Transcript The Middle Class Family Paying for College

Financial Aid 101
Understanding the Basics
Workshop Agenda
• Resource Information
• What is Financial Aid?
– Application process
– Determination of eligibility
– Types and sources of aid
• Side Notes
– College planning services
– Scholarship searches and scams
Sources of General FA Information
• The Student Guide (U.S. Dept. of Ed.)
• College Financial Aid Brochures
• Websites
– Financial Aid Information Page
– U.S. Department of Education
– The College Board
– Educaid
The Financial Aid Information
Page
www.finaid.org
Accurate, Comprehensive and Objective
Information
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Links to Free Scholarship Searches
Scholarship Scam Alerts
Financial Aid Consultant Guide
Loan Calculators
Strategies--Maximizing Aid Eligibility
• Answers to Frequently Asked
Questions
Financial Aid Myths
• Students with highest GPAs get all the aid
• Income is too high, so don’t bother to apply
• Sibling didn’t qualify, so neither will I
• Attend the college that offers the most aid
• Cost is the only way to compare colleges
What is Financial Aid?
Money given, paid or loaned to help pay for
college
Gift Aid
• Grants and Scholarships (free money)
Self-Help Aid
• Work-Study (job opportunity to earn
money)
• Loans (money borrowed that must be
repaid)
Philosophy of Financial Aid
• Parents have the primary responsibility
to pay for their dependent children’s
education.
• Students also have a responsibility to
pay for a reasonable portion of their
educational expenses.
• Evaluation of family circumstances
should be consistent and equitable.
Application Process
~ALL SCHOOLS~
• Free Application for Federal Student
Aid (FAFSA)
Required for federal and state aid
Deadlines vary from school to
school
Several filing methods:
– Paper version
– FAFSA on the WEB
(www.fafsa.ed.gov)
– FAFSA Express (800-4-FEDAID)
Application Process
~SOME SCHOOLS~
• Institutional Aid Application
• CSS/Financial Aid PROFILE Available in September
 Filed earlier than the FAFSA
 Not all schools require
 $ 6 registration fee
 $15 fee per school
Application Tips
(Making Your Efforts Count!)
1. Find out application requirements and
deadlines
2. Fill out forms completely, accurately
and legibly
3. Make copies of all completed forms
4. Comply with all information requests
5. Meet deadlines (obtain proof of
mailing!)
Is There Life After Missed
Deadlines?
Yes, but . . . . . .
• Award letter may be delayed
• Certain funds may be
unavailable:
– Institutional grants and
scholarships
– Free federal money
– Work-Study
– Lower interest or interest free
loans
Basic Application Flow
Student and school receive FAFSA
information from federal processor
(student receives the Student Aid Report (SAR),
school receives the info electronically)
School matches admissions record with
financial aid application and
determines eligibility
School mails award letter to student
Student mails award letter back to school
Financial Aid Timeline
• Apply for Aid (January-February)
• Receive Award Letter (March-May)
• Comply with Information Requests
(March-May)
• Verification and Aid Coordination
(Spring&Summer)
• Financial Aid Disbursed (Start of first
term)
• Re-apply for Aid (January-February the
following year)
Categories of Financial Aid
• Need-based
– Aid based on your financial situation
• Merit-based (or non-need)
– Aid based on your grades, test scores,
hobbies and special talents (artistic,
athletic, etc.)
Definition of Need Analysis
Need Analysis Simply Defined Is:
• A process of determining a
student’s financial need by
analyzing information provided by
the student and parent on a
financial aid form.
