Financial Aid Basics for Students and Families Chad Spencer Senior Associate Dean Davidson College Admission and Financial Aid

What will we cover? Applying for Aid Cost of Education Need-Based Aid Merit-Based Aid Packaging/Awarding Additional Information Answer Your Questions

What are the principles and purposes of need-based financial aid? Families have primary responsibility to pay for college Parents and students contribute to the extent they are able Provide students opportunity to attend college based on best fit Provide equity in distributing limited funds

How do students apply for financial aid? FAFSA Free Application for Federal Student Aid www.FAFSA.ed.gov FSA ID IRS Data Retrieval CSS Profile Profile online - CollegeBoard.org At College’s Discretion Tax returns and W-2 forms Non-custodial Parent PROFILE Institutional application Families must reapply annually FAFSA Required by almost every school in the country Required, by law, to be used to determine eligibility for federal aid State funding programs also tend to use the FAFSA Whose financial information? Custodial Household only (parents, or parent/step-parent) When student is US Citizen, and parent/s are not, may file FAFSA When student is undocumented – State and Federal laws disagree [NY – state aid is available – check with college] PROFILE Typically used by schools who are spending significant amounts of their own money for financial aid Makes much better assessment of family’s ability to afford college costs than FAFSA Whose financial information? Biological/adoptive parents Undocumented students? Check with the college or university (Davidson, yes) Other financial information: Tax returns and W-2s Noncustodial Profile – Biological/adoptive parents are responsible for education of child -Are there exceptions? Yes – Davidson asks for an appeal - elsewhere, check with the financial aid office - Business/farm supplement

What is Prior-Prior Year for 2018-19? FAFSA and CSS PROFILE began to use “prior-prior year” (PPY) income data last year For 2018-19, income will be reported from 2016 (the PPY), rather than 2017 (prior year) Allows 2018-19 FAFSA to be available beginning October, 2017 rather than January, 2018 Allows almost universal use of IRS Data Retrieval by all FAFSA filers, with few exceptions

Can an aid applicant apply as self-supporting? Students can apply as self-supporting IF: They’re 24 years of age They’re married They’re pursuing a graduate degree They’re in the Armed Forces or are a veteran They have a child and provide more than 50% support They’re orphaned or are/have been a foster child They’ve been emancipated by a state court They have a court-appointed legal guardian They’re homeless or at risk of being homeless

How is aid eligibility determined? Cost of education - Expected Financial Assistance (outside resources) - Calculated family contribution = Student’s financial need

What is Included in the Cost of Education? Tuition and fees Room and board Books and supplies Transportation Miscellaneous personal expenses Direct Cost of Attendance Consider both 1. direct expenses (billable costs) - like those paid to institution (tuition, fees, room, board) 2. but also allowance for indirect expenses (do not show up on bill) - books, - transportation, - personal expenses Encourage families – when considering and comparing costs – - look at total costs Indirect

Are there other costs that can be considered? Student health insurance Computer (one time) Specialized equipment Supportive needs

What are outside resources? Funds from sources other than the college/university Clubs and civic organizations Churches Employers Foundations Certain types of benefits (e.g., military)

What about outside resources? They CAN replace self-help (loan and work) components of aid award They CAN fill in difference when schools “gap” award They CAN add to a merit-only award Total of merit and outside award can’t exceed total Cost of Education They DO NOT replace the Calculated Family Contribution in a need-based award but may reduce to cost of attendance at some institutions

What is the “family contribution?” A figure derived from the financial data provided on the FAFSA and/or PROFILE Represents the calculated capacity of the family to contribute toward the cost of education Takes into account factors such as income, assets, family size and number of children attending college Annually determined, so can change from year to year as factors change Ranges from zero (no contribution) to $1,000,000 and above (000000 to 999999)

What are the components of the “Expected Family Contribution?” Parent Income Parent Assets Expected Family Contribution Let’s look more closely at each component of the family contribution. Student Income Student Assets

What About 529 Plans? 529 plans (savings or pre-paid tuition) are assets of the plan owner(s). FAFSA: “When the owner is a dependent student…they are reported as an asset of the parent.” PROFILE instruction: If the student has a 529 plan as part of an UGMA or UTMA account, it is a student asset. “When the owner is some other person…distributions from these plans to the student count as untaxed income, as ‘money received.’”

