College Financing MEFA’s Guide to Step 1 Introduce yourself and share your experience Let families know you’ll be speaking on College Financing Provide the timeframe: presentation will be approximately 1 hour followed by a Q&A Let families know if you’ll be taking questions throughout or just at the end Remind families to complete the eval following the presentation and let them know they can take notes on the back of the College Financing handout Step 2 - Explain to families the benefit of attending this seminar (learning the necessary facts of the financial aid process and about free resources to help them throughout the process) MEFA’s Guide to College Financing

Facts About MEFA Massachusetts Educational Financing Authority Not-for-profit state authority that works to make higher education more accessible and affordable Created in 1982 by the State Legislature Helping families: Plan: Extensive community outreach Save: U.Fund® and U.Plan® college savings plans Pay: Affordable fixed interest rate college loans for over 30 years Introduce MEFA and let folks know that MEFA has a public service mission to help families navigate college financing Can get audience interaction by asking if anyone in the audience has heard of MEFA and in what context

You Can Do This Theme: You CAN Do This And MEFA is here to help! Stress to families the You Can Do This message throughout the presentation: though the financial aid process can seem overwhelming, this presentation and the additional resources available will allow families to get through this process You can touch on here as well what families can do to prepare for the financial aid process – create a separate family email address for all college communication, keep a file folder of all financial aid documents, etc.

mefa.org/seniors Videos/ Social Media Email Sign-up What’s Next: Your to-do list Guidance: Financial Aid Info & Tips e-Book MESSAGE: MEFA is here to help families every step of the way throughout the college enrollment process. MEFA.org/seniors was created as a one-stop resource for families to access important college enrollment resources and necessary links to plan for college and apply for financial aid. Families can access: Both major financial aid applications, FAFSA and PROFILE A free national scholarship search engine (Fastweb) MEFA’s online, interactive calculators E-books Social media Fact sheets Lots more Ask a MEFA Expert Tools & Resources

Agenda What is financial aid? How do students apply? How are financial aid decisions made? Financial aid awards Paying for college Free resources MESSAGE: Agenda slide – introduce the topics to be discussed during the seminar. We will help them ‘navigate’ the process.

Overview of Financial Aid Undergraduate Student Aid 2011-12 ($185.1 Billion) MESSAGE: There is a lot of financial aid available: $185 billion for undergrads in 2011-12. THREE main types of financial aid: Grants & Scholarships Work-Study Student Loans (Loans do count as financial aid!) Grants and scholarships are allocations of free money, also known as gift aid, which do not need to be repaid Loans are considered financial aid because of their special repayment terms for students Loans must be repaid Work-study does not come off the student’s bill You don’t have to accept loans or work-study Mention to families that tax credit info is located in IRS Pub 970 Source: The College Board, Trends in Student Aid 2012

Sources of Financial Aid Federal Grants, work-study, loans, tax incentives Massachusetts Grants, scholarships, tuition waivers, loans www.osfa.mass.edu College/University (institutional aid) Grants, scholarships, loans Outside Agencies Scholarships MESSAGE: Financial aid comes from four primary sources. Each source has different requirements for eligibility. Most federal and state grants are allocated for lower income families You should actively explore each of these sources You may want to ask the school counselor before the seminar beings if he/she wants to speak about local outside scholarships and how the information is available through the guidance office

Merit-Based Aid Awarded in recognition of student achievements (academic, artistic, athletic, etc.) Applicants often compared against one another May or may not be renewable Not offered at every school MESSAGE: Financial aid may also be awarded based on factors other than financial eligibility Only some colleges award merit aid Awarding practices vary significantly from college to college Discuss some of the ways students may need to apply for merit aid: a separate application, essay, nomination, etc. Discuss how students may lose academic merit awards if they don’t meet GPA requirements One example from MA: John & Abigail Adams Scholarship: Non need-based Based on high 10th grade MCAS score No application: winners are notified in fall of senior year Covers tuition (NOT fees) at MA public colleges & universities Must be MA resident and U.S. citizen or eligible non-citizen Must submit the FAFSA (even though it’s not need-based) Students must maintain a 3.0 GPA for renewability Don’t mention this at private high schools, as private high schools are not required to take the MCAS