• Need analysis forms include the
FAFSA and CSS/Financial Aid
PROFILE
Basic Equation of Need
Cost of Attendance (COA)
 Expected Family Contribution
(EFC)
 Student’s Financial Need
(eligibility)
Cost of Attendance
(varies from school to school)
• Tuition and fees
• Room and board
• Books and supplies
• Transportation
• Miscellaneous personal expenses
• Loan fees, study abroad costs, dependent or
elder care expenses, expenses associated
with a disability, or expenses for cooperative
education program
Determining the Expected Family
Contribution (EFC)
• Income
• Asset Equity (excluding home equity)
• Family Size
• Number of Family Members in College
(excludes parent enrolled in college)
• Age of Parents
Sources of Financial Aid
• Federal and State Grants
• Federal Work-Study
• Federal Loans
• Institutional Aid
• Private / Other Government Aid
Federal Pell Grant Program
• Eligible students
– Undergraduates pursuing first
baccalaureate or professional degree
– Aid administrator determines actual
award amount based on Cost Of
Attendance, enrollment status, and EFC
• Annual award amounts
– $400 minimum
– $4,731 maximum (as of 2009)
Federal Supplemental Educational
Opportunity Grant (FSEOG)
• Eligible students
– Undergraduates pursuing first
baccalaureate or professional degree
– Awarded first to students with exceptional
financial need (i.e., students with the
lowest EFCs at that school)
– Priority to Federal Pell Grant recipients
• Annual award amounts
– $100 minimum
– $4,000 maximum
Federal Work-Study
• Employment during school
• Job may be on or off campus
• Income is taxable (state and federal)
• Excluded from student’s total income reported
on
next year’s FAFSA
• Program varies from school to school
Federal Perkins Loan
• Eligible students (priority to those with
exceptional need)
– Undergraduate or graduate students
– Determination of Federal Pell Grant
eligibility
• Annual and aggregate loan limits
– $4,000 annually for undergraduates
– $6,000 annually for graduates
• Grace period may be available
• Deferment and cancellation provisions
available
Federal Stafford Loan
(Subsidized and Unsubsidized)
• Determination of Federal Pell Grant eligibility
• Annual loan limits
– Vary from year to year
– Undergraduate and Graduate amounts
differ
• Subsidized Stafford: must demonstrate “need”
• Unsubsidized Stafford: “need” is not a
consideration
Additional Eligibility
for Unsubsidized Federal Stafford
Additional eligibility for independent
undergraduate and graduate students (and
dependent students whose parents are
unable to borrow PLUS)
Costs of Borrowing
Federal Stafford Loan
• Interest Rate
– variable; changes every July 1
• Fees
– origination fee to Department of
Education
– insurance premium to Guarantor
Federal PLUS Loan
• Parent borrows on behalf of dependent
undergraduate
• Approval subject to credit check
• Loan limits
– Annual limit: cost of attendance less other
aid
– Aggregate limit: none
• Interest rate variable;
• origination fee; insurance premium
• Repayment begins 60 days after final
disbursement
William D. Ford Federal Direct Loan
Program
• Began July 1, 1994
• Includes:
– Direct Subsidized
– Direct Unsubsidized
– Direct PLUS Loans
• Terms and conditions of loans made under
the Direct Loan Program are same as FFEL,
except that borrowers are afforded
somewhat different repayment options
Institutional Aid
• Academic Scholarships
• Performance Scholarships
• Entitlement Scholarships
• Need-based Grants and Loans
Private Aid
• Community Organizations
• Employers and Labor Unions
• Professional Associations
• Corporations / Foundations
• Private Loans
Other Government Aid
• Veteran Educational Benefits
– Montgomery GI Bill and VEAP
• Military Academies
• Reserve Officer Training Corps (ROTC)
• Native American Bureau of Indian
Affairs
• AmeriCorps*NCCC,
AmeriCorps*VISTA
Additional Financial Resources
• Inquire about tuition installment
plans
– Spreads tuition payments over 12
months
– Low sign-up fees, low to no interest
charged
• Consider alternative loan programs
– Federal non-need based educational
loans
– Private educational loans
– Home equity or line-of-credit loans
Additional Financial Resources
(cont.)
• Check into tax benefits for education
– Hope Scholarship (tax credit)
– Lifetime Learning Credit
– Educational IRAs
– Withdrawals from traditional IRAs
– Deduction for interest payments on
educational loans (consult your tax
advisor)
College Planning and Financial Services
Provided by:
College Aid Advisors
Admissions Consultants
CPAs
FA Consultants
Financial Planners
FA Brokers
Services Offered:
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College Selection
Service
Educational Consulting
College Aid Advising
Education Credit
Company
College Financial
Services
Scholarship Searches
‘Financial Aid’ Related Services
• Estimate aid eligibility
• Suggest strategies for maximizing
eligibility
• Prepare financial aid applications
– FAFSA, CSS/Financial Aid PROFILE
• Review, interpret and negotiate
awards
Financial Aid Consultants
$
~Several Things You Should Know~
• Free assistance is available
• Be wary of any consultant who
encourages you to use strategies that
seem unethical to you
• Avoid consultants who encourage you
to over-estimate your income
Consultants’ Fees Vary Widely
Size of fee depends upon:
– types of services requested
– complexity of financial situation
Fees range from:
– hourly charges of up to $125 per hour
– package prices of $275 to $595 or
more
CAUTION: Paying more for services does not
necessarily mean you’ll receive more financial aid.
Scholarship Searches
“Billions of Dollars Unclaimed . . .”
• Several warning signs of a possible
scam
– Guaranteed winnings
– ‘Free seminars’ on financial aid
– 1-900 telephone numbers
CAUTION: As a general rule, if you must
pay money to get money, it might be a scam.
Free Scholarship Searches
Via The World Wide Web
• FastWEB
• SRN Express
• ExPAN Scholarship Search
• CollegeNET MACH25
NOTE: If you use a scholarship search service, consider
using the cheapest possible service to minimize your
losses. You won’t get a better response from the more
expensive databases.
Something to Think About . . .
“Education is one of the best financial
investments you can make. A bachelor’s
degree yields an increase in lifetime
earning potential of nearly half a million
dollars according to Census Bureau data.
This is equivalent to a 20% annual
return on investment.”
THE FINANCIAL AID INFORMATION PAGE
(www.finaid.org)