What if the Family has More than One Student Enrolled? Total Parent Contribution Parent Contribution per Student # in college adjustment If the family has more than one student enrolled in undergraduate studies then the parent contribution will split among the students. Total Parent Contribution divided by number in college = PC per student FM formula makes an even per student split, while the IM formula calculates PC based upon a percentage calculation. (60% for 2 enrolled, 45% for 3, 35% for 4 or more) ÷ 1-? =

How is Family Contribution Calculated? Family Contribution (EFC) Parent Contribution Per Student Student Contribution Family Contribution Calculation: To state the obvious, we add… - the calculations of parent contribution from income, - parent contribution from assets, and - student contribution to derive the expected family contribution. NOTE: Many colleges and universities willing to consider special financial circumstances of families (like high medical expenses). However, the family contribution will not be adjusted b/c of expenses that simply are a matter of choice and lifestyle (e.g., credit card debt, car payments). Family w/discretionary consumer debts will be treated the same as family w/o that kind of indebtedness. + =

What about merit-based scholarships? Funds awarded on the basis of factors other than financial need Academic factors Talent factors Service factors (Fill in the blank) factors Procedures for being considered vary Nomination process Scholarship application Admission application

What about athletic scholarships? Awarded by athletics department, not admission/financial aid office Both partial and “full” athletic scholarships can be offered Some schools offer athletics, but not athletic scholarships (D-III)

Questions To Ask About Merit and Athletic Scholarships Is the scholarship renewable? If so, what are the requirements for renewal? Will it affect my need-based aid eligibility? How do merit scholarships affect need-based aid? - depends on the college policy - usually do NOT reduce Expected Family Contribution – that is, they do not reduce what you will pay - at Davidson, scholarships replace jobs first, then replace need-based grants – again, they do not reduce Expected Family Contribution

What are the typical components of a financial aid award/package? Gift Aid Grants (Institutional, Federal, and State) Merit-Based Scholarships Funds not requiring work or repayment Self Help Student Employment Student Loans (at some schools)

How is need met? Sample Aid Packages Davidson Public U. Private U. Cost $66,000 $30,000 $49,000 EFC $15,000 Need $51,000 $34,000 Merit $0 $12,000 Grant $48,900 $9,500 $12,500 Loan $3,500 $5,500 Work Study $2,100 $2,000 Total Aid $32,000 Unmet Need Total Paid $15,000+loan +interest $17,000+loan How do many parents and students view this? - look first at “Cost” (note: EFC is the same at all schools) - then look at “Total aid”, w/o considering costs or components of aid package Preferred way to consider: - When comparing aid with costs, calculate total paid rather than total aid - Consider types of aid in aid package Loans must be repaid Job allocations must be earned Merit-based awards may have requirements for renewal If so, what are they? What happens if student doesn’t meet them? Davidson Trust – we do not package loans as part of our need-based aid packages

How is need met? Sample Aid Packages Davidson Public U. Private U. Cost $66,000 $30,000 $49,000 EFC $15,000 Need $51,000 $34,000 Merit $0 $12,000 Grant $48,900 $9,500 $12,500 Loan $3,500 $5,500 Work Study $2,100 $2,000 Total Aid $32,000 Unmet Need Total Paid $15,000+loan +interest $17,000+loan How do many parents and students view this? - look first at “Cost” (note: EFC is the same at all schools) - then look at “Total aid”, w/o considering costs or components of aid package Preferred way to consider: - When comparing aid with costs, calculate total paid rather than total aid - Consider types of aid in aid package Loans must be repaid Job allocations must be earned Merit-based awards may have requirements for renewal If so, what are they? What happens if student doesn’t meet them? Davidson Trust – we do not package loans as part of our need-based aid packages

How is need met? Sample Aid Packages Davidson Public U. Private U. Cost $66,000 $30,000 $49,000 EFC $15,000 Need $51,000 $34,000 Merit $0 $12,000 Grant $48,900 $9,500 $12,500 Loan $3,500 $5,500 Work Study $2,100 $2,000 Total Aid $32,000 Unmet Need Total Paid $15,000+loan +interest $17,000+loan How do many parents and students view this? - look first at “Cost” (note: EFC is the same at all schools) - then look at “Total aid”, w/o considering costs or components of aid package Preferred way to consider: - When comparing aid with costs, calculate total paid rather than total aid - Consider types of aid in aid package Loans must be repaid Job allocations must be earned Merit-based awards may have requirements for renewal If so, what are they? What happens if student doesn’t meet them? Davidson Trust – we do not package loans as part of our need-based aid packages

