Financial Aid 101

F. Duane Quinn Financial Aid Specialist duane201@charter.net

……But Before We Start…. “When we talk about the Financial Aid Process, I really wish I understood How??…... Why??……”

The Higher Education Assistance Act of 1965 The laws which established student financial aid. The law is “Reauthorized” every five years (Sort of!) An opportunity for change and reform

General Categories of Aid Merit Aid: Colleges Community Service Agencies Web Searches Need Based Aid Most College Aid Most Federal /State Aid

General Categories of Aid Non-need based aid PLUS Loans Unsubsidized Loans “Alternative Financing” Parent / Student Alternative loans Tax Credits

Theory (traditional) Parents and students are responsible for financing education costs......… Up to their ability. Financial aid offers “Access and Choice”

Theory (traditional) The student and her family will benefit the most from higher education and should pay for it...… Savings Working Borrowing

Theory (modern) Financial Aid is a tool used to craft and shape the first year class. Governs how institutional funds are disbursed. Federal / state aid follow traditional model.

A Student is “Dependent” until… Age 24 Veteran of armed forces Child whom he/she supports A dependent who lives with student and whom he/she supports Married Student Graduate Student Orphan or “Ward of the Court” Homeless Active Duty National Guard

Eligibility (traditional) Cost less Family contribution = Eligibility for aid

Cost not just tuition Tuition + Room and Board or Commuter expenses + Books and supplies + Transportation expenses + Personal expenses + “Other” special costs

The Family Contribution Not “extra” money. Not “family savings” The ability of both the parents and the student to absorb educational expenses over time. It should represent a true sacrifice on the part of the family.

Hint: Know Your EFC Calculators available: Net Cost Calculator on College web pages Department of Education College Board Mapping Your Future

Different Ways to Apply for Aid Paper FAFSA (Limited distribution) Renewal FAFSA FAFSA on the WEB http://www.fafsa.ed.gov http://www.fafsa.gov

New for current year, “Prior/Prior” In past family reported income from year just ending Often “estimated” tax information, then correct after taxes completed 17 -18 will use tax data from prior year filed taxes FAFSA available October 1: Not January 1 Colleges may alter filing deadlines

Application Process STUDENT COLLEGES SAR Data Matches Fed. Processor IRS Interface College A College B Fed. Processor FAFSA College C STUDENT COLLEGES SAR

The Student Aid Report SAR Acknowledgment of processing Read messages to assure properly processed Review data; Use to correct or update data Add additional Colleges Web file = web SAR; Paper with e-mail = web SAR; Paper without e-mail = paper SAR

CSS PROFILE Supplemental Form Required by some colleges to determine eligibility for college aid Used by some for Early Decision Process

Eligibility Cost less Family contribution = Eligibility for aid

Example of Two Schools cost $ 40,000 - F.C $ 8,000 = need $32,000 COLLEGE “A” cost $ 40,000 - F.C $ 8,000 = need $32,000

Example of Two Schools cost $19,000 -F.C. $ 8,000 =need $ 11,000 COLLEGE “B” cost $19,000 -F.C. $ 8,000 =need $ 11,000

Will Saving Effect My Eligibility for Aid? (federal) Retirement plans are not reportable asset Home equity not a reportable asset (federal) Business with < 100 employees not reportable Parent assets heavily protected for retirement Do NOT save under student’s SSN… 20%

Asset Impact on EFC An example: 4 in the family, 1 child in college: Family A Family B Family C Combined Parent Income $75,000 Combined Parent Assets $0 $150,000 EFC $7,819 $10,208 $14,438 Difference $2,389 $6,619 There is a generous parent asset protection allowance factored into the EFC formula. 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. Parents have to list the 529 assets for ALL children, because the beneficiary (the child) can be changed, so one child could hypothetically end up using all 529 plans In this example: An additional 75K in savings only increases the EFC by $2,389 An additional 150K in savings only increases the EFC by $6,619 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 2016-17 Federal Methodology Based on 2016-17 Federal Methodology: Courtesy of MEFA (Massachusetts Educational Financing Authority)

Income Impact on EFC An example: 4 in the family, 1 child in college: Family A Family B Family C Combined Parent Income $75,000 $100,000 $150,000 Combined Parent Assets $50,000 EFC $8,798 $17,245 $32,803 Difference $8,447 $24,005 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 EFC can change from year to year when income increases due to a raise, etc. In this example: An additional 25K in income increases the EFC by $8,447 An additional 75K in income (from $75,000) increases the EFC by $24,005 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 EFC calculators Numbers were calculated using the U.S. Department of Education’s 2016-17 Federal Methodology Based on 2016-17 Federal Methodology: Courtesy of MEFA (Massachusetts Educational Financing Authority)

So My Kid Is Just Going To Have to Borrow a Lot! Federal limits on student loans for undergraduate dependent students 1st: $5,500. 2nd $6,500 3rd & 4th $7,500. Not to exceed $31,500. (undergraduate dependent)

So My Kid Is Just Going To Have to get a lot of Scholarships! The most competitive colleges do not give “merit” Aid. Private scholarships most often reduce financial aid dollar for dollar (loan first, so it is a good thing!)

The Financial Aid Package GRANTS - “Free money” Never has to be repaid WORK - An opportunity to earn college funds. LOANS - Funds which must be repaid

The Financial Aid Package cost $40,000 $ 8,000. F. C.

The Financial Aid Package cost $40,000 need = $32,000 $ 8,000. F. C.

The Financial Aid Package cost $40,000 grant = $25,000 meet full need $ 3,000 work $4,000 loan $ 8,000. F. C.

The Financial Aid Package cost $40,000 unmet need “GAP” $5,000 grant = $20,000 $3,000 work $4,000 loan $ 8,000. F. C.

Where Ya’ Gonna Surf??? American Student Assistance www.amsa.com Department of Education www.ed.gov/student aid www.fafsa.gov College Board www.collegeboard.com Mapping Your Future www.mapping-your-future.org Financial Aid Information Page www.finaid.org