Academic plan, estimated edu cost, estimated financial resources, identify and analyze unmet need

Creating

A

Financial

Path

To

Graduation

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?

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.

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
TOTALS	14.5		15

YEAR 1

Fall Enrollment	Credits	Spring Enrollment	Credits	Summer Enrollment	Credits
TOTALS

YEAR 2

Fall Enrollment	Credits	Spring Enrollment	Credits	Summer Enrollment	Credits
TOTALS

YEAR 3

Fall Enrollment	Credits	Spring Enrollment	Credits	Summer Enrollment	Credits
TOTALS

YEAR 4

Fall Enrollment	Credits	Spring Enrollment	Credits	Summer Enrollment	Credits
TOTALS

YEAR 5

Fall Enrollment	Credits	Spring Enrollment	Credits	Summer Enrollment	Credits
TOTALS

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 $___________

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 = ___________

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!

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 $___________

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.

2012 Median Yearly Starting Salary Offers (Bachelor’s Degree)

Accounting $47,800

Advertising $44,700

Aerospace Engineering $64,200

Ag Business/Management * N/A

Ag Engineering* N/A

Animal Science* N/A

Biological Sciences $38,300

Business Administration/Management $49,200

Chemical Engineering $63,000

Civil Engineering $55,300

Clothing/Apparel/Textile Studies * N/A

Communications $39,400

Computer Engineering $67,800

Computer Science $58,300

Economics $54,800

Finance $49,700

Electrical Engineering $57,300

Elementary Education $35,800

Hotel and Restaurant Management $31,700

Marketing $49,600

Mathematics/Statistics $47,000

Mechanical Engineering $58,600

Psychology $33,500

Secondary Education $38,600

Sociology $31,700

NOTE: *2012 data not currently available. The National Association of Colleges and Employers (NACE) Salary Survey contains data obtained in February 2012. 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.

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.

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.

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 2013