Need-Based Aid Awarded based on family’s financial eligibility as determined by standardized formula Includes grants, loans and/or work-study Most federal, state and institutional aid is awarded based on financial eligibility MESSAGE: Most financial aid is awarded based on the family’s ability to pay for college, not grades, standardized test scores or other factors Most federal and MA financial aid is awarded based on financial eligibility Colleges also offer institutional funds based on financial eligibility

Must be completed every year! The FAFSA Free Application for Federal Student Aid (FAFSA) Required by all colleges for federal and MA state aid Open January 1st: FAFSA.gov Must sign with a PIN: PIN.ed.gov IRS Data Retrieval Tool – available February 1st Requires data from all parents who live together, married or not Must be completed every year! FAFSA: Discuss the benefits of completing the FAFSA online: skip logic, saved info year-to-year, etc. Talk about estimating income to meet deadlines Introduce IRS Data Retrieval Tool – available Feb 1 - stress that families should not wait for tool to be available if application deadline is approaching. Also, it cannot be used by parents married filing separately, change in marital status during the tax year, amended tax return, or foreign/Puerto Rican return Can only do 1 form and send it to up to 10 schools at a time It’s FREE – DON’T use fafsa.com Parent & student need a PIN to sign Must be completed each year Stress that meeting the deadline is VERY IMPORTANT Mention FAFSA Day as resource for free help completing the application Federal and MA state financial aid eligibility will be based exclusively on EFC from FAFSA. The FAFSA must be completed for state aid by MAY 1. NEW this year: Information from both parents will be required on the FAFSA, regardless of parents’ gender or marital status, if 1. Both parents are legal parents, defined as biological or adoptive parents; and 2. The student’s legal parents live together. This change requires same-sex parents who live together and parents who have never been married who live together to now BOTH report information on the FAFSA.

Other Financial Aid Applications CSS/Financial Aid PROFILE® Some colleges require for institutional aid $25 for 1st school, $16 for each additional Online application required: CollegeBoard.org Noncustodial Parent PROFILE required when applicable College Financial Aid Application Required by some colleges Usually part of the admissions packet Don’t wait until you’re accepted to apply! CSS PROFILE SOME colleges require this…why? The PROFILE provides colleges more information to award institutional funds There is a fee for the PROFILE: $25 for first, $16 for every add’l school If student is applying Early Decision/Early Action, the PROFILE may be required earlier than FAFSA College/University Financial Aid Application Institutions can ask anything Not all colleges require this, check with the college for details Other Information Required As part of the original financial aid application (and not simply for Verification), some schools may require families to provide the corresponding tax return when submitting the financial aid application(s). If the appropriate year tax return (from the previous calendar year) is not yet available, some schools may accept the tax return from the year prior for the initial financial aid application process. Families can also be reminded that the Social Security Number, while still an optional field on the Common App and the PROFILE, is often used by schools as the identifier when compiling all student data and applications, and it is helpful for families to therefore report the student’s SSN on all applications when requested.

What Happens After You Apply? 1. Colleges & state receive data electronically 2. You will receive (electronically or by mail): Student Aid Report (SAR) CSS/Financial Aid PROFILE® acknowledgement report Review both & keep for records 4. Colleges may request Verification documents With any special circumstances, contact Financial Aid Office at each college MESSAGE: Explain what happens with the applications once they are submitted Your information is processed by a central processing center and data is sent to selected colleges as well as the Massachusetts Office of Student Financial Assistance You will receive a SAR (Student Aid Report) and, if you also file PROFILE, a CSS PROFILE® Acknowledgement Report For PROFILE corrections, contact your colleges directly SAR comes in different forms: email if student provided a valid email address, mail if not Be sure to review all of your answers and make sure they are accurate If you estimated your income, update FAFSA when taxes are complete Utilize IRS Data Retrieval Tool to make corrections if possible Explain Verification process. U.S. Department of Education requires that schools verify data on certain FAFSAs. Explain what documents might be required Remind parents that colleges communicate with the students directly, and mostly electronically (so students should keep on top of email – some families set up a separate email address for all college communication that both students and parents can access) Families will be required to submit IRS transcript if selected for federal Verification and tax information on FAFSA was not gathered using IRS Data Retrieval Tool – or if IRS Data was subsequently changed Can let folks know to contact the financial aid office if something changes (a job loss) or if there are special circumstances (student wants to petition to be independent, etc.)

