Paying for Postsecondary Education Financial Aid 101 Paying for Postsecondary Education

Know where the money comes from and how you apply for it Things to take away… Know where the money comes from and how you apply for it File the FAFSA Know your DEADLINES Be a Smart Consumer

What is Financial Aid? Financial aid consists of funds provided to students and families to help pay for postsecondary educational expenses

Basic Principles Joint responsibility of the student and parent(s) to pay, to the extent possible Need-based financial aid subjected to federal formula to determine financial need Not all families qualify for need-based aid. There is no guarantee that you will get any free money to pay for higher education

Types of Financial Aid Gift Aid – FREE MONEY Self Help Aid Grants and scholarships Self Help Aid Loans and work programs Merit-Based Aid based on - academic ability, special talent or achievement, program of study, family or ethnic background Need-based grants, loans, and employment usually based on - income, assets, other factors

Where does the money come from? Federal Government State Government School/Colleges Private Scholarship Sources: HS Counselors Clubs and organizations Employers Internet scholarship searches

Federal, State and College Financial Aid Programs

Federal Direct Stafford Loan Program Borrowing Limits

Additional eligibility

Federal Direct PLUS Loan For parents of dependent students or graduate level students There is no borrowing limit on the PLUS Loan May borrow up to full cost of education minus financial aid Credit check is required on this loan, but no debt-to-income test 4% origination fee will be deducted from disbursements

Federal Direct PLUS Loan Repayment begins immediately, but can defer repayment until 6 months after student graduates or drops below half-time enrollment. If defer payment – encouraged to make interest payments All loans must be repaid within 10 years PLUS loan Interest rate = 7.9% $10,000 = $125/mo; $40,000 = 500/mo; 2 or 3 kids???

Alternative/Private Education Loans Student borrows in his or her own name Based on credit scoring and debt-to-income ratio Repayment may be deferred until education completed Fees, interest rates, loan amounts, and repayment provisions vary by lender and are generally higher than federal student loans Co-signers usually required. Some loan products have a co-signer release option Compare loans before making choice and read the fine print!

Financial Aid 101 College Fund FORMS

The Free Application for Federal Student Aid (FAFSA) The FAFSA (Free Application for Federal Student Aid) is a federal form used to determine student eligibility for the following: Federal programs, such as Pell Grants, work-study, and student loans State programs, such as Pennsylvania State Grant, and other special programs School programs, such as need-based grants and scholarships

Applying for Financial Aid Know what financial aid forms are required: FAFSA (Free Application for Federal Student Aid) – federal aid, PA State Grant, college aid, and private scholarships State Grant Form (SGF) required for first year students (and may be requested for subsequent years) CSS Profile required by some postsecondary schools and scholarship organizations Institutional financial aid forms

Know Your Deadlines!!!!! Know all of your state and school/college deadlines and file the FAFSA by the earliest deadline. Federal Deadline - end of the award year - for 2013-2014, this would be June 30, 2014 PA State Grant deadlines – May 1, 2013 - First Time and Renewal Applicants that plan to enroll in a degree program or a college transferable program at a junior college or other college or university August 1, 2013 - First Time applicants that plan to enroll in a community college; a business, trade, or technical school; a hospital school of nursing; or a 2-year program that is not transferable to another institution Know School Deadlines

Free Application for Federal Student Aid (FAFSA) Complete the FAFSA as soon as possible after January 1 of the year for which the student is seeking financial aid. Two ways to complete the FAFSA: Online at www.fafsa.gov (highly recommended) - safe, secure, fast, skip logic, built-in edits - complete FAFSA on the Web Worksheet - print the confirmation page when finished Paper FAFSA – call 1-800-433-3243

www.FAFSA.GOV New FAFSA Entry Renewal Application Entry FAFSA Corrections Providing Signatures Continuing a Saved FAFSA Viewing Transaction History

Apply for PA State Grant from FAFSA Confirmation Page

Who is independent? 24 or older on Jan 1st of award year (January 1, 1990) Veteran (includes active duty personnel) Working on graduate level degree Emancipated minor in legal guardianship Orphan, in foster care, or ward of the court at anytime when student was age 13 or older Have legal dependents other than spouse Student deemed homeless by proper authority

Special Circumstances Recent death or disability Reduced income Loss of employment Recent Separation or Divorce Contact the school and ask for a special consideration AND Contact State Grant Division at PHEAA

Financial Aid Forms are Filed – What’s Next?

Determining need-based eligibility Student submits FAFSA Family undergoes need analysis Expected Family Contribution (EFC) is determined based on: - Parent income and assets - Student income and assets - Family size - Number of children in college - Age of the older parent This is NOT the amount you will pay each year!

How will you cover the cost?? In most cases, you WILL have to pay for educational expenses. This is your ACTUAL family contribution, or AFC. You have three ways to cover your share: Yesterday’s money SAVINGS – have you been able to save? Today’s money INCOME – is anything left at the end of the month? Tomorrow’s money LOANS – how much can you afford to borrow?

