Demystifying the Financial Aid Process Seneca HS January 25, 2012 Bob Murray Dean of Enrollment Management Illinois Wesleyan University Dean of Enrollment Management Illinois Wesleyan University

College Cost Facts   Over 66% of college students attend four-year colleges where tuition and fees are less than $15,000.  The average cost (tuition and fees): In-state four-year public college or university is $7,605. Out-of-state four –year public is $19, % receive some aid Total T, R & B, and fees - $16,140 & $28,130  The average cost (tuition and fees) of a four-year private college or university is $27, % receive some aid Total T, R & B, and fees - $36,993

Merit vs Need-based Scholarships typically based on “merit” - - Academic: the more selective = fewer scholarships - Fine arts, athletic, leadership qualities - Awarded by colleges and universities, clubs, organizations, corporations - Requirements for renewal Grants typically based on “need” - - Awarded by state and Federal gov’t - Colleges/universities - Evaluated each year

Principles of Need Analysis 1. To the extent they are able, parents have the primary responsibility to pay for their dependent children’s education. 2. Students also have a responsibility to contribute to their educational costs.. 3. Families should be evaluated in their present financial condition. 4. A family’s ability to pay must be evaluated in an equitable and consistent manner. 5. Does not calculate “ Ability” vs “Willingness” to pay

Financial Aid Terms Free Application for Federal Student Aid (FAFSA) Student Aid Report (SAR) Expected Family Contribution (EFC) Illinois Student Assistance Commission (ISAC) Monetary Award Program (MAP) CSS PROFILE

FAFSA - Used to determine eligibility for state and Federal funds -Can list up to ten* schools – regardless of admission decision - List an Illinois college/university first - File after January 1 st and preferably prior to March 1 st CSS PROFILE - Typically used at private colleges/universities - Used to determine eligibility for institutional funds

quicker response, immediate notification edit checks for incorrect answers Uses “smart logic” to reduce unnecessary questions Spanish version available Recent changes! Parents with 2 or more dependents can have their information “pre-filled” to add’l FAFSA’s FAFSA on the Web

New or recent changes for Must list HS from which student has graduated IRS Data Transfer - only if taxes have been filed Data Retrieval Tool (DRT) – tax returns no longer valid for verification Ready by Feb. 1, 2012 (maybe) Available 2 weeks after electronic filing 6-8 weeks after paper filing Must indicate parent & their PIN Not for parents filing separate, amended tax return or foreign tax return Match identifiers on tax form: name, SSN, DOB, address, tax filing status

Recommendation for filing FAFSA File FAFSA as soon as you can for IL MAP grant consideration. State uses FAFSA submitted date. Use FOTW worksheet to assist with completion. When filing FAFSA, use “will file” instead of “already completed”. Once tax return is submitted, use DRT two weeks after submission to “correct” FAFSA. IRS Data Retrieval Tool – Data Available for Transfer. – Enhanced IRS Data Tracking. – Encouraged Use of the Tool.

PIN info Why have a PIN? A PIN is used for many things. You can do the following with your PIN: Electronically sign a FAFSA. Use “Pre-fill” FAFSA on the Web to submit an application, if you applied last year. “Renewal” term no longer used. Use Corrections on the Web to an existing FAFSA. Status check of your FAFSA and view an electronic copy of your Student Aid Report (SAR). Print a copy of your SAR on-line. “Real time” processing – use immediately – new!

Problematic FAFSA Questions Student’s SSN and formal name must match Dependency Questions Parent’s Marital Status Investment - carefully read what is included and excluded 529’s list as an asset under holder’s name, not beneficiary College Illinois – Parent asset – report refund value Business/Farm – less than 100 employees Taxes Paid not amount withheld Signatures

After FAFSA has been submitted: You will see a Confirmation page. Indicates FM EFC and Pell Grant eligibility You will receive a SAR (Student Aid Report) Electronic version sent w/ valid address Please review carefully Colleges will be sent information All schools listed receive the same information

Things to remember: 1.Each family member enrolled should file a FAFSA. 2.Need to complete forms each year (“Pre-fill” FAFSA after 1st year). 3.Financial aid based on previous year income. 4.Financial aid based on total household income. 5.Use a completed tax return, if possible. Can estimate - tax forms don’t need to be filed. 6.Make copies of all completed forms and worksheets. 7.Forms provide a “snapshot” of financial situation

Determining Financial Need Cost of Education minus Family Contribution =Financial Need

Parent Contribution (From Income + Assets) + Student Contribution (From Income + Assets) = Family Contribution

Determining Family Contribution Family Income (AGI plus Untaxed Income) Family Size Number of Children in College Assets Age of Parents (Student’s Income - Allowances) X 50% = Contribution from Income Student’s Assets X 20% = Contribution from Assets Other…

Dependent students Simplified (assets not considered) Parents had a 2011 AGI of $49,999 or less (for tax filers), or if non-filers, income earned from work in 2011 is $49,999 or less; and either – Parents filed or are eligible to file a 2011 IRS Form 1040A or 1040EZ (or not required to file any income tax return) or – Anyone in the parents’ household size (as defined on the FAFSA) received means tested federal benefits during 2010 or 2011, or – Parent is a dislocated worker. Automatic Zero EFC Parents had a 2011 AGI of $23,000 or less (for tax filers), or if non-filers, income earned from work in 2011 is $23,000 or less; and either – Parents filed or are eligible to file a 2011 IRS Form 1040A or 1040EZ (or not required to file any income tax return) or – Anyone in parents’ household size (as defined on the FAFSA) received means tested federal benefits during 2010 or 2011, or – Parent is a dislocated worker.