Cost of Attendance (COA) Total expenses for one year of college MESSAGE: The Cost of Attendance is comprised of more than the billed costs. Financial aid is determined by the full cost including Tuition, Fees, Room & Board, travel expenses, books, supplies and miscellaneous expenses

Expected Family Contribution (EFC) Calculated amount the family has the ability to absorb for one year of college expenses Same federal formula used for every family Family has the primary responsibility for paying Not necessarily what the family will pay MESSAGE: The FAFSA calculates the EFC, not the amount the student will receive in financial aid The EFC reflects the family’s ability to absorb educational expenses (a family’s financial strength), but makes no particular assumptions about how the family will finance that contribution The EFC is calculated using a standard formula for all families The family has the primary responsibility to pay for the student’s education Families have choices about how to do that Families often pay more for college than the EFC MEFA.org/seniors has a link to an EFC calculator. The EFC calculator is provided by the College Board (under the big future program) and provides both an IM and FM EFC. Visit mefa.org/seniors to use an EFC calculator

EFC Formulas Federal & institutional formulas are different Federal formula for MA & federal aid Institutional formula for aid from some colleges Includes income & asset protection allowances Parent & student info treated differently Does not include personal debt (credit cards, auto loans or personal loans) Depending on the audience, you may want to go into more detail about methodology Families can be referred to the e-book, which has more information on the EFC formulas It is important to note that the 0-47% of income that ends up being part of the EFC is 0-47% of the available income for the family AFTER all taxes (federal, state and FICA) and allowances (employment allowance and income protection allowance) have been subtracted   As income increases, the percentage of income that is considered “available” increases based on the principle that as income increases, families are better able to absorb educational costs Percentage of income may actually be as low as zero if the income is low Can explain the Simplified needs test where in certain circumstances, assets are not counted at all Can explain the Auto zero test where in certain circumstances, EFC = 0 The income protection allowance is based on the number in the family and number in college; it allows for basic living expenses (food, housing, transportation expenses, medical care and other family consumption) This treatment levels the playing field for families so that families with similar available income are treated similarly in the process regardless of how they spend their available income. In other words, personal lifestyle decisions are not factored into the formula A higher percentage of a student’s income and assets are expected to be contributed toward college as the student is the primary beneficiary of the education Use this slide to talk about how multiple children in college affect the parent contribution There is a separate institutional formula used by some colleges granting institutional aid

Asset Impact on EFC An example. 4 in the family, 1 child in college: Family A Family B Family C Parent Income $60,000 Parent Assets $0 $75,000 $150,000 EFC $4,227 $5,461 $10,815 Difference $1,234 $6,588 MESSAGE: There is a generous parent asset protection allowance factored into the EFC formula. Define assets While assets (current value of savings, checking accounts, investments and reportable businesses and farms) are considered in the financial aid formula, assets have minimal impact to the EFC, as it is primarily an income-driven formula Having saved for college or having other assets that you can use to help pay for college is a good thing; it gives families options for paying the balance due Families in the audience who have saved for college should feel good about it! All 529 plans are considered assets in the parents’ name and are treated in the same manner as every other parent asset. In this example: An additional 75K in savings only increases the EFC by $1,234 An additional 150K in savings only increases the EFC by $6,588 Remember this is parental assets (up to 6%) while student assets would be assessed at a higher rate (20%) Numbers were calculated using the U.S. Department of Education’s 2014-15 FAFSA4caster Based on 2014-15 Federal Methodology