What happens next? Student Aid Report or Acknowledgment sent to student (review and make necessary corrections) Information is sent to PHEAA. Student must complete State Grant Form (SGF). Can link to this directly from the FAFSA. Account Access (PHEAA) - create an account at www.pheaa.org to view PA State Grant Information is sent to schools/colleges. Send to all schools being considered.

Calculating Financial Need Schools/colleges receive financial aid information and calculate financial need School cost……………………. $26,000 EFC…………………………….. - 3,000 Financial need………………… $23,000 Financial Aid Office (FAO) “packages” student based on financial need and available funding (varies from school to school). Financial aid award letter sent to student.

Packaging Example Free Money $ 6,000 $ 8,000 $18,000 Cost $15,000 $25,000 $45,000 EFC $ 3,000 $ 3,000 $ 3,000 Need $12,000 $22,000 $42,000 Free Money $ 6,000 $ 8,000 $18,000 Loans $ 5,500 $ 7,000 $ 8,000 Work $ 0 $ 2,000 $ 3,000 Total Aid $11,500 $17,000 $29,000 Gap (Cost – Aid) $ 3,500 $ 8,000 $16,000 Actual Cont. (Cost – Free Money) $ 9,000 $ 14,000 $24,000

Financial Aid Award Letter Is official notification from school about financial aid, terms, and conditions. Lists the type and amount of each award to be received Describes what must be done to accept or reject any award. Discloses students rights, responsibilities, and academic requirements.

How to Cover the Actual Family Contribution Savings – Family 529 Plans – Family Scholarships – Various Sources Grants – Federal and State Tuition Payment Plans – School Federal Student Loans – Department of Education Institutional Loans – School Private Education Loans – Bank Home Equity Loans – Bank

Financial 101 Tips and Strategies

Reduce the Need for Financial Aid Graduate on Time 4 year for Bachelors Degree / 2 year Associates Degree Research and find the right school and major Minimize transfer and change of major Earn college credits while in high school through AP courses, Vo-Tech, and dual enrollment Consider options for cutting costs (commute, take summer classes, buy used books, make smart meal plan choices 2 + 2 Strategy (2 years at a Community College then transfer credits to a 4 year school) 3 + 2 (Master’s Degree)

Beware of the 5 Year Plan! Things like double majors, study abroad, internships, and athletics can enhance the educational experience and improve marketability. But it comes at a price: Total cost just increased by 25%. The fifth year likely costs 20% more than the 1st year did. Loss of institutional funds if they only allow for four years. Loss of PA State Grant if all four years have been received. Reduction in student borrowing capacity if maximum loans received in the first four years (only $4,000 left). Talk it over and plan ahead!

Reduce the Impact of Borrowing Don’t borrow more than you need Maximize Federal loans vs. Private loans Don’t borrow more to get your degree than you plan on making the very first year after graduation Utilize institutional or private payment plans – monthly payments, little or no interest

Be a Smart Consumer Do your Research… What is the Net Price that you will pay? Use the Net Price Calculator at schools student is interested in attending to get an estimate of your “net price” to attend. Net Price calculator available on each school’s website. What is the graduation rate? What is the average debt of graduates? What is the repayment rate and default rate of the school’s borrowers? What is the employment outcome for recent graduates? In accordance with the Higher Education Opportunity Act of 2008 (HEOA), by October 29, 2011, each postsecondary institution that participates in Title IV federal student aid programs must post a net price calculator on its website that uses institutional data to provide estimated net price information to current and prospective students and their families based on a student’s individual circumstances. This calculator should allow students to calculate an estimated net price of attendance at an institution (defined as cost (price) of attendance minus grant and scholarship aid) based on what similar students paid in a previous year. The net price calculator is required for all Title IV institutions that enroll full-time, first-time degree- or certificate-seeking undergraduate students. Institutions may meet this requirement by using the U.S. Department of Education’s Net Price Calculator template or by developing their own customized calculator that includes, at a minimum, the same elements as the Department’s template. Shopping Sheet: The Department of Education partnered with the Consumer Financial Protection Bureau to develop the Financial Aid Shopping Sheet to promote transparency in student financial disclosures. The Shopping Sheet is designed to help students better understand the amount of grants and scholarships they would receive from a given institution, and the amount of loans an institution recommends a student take out to cover out-of-pocket costs. While the Shopping Sheet isn’t mandatory, the Department of Education requests that schools adopt this format to deliver financial aid offer information to students beginning with the 2013-14 year.

Financial Aid 101 Final Thoughts

Carol Handlan PHEAA chandlan@pheaa.org 717-514-9038 Presenter Contact Information Carol Handlan PHEAA chandlan@pheaa.org 717-514-9038