may need to borrow.
Example:
Unmet Need Year 1 Year 2 Year 3 Year 4 Year 5 Total
Estimated Educational
Cost $10,000 $15,000 $15,000 $10,000 $0 $50,000
Estimated Financial
Resources $7,379 $8,922 $8,967 $8,500 $0 $33,768
Unmet Need (Potential Debt)
$2,621 $6,078 $6,033 $1,500 $0 $16,232
To calculate your unmet need, take the total estimated cost (page 5) and
the total estimated financial resources (page 6), and complete the worksheet.
Unmet Need Year 1 Year 2 Year 3 Year 4 Year 5 Total
Estimated Educational
Cost
Estimated Financial
Resources
Unmet Need (Potential Debt)
If you have unmet need, decide where you can reduce your spending or
increase your resources. BE CREATIVE!
Now add to this unmet need any outstanding student loans. If you are free of student loans at this point, place a zero in the indicated space. Adding the adjusted unmet need and outstanding student loans will give you your
potential loan debt.
Unmet need $___________ Outstanding Student Loans $___________
Total Potential Loan Debt $___________
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Step 5: Establish Your Maximum Debt Limit
A wise person approaches debt very cautiously. Experts suggest that a reasonably
monthly payment for student loan debt is no more than eight percent of your
monthly take-home pay (net income). In this step, you will learn the maximum
amount you can reasonably borrow using your estimated starting salary.
1. Estimated Starting Salary How much do you think you will be making when you get your first job following
graduation? You may refer to the list on the next pate. (If you want detailed
starting salary information, you may request information from your individual college
or university career services office). In addition, the Bureau of Labor Statistics
website (http://stats.bls.gov/oco/ocoiab.htm) offers detailed information on salary
and career opportunities in numerous areas.
Gross annual income from work $__________
2. Net Annual Income From Work’ Subtract 25 percent from your gross annual income to account for taxes, Social
Security, insurance, etc. This will give you an estimate of your net annual income
from work. (If you plan to make charitable contributions, add that percentage to the
25 percent.)
Example: $24,000 X .25 = $6,100; $24,400 - $6,100 = $18,300
Net annual income from work $__________
3. Net Monthly Income From Work Divide the net annual income from work by 12 to determine your net monthly
income from work.
Example: $18,300 / 12 = $1,525
Net monthly income from work $__________
4. Other Monthly Income Write down any other income you receive each month. This could be money from
odd jobs, money received from parents or other family members, Social Security
benefits, workman’s compensation, disability, child support, interest income from
saving or investments, etc.
Other monthly income $__________
5. Total Net Monthly Income Add together the net monthly income from work and the total other monthly income.
This will give you your total net monthly income.
Total net monthly income $__________
6. Monthly Student Loan Payment Multiply the net monthly income by 8 percent to estimate a reasonable amount you
could pay each month for a loan payment. (Eight percent of net monthly income is
the industry standard for a monthly student loan payment.
Example: $1,525 X .08 = $122
Monthly student loan payment $__________
7. Your Maximum Student Loan Debt Limit Refer to the loan repayment chart (page 11). Locate the monthly payment in the
left that is closest to your own. By reading from right to left, you will be able to
determine an approximate figure for your potential loan debt. Record that figure for
the maximum debt limit.
Example: $10,000
Your maximum student loan debt limit $__________
Compare your total maximum debt limit to your potential loan debt. If your
potential loan debt is greater than your total maximum debt limit, you should
reevaluate your options. You may want to consider other resources and look for
ways to reduce your expenses.
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January 2003 Average Yearly Salary Offers (Bachelor’s Degree)
Accounting $42,005
Advertising $31,722
Aerospace Engineering $47,820
Ag Business/Management $30,184
Ag Engineering $43,907
Animal Science $30,549
Biological Sciences $28,455
Business Administration/Management $36,643
Chemical Engineering $51,301
Civil Engineering $41,541
Clothing/Apparel/Textile Studies $32,875
Communications $33,267
Computer Engineering $52,722
Computer Science $44,678
Economics/Finance $40,413
Electrical Engineering $50,615
Elementary Education $29,302
Hotel and Restaurant Management $31,015
Marketing $35,698
Mathematics/Statistics $41,204
Mechanical Engineering $48,115
Psychology $27,194
Secondary Education $29,031
Sociology $27,338
NOTE: The National Association of Colleges and Employers (NACE) Salary Survey contains data obtained between September 2002 and January 2003.