Income Impact on EFC An example. 4 in the family, 1 child in college: Family A Family B Family C Parent Income $60,000 $100,000 $150,000 Parent Assets $50,000 EFC $4,591 $16,552 $32,084 Difference $11,961 $27,493 MESSAGE: The EFC formula can be heavily income-driven Income (all income, from taxable and non-taxable earnings and other sources) is assessed at a higher rate in the financial aid formula than assets In this example: An additional 40K in income increases the EFC by $11,961 An additional 90K in income (from $60,000) increases the EFC by $27,493 Colleges don’t tell families how to meet their EFC. For example, with family B, the college wouldn’t require the family to use any of their reported assets for education expenses. This is an option the family may choose Reminder, the EFC is determining how much the family can absorb in educational expenses over time. In many cases, families using multiple resources, which we will discuss later Families should not use these charts to calculate their own EFC; instead they should utilize the EFC calculator link available on mefa.org/seniors This is a great opportunity to point families to the EFC calculator on mefa.org/seniors, so that they may calculate their own EFC Numbers were calculated using the U.S. Department of Education’s 2014-15 FAFSA4caster Based on 2014-15 Federal Methodology

Financial Aid Formula Cost of Attendance (COA) – Expected Family Contribution (EFC) = Financial Aid Eligibility MESSAGE: All colleges use this preliminary calculation to determine eligibility for financial aid EFC stays the same regardless of institution Explain that COA varies The amount the family can contribute is taken into consideration before determining a financial aid award Colleges fill in Financial Aid Eligibility with financial aid from multiple sources

How the Formula Works Cost of Attendance MESSAGE: The bar graph illustrates the three line formula (COA – EFC = Eligibility) that we looked at earlier. Financial aid eligibility varies from school to school Use this chart to show why a student should never rule out a college because of its cost. The student is eligible for a large financial aid package from college A At the same time, you don’t know what that financial aid package will include until the student is accepted to the school and receives the financial aid award letter. For this reason, the student should consider applying to a balanced list of colleges financially At College D, the student has 0 eligibility for financial aid, however it might be an affordable option for the family In a perfect world (theoretically), the college will be able to meet the student’s full eligibility and the EFC will remain the same, however many colleges cannot meet full eligibility due to available funding Students still in the process of determining their final list of colleges and students in younger grades should look for colleges’ net price calculators to aid in the discussion around affordability

Financial Aid Awarding COA = $30,000 Unmet Need $3,000 Federal Work-Study $1,500 Student Loan $5,500 Grant $7,500 Scholarship $7,500 MESSAGE: Colleges use the EFC to determine eligibility for financial aid, then try to meet the eligibility (or fill the barrel) with financial aid from all resources Most colleges are not going to be able to fill the barrel The EFC always goes into the barrel first Unmet need is more common than not Explain what happens to EFC when there is unmet need. In this example, if the student decides to attend this institution, the family will need to contribute the EFC plus unmet need ($5000 + $3000 = $8000) for the student to attend Use this as an example to demonstrate how the EFC is often the MINIMUM contribution for a family, not necessarily a MAXIMUM Explain the difference between direct and indirect costs in the COA and that even though the college won’t bill the student for indirect costs, the family still needs to determine how they will be met Explain ways that students can reduce indirect costs, such as used books and cheaper travel Explain how outside scholarships may affect the financial aid EFC $5,000 ANY college costs not covered by financial aid are the FAMILY’s responsibility! This example is an estimate only.