Appeals: Professional Judgment - used with factual and verifiable information - Early retirement - Divorce, separation, widowed - Medical expenses not covered by insurance - One-Time taxable income - Elder\ care Parent with whom the student lives files the forms. - child support paid is deducted (Worksheet B)

Institutional Methodology vs Federal Methodology IM Student Contribution FM $ 0Income Protection allowance$3,000 50%Income assessment rates 50% $1,550Minimum Income Contribution $ 0 25%Asset Conversion Rate 20% Parent Contribution 10% Allowance for State and other taxes4% (Ex. - $80,000 - $90,000 income)

Meeting the Need Gift Assistance Employment Loan Assistance -Grant in Aid -Scholarships -State Funds - MAP grant -Federal Funds - Pell, SEOG,TEACH -Stafford Loans -Perkins -Private, PLUS, Home Equity loans -Campus Work Study -Off Campus

Federal Stafford Loan Programs All Direct lending – not through banks Low-interest student loan Must file a FAFSA to access Stafford loans Subsidized Stafford Loan Interest free while the student is enrolled in college Current rate during repayment 6.8%. ( ) Need-based Unsubsidized Stafford Loan Principal is deferred; Interest accrues. Upon completion of school, interest rate is same as the Subsidized interest rates stated above. ( 6.8% while in school) Not based on need

Subsidized vs Unsubsidized Must file a FAFSA to access Stafford loan Financial Need Subsidized = need-based Unsubsidized = not based on need Payment of interest Subsidized- Federal Government pays while student is in college Unsubsidized - interest is accruing

Maximum annual amount of Stafford Loan 1st year$3,500 2nd year$4,500 3rd, 4th & subsequent years$5,500 Recent change – Add’l $2,000 Unsubsidized regardless of need. Repayment begins 6 months after the student graduates or falls below half-time Stafford Loan Limits

PLUS Loan (Parent Loan for Undergraduate Students) Principal and interest are not deferred. Recent Rate 7.9%. Maximum amount is cost of education minus financial aid Be aware (or wary) of PLUS loans being packaged in your proposal Federal Loan Program

Distribution of Loan Debt Among Recipients of Undergraduate Degrees and Certificates, Department of Education data No debt Less than $10,000 $10,000 - $19,999 $20,000 - $29,999 $30,000 - $39,999 $40,000 or more Bachelor's 34%14%19%15%9%10% Associate 52%23%14%6%3%2% Certificate 37%34%21%5%2%1% All undergrads 41%20%18%11%6%

Family Income$45,000 Number in Family 4 Number in College 1 Family Contribution $3,000 A B C Cost of College18,000 30,00045,000 Family Contribution 3,000 3,000 3,000 Demonstrated Need15,000 27,00042,000 Breakdown: Grant 9,500 21,00035,500 Loan 3,500 4,000 4,500 Job 2,000 2,000 2,000 Total Aid15,000 27,00042,000

Breakdown of grant proposal A B C Grant 9,50021,00035,500 Loan 3,500 4,000 4,500 Job 2,000 2,000 2,000 Total Aid15,000 27,00042,000 Grant breakdown of “School C”: Pell grant (federal)$ 3,000 SEOG (federal)$ 1,000 MAP grant (state – if in IL)$ 4,500 University grant (institutional)$ 27,000 Total$ 35,500

Family Income$80,000 Number in Family 4 Number in College 1 Family Contribution$12,000 A B C Cost of College18,000 30,00045,000 Family Contribution12,000 12,00012,000 Demonstrated Need 6,000 18,000 33,000 Breakdown: Grant 0 12,000 26,500 Loan 3,500 4,000 4,500 Job 0 2,000 2,000 Total Aid 3,500 18,000 33,000

Number in College : 1 Family Contribution $12,000 Number in College : 2 Family Contribution $7,000 Family Income$80,000 Number in Family 4

Family Income$80,000 Number in Family 4 Number in College 2 Family Contribution $7,000 A B C Cost of College18,000 30,000 45,000 Family Contribution 7,000 7,000 7,000 Demonstrated Need 11,000 23,000 38,000 Breakdown: Grant 0 17,00031,000 Loan 3,500 4,000 5,000 Job 2,000 2,000 2,000 Total Aid 5,500 23,00038,000

Family Income$110,000 Number in Family 4 Number in College 1 Family Contribution$ 20,000 Family Contribution 20,000 20,000 20,000 Grant ,00019,000 Loan 3,500 (unsub) 3,500 (unsub) 4,000 Demonstrated Need ,000 25,000 Job ,000 Breakdown: Total Aid 3,500 13,500 25,000 A B C Cost of College 18,000 30,000 45,000

Family Income$200,000 Number in Family3 Number in College1 Family Contribution$ 50,000 No Need Opportunities: University Scholarship $14,000 Local Scholarship 2,500 Campus Job 2,000 Unsubsidized Stafford Loan 5,500 Total non-need assistance $24,000 Home Equity Loan+ 6,000 Total assistance $30,000 Out of pocket contribution $10,000 Cost of College $ 40,000

Other thoughts … - Can accept or reject any portion of a FA proposal - Understand scholarship renewal qualifications - Be aware of scams “The scholarship will cost some money.” “The scholarship is guaranteed or your money back.” “You can’t get this information anywhere else.” -Juniors - use calculators on websites, don’t file FAFSA -Use FAFSA4caster site -Net Price Calculators (as of Oct. 29, 2011) - Consider possibility of graduating in 4 vs 5 years

Suggested Websites

Good Luck! Bob Murray Illinois Wesleyan University or