The information represents a compilation of offers extended to students graduating between September 1, 2002 and August 31, 2003. Figures reported are for base salaries only and do not include bonuses, fringe
benefits, etc. The data is provided by career planning and placement offices of colleges and universities across the United States. The numbers of actual
offers vary between majors and the salaries reported are on average of those offers. Consequently, the starting salaries reported should be used as a guide, not an absolute.
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Step 6: Identify the Costs of Borrowing
You have made your academic plan, calculated your total educational costs, and determined how much you can afford to borrow by using your expected
income once you graduate. Now you can look at your potential loan debt and see what your true cost of borrowing will be.
1. Take your potential loan debt as calculated on page 7. $__________
2. Using the payment chart on the next page, locate the total interest
you will pay on that debt.
+__________
3. total repayment (1+2) =$__________
Now calculate the minimum annual starting salary you should earn to “afford” this debt
4. Find your estimated monthly payment on the chart on the next page.
$__________ 5. Multiply this by 200*
X__________
6. Annual salary =$__________
*You are making two assumptions by using the number 200
1. You are taking into account 25 percent for monthly federal and state taxes.
2. You are using the 8 percent rule, the industry standard for maximum student loan debt repayment. Debt above this
amount can create financial hardship. If the calculated salary needed to repay your loans seems unrealistically
high, return to potential loan debt (page 7). You will want to look at how you can decrease your educational costs and increase your financial resources
(page 6). REMEMBER: If the job you want once you graduate will not provide the kind
of income you will need to repay the loans you choose to borrow, you need to plan NOW.
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Loan Repayment Chart Monthly
Payment
Number of
Payments
Potential
Loan Debt
Total
Interest
Approximate
Total
Repayment
50 107 4000 1340 5340
58 120 5000 1910 6910
69 120 6000 2290 8290
81 120 7000 2670 9670
92 120 8000 3050 11050
104 120 9000 3430 12430
115 120 10000 3810 13810
127 120 11000 4190 15190
138 120 12000 4570 16570
150 120 13000 4950 17950
161 120 14000 5330 19330
173 120 15000 5710 20710
184 120 16000 6100 22100
196 120 17000 6480 23480
207 120 18000 6860 24860
219 120 19000 7240 26240
230 120 20000 7620 27620
242 120 21000 8000 29000
253 120 22000 8380 30380
265 120 23000 8760 31760
276 120 24000 9140 33140
288 120 25000 9520 34520
299 120 26000 9910 35910
311 120 27000 10290 37290
322 120 28000 10670 38670
334 120 29000 11050 40050
345 120 30000 11430 41430
357 120 31000 11810 42810
368 120 32000 12190 44190
380 120 33000 12570 45570
391 120 34000 12950 46950
403 120 35000 13330 48330
414 120 36000 13720 49720
426 120 37000 14100 51100
437 120 38000 14480 52480
449 120 39000 14860 53860
460 120 40000 15240 55240
472 120 41000 15620 56620
483 120 42000 16000 58000
495 120 43000 16380 59380
506 120 44000 16760 60760
518 120 45000 17140 62140
529 120 46000 17520 63520
541 120 47000 17910 64910
552 120 48000 18290 66290
564 120 49000 18670 67670
575 120 50000 19050 69050
Federal Stafford Loans have an interest rate cap of 6.8%, as used here.
Calculations made from Federal Student Aid calculators.
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The publication of this workbook was made possible by a generous grant from the
UTAH HIGHER EDUCATION ASSISTANCE AUTHORITY
Prepared by the
BRIGHAM YOUNG UNIVERSITY
FINANCIAL AID OFFICE Copyright © by Brigham Young University
First edition 1997 Second edition 2001
Revised edition by Iowa State University Financial Counseling Clinic 2007