Comparing Award Letters: Award Totals Vary COA: $30,000 EFC: $5,000 Total Eligibility: $25,000 College A College B College C Grants/Scholarships $18,000 $15,000 $10,000 Student Loans $5,500 Work-Study $1,500 Total $25,000 $22,000 $17,000 Unmet Need $0 $3,000 $8,000 MESSAGE: Unmet need can vary greatly from college to college even when the COA is constant Explain the differences and possible reasons for the variance College A, B and C could also represent 3 different students at the same institution (students with the same eligibility at the same school may still receive different financial aid based on the different strengths of the admissions applications or enrollment goals of the school, or maybe one student missed the college’s financial aid application deadline) When comparing financial aid award letters, families should consider the total number of years the student plans to be enrolled Encourage families to visit mefa.org/seniors after receiving award letters to take advantage of the online, interactive College Cost Calculator Remind families that deadlines are so important – the student may receive less aid because the financial aid application was late

Comparing Award Letters: Award Totals Are Equal COA: $30,000 EFC: $5,000 Total Eligibility: $25,000 College A College B College C Grants/Scholarships $15,000 $5,000 $0 Student Loans $5,500 Parent Loan $10,000 $16,500 Work-Study $1,500 Total $22,000 Unmet Need $3,000 MESSAGE: When comparing award letters, you can’t just look at the bottom line. You need to compare what’s making up each financial aid award Here are three examples of awards from colleges with the same Cost of Attendance Might want to start out by asking the audience what’s different about these award letters (Parent Loan) You can see that even though three hypothetical colleges have the same total financial aid, the funds making up that award vary greatly Explain the differences and possible reasons for the variance Talk about the different kinds of loans a family might see on an award letter What should a family do if offered a parent loan?

How to Fill the Unmet Need Favorite College Balance Due $20,000 Past Income Student Savings -$1,500 Parent Savings -$4,000 Present Income Student Contribution to Payment Plan -$1,000 Parent Contribution to Payment Plan -$3,500 Future Income Education Loan -$10,000 $0 EXAMPLE MESSAGE: Families decide the best plan to meet the balance due at the college based on their own personal finances. The options fall under three major categories: past, present and future income. Families don’t need to choose just one option (past, present or future income) to pay the balance due, and combination plans can save money in the long run. Encourage families to visits mefa.org/seniors to access a Monthly Payment Calculator, which allows families to build a monthly payment plan into their strategy in combination with a loan, when considering which option is most affordable for their family Past Income: savings or other investments such as college saving plans Present Income: Explain payment plan, e.g., owe $1,000? pay $100 per month for 10 months. Better than ANY loan Future Income: borrowing loans. This will be in addition to student loans that are offered in the financial aid award. If families are considering financing any portion of the student’s education, they should take advantage of federal student loans first Families need to be thinking about a long-term plan when deciding what options to use. This includes the total number of years the student plans to be enrolled as well as multiple children who plan to attend college Colleges who use institutional methodology often expect the student to contribute from savings and/or summer work. Students are able to contribute to the payment plan along with the parents. For families who are not receiving aid, you can still use these same steps. You will not be able to subtract aid, but if you have outside scholarships be sure to subtract them from direct costs. Outside Scholarships can also be used as present income to help pay direct and indirect costs.

Federal Direct Student Loans Student is the sole borrower No credit check Annual limits 3.86% fixed interest rate for 2013-14 Repayment No payments due while enrolled Approximately $300/month for 10 years for $27,000 debt MESSAGE: Federal loan options should ALWAYS be considered before private options Go over loan details and limits: Student Direct Loan: $5500 FR, $6500 SO, $7500 JR & SR – these all include a $2000 Unsub DL Loan each year Start the kitchen table conversations now as a family about affordable monthly payments and debt that students will be able to afford based on future earnings. $300 is the approximate monthly payment for a student who borrows 4 years of maximum unsubsidized Direct Loans ($27,000 total). Student will need to sign a master promissory note and complete entrance counseling on studentloans.gov Direct Loan – all U.S. citizens/permanent residents are eligible Students whose parents are denied for the PLUS loan are automatically eligible for a $4K (FR & SO) or $5K (JR & SR) Unsub Direct Loan – these amounts are in addition to the limits above Many repayment options are available for borrowers, including one that can be tailored to the student’s budget. Forgiveness provisions for certain professions. See studentloans.gov for details What is reasonable student loan debt? Avg debt for class of 2011: $26,600. MA Avg.= $25,541. (Project on Student Debt). Additional Loan Options Perkins: Not available at all schoools, $5500 max/yr NIL: A MA state loan for low-income students; not available at all schools