How is need met? Sample Aid Packages Davidson Public U. Private U. Cost $66,000 $30,000 $49,000 EFC $15,000 Need $51,000 $34,000 Merit $0 $12,000 Grant $48,900 $9,500 $12,500 Loan $3,500 $5,500 Work Study $2,100 $2,000 Total Aid $32,000 Unmet Need Total Paid $15,000+loan +interest $17,000+loan How do many parents and students view this? - look first at “Cost” (note: EFC is the same at all schools) - then look at “Total aid”, w/o considering costs or components of aid package Preferred way to consider: - When comparing aid with costs, calculate total paid rather than total aid - Consider types of aid in aid package Loans must be repaid Job allocations must be earned Merit-based awards may have requirements for renewal If so, what are they? What happens if student doesn’t meet them? Davidson Trust – we do not package loans as part of our need-based aid packages

How is need met? Sample Aid Packages Davidson Public U. Private U. Cost $66,000 $30,000 $49,000 EFC $15,000 Need $51,000 $34,000 Merit $0 $12,000 Grant $48,900 $9,500 $12,500 Loan $3,500 $5,500 Work Study $2,100 $2,000 Total Aid $32,000 Unmet Need Total Paid $15,000+loan +interest $17,000+loan How do many parents and students view this? - look first at “Cost” (note: EFC is the same at all schools) - then look at “Total aid”, w/o considering costs or components of aid package Preferred way to consider: - When comparing aid with costs, calculate total paid rather than total aid - Consider types of aid in aid package Loans must be repaid Job allocations must be earned Merit-based awards may have requirements for renewal If so, what are they? What happens if student doesn’t meet them? Davidson Trust – we do not package loans as part of our need-based aid packages

How is need met? Sample Aid Packages Davidson Public U. Private U. Cost $66,000 $30,000 $49,000 EFC $15,000 Need $51,000 $34,000 Merit $0 $12,000 Grant $48,900 $9,500 $12,500 Loan $3,500 $5,500 Work Study $2,100 $2,000 Total Aid $32,000 Unmet Need Total Paid $15,000+loan +interest $17,000+loan How do many parents and students view this? - look first at “Cost” (note: EFC is the same at all schools) - then look at “Total aid”, w/o considering costs or components of aid package Preferred way to consider: - When comparing aid with costs, calculate total paid rather than total aid - Consider types of aid in aid package Loans must be repaid Job allocations must be earned Merit-based awards may have requirements for renewal If so, what are they? What happens if student doesn’t meet them? Davidson Trust – we do not package loans as part of our need-based aid packages

College costs do not have to be paid all at once! There are four ways to pay for this investment Saving in advance Paying from current income Borrowing – pay with future income Scholarships and Grants

Paying for College: Saving, Borrowing, Current Income A comparison of the various methods of paying for college. Clearly if one can save in advance, it costs less. Borrowing is the most expensive way to pay for college, and paying out of current income is extremely difficult. Typically families must use a combination of the three methods in order to fund the expense. The above information is based on saving for 12 years prior to the beginning of the first year of college at an interest rate of 4%. Borrowing is through a PLUS loan at 7.9% interest. Paying out of current income occurs for the four years of college. Borrowing instead of saving costs almost $30,000!

What are some payment options? Monthly payment plans Federal Educational Loans Student (Direct Stafford; Perkins) Parents (Direct PLUS) Private Educational Loans

What if my financial circumstances change? Institutions may choose to consider changed family circumstances at different times throughout year or wait until next annual filing Might affect a family’s funding options Might not affect family contribution

Do you have any “consumer tips?” Hire an admission/aid consultant(?) Avoid scholarship programs and search services that charge fees Negotiation? Price matching?

What are other things I should know? Deadlines are important Sticker Price vs. Net Price Net Price Calculators Early Decision Admission—yes/no? Need-blind and need-sensitive May 1: National Candidates Reply Date

What are some on-line resources? School web sites www.davidson.edu Federal government www.StudentAid.gov SmartStudent Guide to Financial Aid www.finaid.org The College Board www.collegeboard.org

Additional Questions. Thank you for coming. Chad Spencer Additional Questions? Thank you for coming! Chad Spencer Senior Associate Dean Davidson College Admission and Financial Aid