1. Discuss relevant considerations regarding Kylie's education.

2. Make recommendations for Kylie's education.

3. Determine the cost of education for Tyler and Trace.

4. Assume the Windsors want to start a college fund for Tyler and Trace. They plan to save (make a

payment) at the end of each year until the youngest child begins college. How much they save year

year?

INTRODUCTORY DATA William and Kate came to you because their oldest child starts college tomorrow and they need help determining how to pay for it. They have done a good job of saving for retirement, but have not set aside any funds to pay for their children to attend college. They hope their children will qualify for scholarships and/or financial aid from the federal government and just submitted their first Free Application for Federal Student Aid (FAFSA). They have not received official word yet as to the type and amount of aid for which they may qualify, but the on-line FAFSA estimator indicated they would not be eligible for Federal Pel! Grants or Subsidized Stafford Loans.

The Windsors believe they may benefit from meeting with a CERTIFIED FINANCIAL PLANNER practitioner. They arrived with the following information for you to assist them in creating a plan to meet their education funding goals.

THE FAMILY

William and Kate Windsor are both 42 years old and have been married for 22 years. William Windsor is an aircraft mechanic who works full-time for Southeast Airlines (SE) Company, a large publicly owned firm, which offers flights across the United States. William and Kate met and fell in love in high school while William's father was stationed at Fort Soldier. William's father was reassigned to another base at the end of William's senior year. William moved with his family but stayed in touch with Kate, and they eventually married.

Kate worked while William learned his craft at the local Technical school. Myer William began working for SE, they began their family and Kate became a stay-at-home mom. Kate returned to work about 8 years ago. She is employed by SE as a Gate Attendant. William and Kate have three children.

The Children

Kylie, age 18, who will begin college today. Tyler, age 12, is in sixth grade, and Trace, age 9, is in third grade. While all of the children are academically talented students with excellent grades, Kylie has shown exceptional athletic ability and Tyler has shown exceptional musical ability. Trace, the baby, exhibits a charming personality and winning smile, but no interest in sports or music. He considers himself a work in progress.

William and Kate have not saved any money to send any of the children to college. Their hope was that each child would qualify for financial aid. They believe it likely that Kylie will qualifY for an athletic scholarship, or a combination of an athletic scholarship and financial aid, and Tyler will qualifY for some sort of music scholarship and financial aid. As their thoughts turned to Trace's unique qualities and lack of interest in sports and music they realized they might have to save money to pay for Trace to attend college.

They searched for scholarships to charm schools, which to their dismay, turned out to be offered mainly to girls. Trace, being the precocious child he is, thought a scholarship to charm school would be perfect. William and Kate disagreed, and are now on a mission to find ways to pay for each of their children to attend 4 years of college at State University, beginning at age 18.

They completed the FAFSA on-line and found some scholarship funds to offset more than half of the cost of tuition and fees, but the scholarship does not pay for books, room and board, transportation or meals while living away from home. The Windsor's need help identifYing how to pay for Kylie's current college expenses while also planning for Tyler's and Trace's future college expenses.

They are willing to make changes to their finances to pay for Tyler and Trace to attend college, bnt also need your help determining how much they should save and where they should invest the money until the boys are ready to attend college.

EXTERNAL INFORMATION Economic Information General inflation (CPI) is expected to be 3% annually. Education inflation is expected to be 6% annually. They live in a common law state that has no state income tax.

Bank Lending Rates Mortgage 30 years -conforming rate= 4.0%. Mortgage 15 years- conforming rate= 3.5%. Prime rate is 3.25%. They plan to stay in their home through retirement and are more concerned about paying for their children's college education than refinancing their home.

Investment Returns Expected General market is expected to return 8.0%. The Windsor's required and expected rate of return is 8.0%. Fixed income investments are expected to yield 6%. T-Bills are expected to yield 3% per year and are expected to be the proxy for the risk-free rate of return. William and Kate scored a 22 on the Global Portfolio Allocation Scoring System (PASS) for Individual Investors.

EDUCATION

The Windsor's estimate that college costs at State University currently total $15,000 per child, per year in today' s dollars for tuition, fees, room and board. State University is within commuting distance of William and Kate's home. If the children do not qualifY for financial aid, and their parents cannot afford to pay the full cost of attending college and living on campus, the children can enroll in classes while living at home, or enroll in classes at the local community college to reduce the cost of admission. Kylie wants to live on campus and does not want to attend community college . William and Kate have been told that their state offers a 529 College Savings Plan as well as a unit-type prepaid tuition program. Each unit of prepaid tuition purchased is redeemable for one percent of the resident undergraduate tuition at the highest-priced public university in their state. Their State's prepaid tuition program is not backed by the full faith and credit of the State, but the units may also be used for eligible educational institutions across the country. .

ASSUMPTION

Education assumptions include four years of college at $15,000 per year in today's dollars. The education inflation rate is 6%. Financial Aid may be possible, bur do not assume outside funding assistance from the children's grandparents or any other person