Alternative Loan Considerations Be a Wise Consumer! Interest rate and APR Fixed or variable interest rate Fixed: stable, monthly payments Variable: changes based on market conditions Primary borrower (student or parent) Start of loan repayment Monthly payment amount and years in repayment MESSAGE: Any family that needs to borrow should plan for plenty of time to compare loan products so they choose an option that’s right for their family Whether the parent is offered a loan as part of the financial aid package or families are comparing private loans, they need to consider all of these factors Families should not wait until they receive their bill in July to determine their financing plan: Encourage families to start researching financing options as soon as the student decides which college to attend (around May 1) Discuss the difference between fixed vs. variable rate loans Explain that advertised interest rates may not always be the rate families are awarded after being approved Encourage families to seek application and solicitation disclosures from each lender so they are making accurate comparisons Discuss current lending climate in that it is very difficult for students to borrow private loans without a co-borrower Make parents aware that with some loan products, repayment begins while the student is still enrolled, usually after the last disbursement of that academic year Remind families to start a file or folder and keep copies of all award letters, tuition bills and CERTAINLY promissory notes The financial aid office at the college is a great starting point for searching for lenders and loan products

FAFSA Day Massachusetts Free assistance in completing the FAFSA! Over 25 locations across Massachusetts Sunday, January 26, 2014 at 1:00 p.m. Sunday, February 23, 2014 at 1:oo p.m. Additional dates and all locations listed at fafsaday.org MESSAGE: Families may receive free assistance in completing the FAFSA Sunday, January 26, 2014, 1:00pm AND Sunday, February 23, 2014, 1:00pm. Certain locations may be offering FAFSA Day on different date/time! For additional information and to register, please visit FAFSAday.org Families signed up for MEFA Emails will receive reminders about FAFSA Day FAFSA Day is part of the National College Goal Sunday Program under USA Funds and is a statewide volunteer program that provides free information and assistance to students and families who are applying for financial aid for postsecondary education FAFSA Day Massachusetts brings together financial aid professionals from colleges and universities along with other volunteers to help college-bound students and their families complete the FAFSA. It is currently supported by funding from MEFA, Massachusetts Association of Student Financial Aid Administrators (MASFAA) and American Student Assistance

Continued Spring Guidance After The Acceptance Seminars 25 Locations across MA in late March/April One-on-one guidance Provides key, timely info on: Understanding financial aid award letters College bills and payment plans Loan options (parent and student) Working with the Financial Aid Office Register for MEFA emails to receive location details MESSAGE: After the Acceptance seminars are designed to help families during a critical decision-making period – after receiving award letters and before making a final decision about which college to attend. They offer a financial aid refresher and further details Over 25 regional seminars will be held throughout the state Held in late March & April – after most families have received financial aid award letters Offers financial aid refresher, details about understanding award letters and explains financing options and payment plans Families who sign up for MEFA Emails will receive location information and reminders about the After the Acceptance seminars

You Can Do This What You Can Do Now Research financial aid deadlines & requirements Partner with MEFA: Sign up for MEFA emails Download the College Financing e-book Bookmark mefa.org/seniors You Can Do This MESSAGE: Families should take these actions now to begin the financial aid process. Remind families of the You Can Do This message Let families know that they can read more detailed financial aid info in the College Financing e-book, which they can download on mefa.org/seniors.

Thank You Questions or Comments? Please take a moment to complete the seminar evaluation Presenter: ________________ Ask for any questions Please ask families to complete the seminar evaluation and sign up for MEFA Emails Let them know where to place completed evaluations and collect them before leaving Presenters: please fill in your full name for families to use for the evaluations