1. 2014 WASFAA Conference Reno, Nevada Mike Johnson, Director of Financial Aid, Pacific University

2.  High and increasing cost of college  High and increasing student and parent indebtedness  Lack of transparency in cost and financial aid information  Confusing or incomplete information about true cost and financial aid program details

3.  The Higher Education Act of 1965, as amended – Section 472 defines Cost of Attendance

4.  Only the COA components mentioned in statute may be used:  Tuition and fees, including rental or purchase of equipment and supplies  Books and supplies, transportation, and miscellaneous personal expenses, including the rental or purchase of a computer  Room and board costs, described differently based on students’ dependency status and whether they live with parents

5.  The statute also describes:  How to treat less than half-time and incarcerated students  How correspondence study, instruction through telecommunications, and study abroad are treated  How to include dependent care costs, disability-related costs, cooperative education costs, and loan fees

6.  The modern list of components is:  Tuition and fees  Room and board  Books and supplies  Transportation  Personal and miscellaneous costs

7.  When do you use actual amounts in the COA? Average amounts? How do you calculate averages?  How and when do you present COA information on award notifications and in other communications?  How does the COA at your school affect students’:  “Unmet need”?  Net price?

8.  How do you describe the COA to students and parents? Do you distinguish between direct and indirect costs? How do you determine indirect cost amounts?  What do you say about the price (sticker price and net price) that your school charges? Do you find yourself defending it or apologizing for it?

9.  Need analysis has two parts:  Estimating a student’s costs (COA)  Calculating the Expected Family Contribution (EFC)

10.  Widely used methodologies for determining students’ need have included:  John Monro’s “15% Rule” (1954)  Institutional Methodology (1974)  Congressional Methodology (1986)  Federal Methodology (1992)

11.  Federal Methodology is detailed in Part F of Title IV of the Higher Education Act of 1965, as amended  Updated tables appear each year in the Federal Register  Federal Methodology must be used to determine a student’s eligibility for federal financial aid  Other methodologies can be used to determine a student’s eligibility for institutional aid

12.  Families – as defined by the FAFSA – have the primary responsibility for meeting postsecondary costs  The distribution of financial aid should be based on the family’s ability – not willingness – to pay  Need analysis should provide a “snapshot” of the family’s financial circumstances at the time of application

13.  Regular formula  Parent required to file a 2013 IRS Form 1040, or had 2013 income of $50,000 or more  Includes consideration of assets

14.  Simplified formula  Parent’s household member received a federal means- tested benefit in 2012 or 2013  Parent filed, or was eligible to file, a 1040 A or EZ; or was not required to file a federal income tax return; or is a dislocated worker - and  Parent’s 2013 income was $49,999 or less  Excludes consideration of assets

15.  Automatic zero formula  Parent’s household member received a federal means- tested benefit in 2012 or 2013  Parent filed, or was eligible to file, a 1040 A or EZ; or was not required to file a federal income tax return; or is a dislocated worker - and  Parent’s 2013 income was $24,000 or less  Excludes consideration of income and assets

16.  Income:  Parent and student information are considered  Total income is the sum of taxable income or income earned from work, and untaxed income (including payments to retirement accounts)  Additional Financial Information, which reduces reported income, include education tax credits, child support paid, and taxable income from need-based employment

17.  Income  Allowances against reported income include:  U.S. income tax paid  State and other taxes  Social Security taxes  Income protection allowance  Employment expense allowance

18.  State and other taxes:  Amounts come from tables that consider differences in tax rates in different states for families at different income levels  Amounts range from 1% to 9%

19.  State and other taxes: % of total parent income $0 - $14,999>$14,999Student  Alaska 2% 1% 0%  Arizona 4% 3% 2%  California 8% 7% 5%  Hawaii 4% 3% 3%  Idaho 5% 4% 3%  Nevada 3% 2% 1%  Oregon 7% 6% 5%  Washington 4% 3% 1%

20.  Income protection allowance:  Amounts come from a table that uses Bureau of Labor Statistics (BLS) data for lower budget expenditures, adjusted annually based on the Consumer Price Index (CPI)  Amounts increase for each additional family member, decrease for each additional college student

21.  Income protection allowance*: Household sizeNumber in college 1 2 3 4 2$17,440$14,460 3$21,720$18,750$15,770 4$26,830$23,840$20,870$17,890 5$31,650$28,670$25,700$22,710 6$37,020$34,040$31,070$28,090 * set at $6,260 for dependent students

22.  Employment expense allowance:  Amounts represent additional costs that families incur when two parents, or a single parent, work(s)  Uses 35% of the lower income, or $4,000, whichever is less

23.  Assets  Reported on the FAFSA include:  Current balances of cash, savings, and checking  Net worth of investments, including real estate (excluding retirement accounts and the family’s principle residence)  Net worth of businesses and investment farms (excluding small family owned businesses and family farms)

24.  Assets  Parent contribution from assets:  Education Savings and Asset Protection Allowance subtracted from net worth to determine discretionary net worth  Contribution is 12% of discretionary net worth  Student contribution from assets:  Contribution is 20% of net worth

25.  Education savings and asset protection allowance:  Amounts come from a table that uses the age of the older parent, adjusted for one and two parent households  Assets are increasingly protected as parent age increases

26.  Education savings and asset protection allowance: Allowances Age of older parentTwo-parentsOne-parent 45*$30,700$7,100 46$31,500$7,200 47$32,200$7,400 48$33,000$7,600 49$33,800$7,800 * 45 is the default if no date of birth indicated

27.  The formula’s use of actual, calculated, and assigned numbers make the EFC a financial aid eligibility index rather than an indication of a family’s true ability to pay.  In light of that, how do the following affect a school’s ability to assess a student’s need?

28.  A student who earned $6,200 is treated the same as one who did not work  Basic annual living costs for families of four with one in college are set at just under $27,000 regardless of where they live  Parents are expected to spend no more than $4,000 per year in work-related expenses such as clothing and transportation regardless of where they work

29.  Money saved for retirement is not reported on the FAFSA, yet the effect of reported assets on the parent contribution is reduced as the age of the older parent increases  At the same age of the older parent, two parents have more than four times the asset amount protected that single parents do  How would you explain these aspects of need analysis to families? Would you explain them?

30.  Schools’ awarding policies vary according to a variety of factors, including:  School size  School ownership (public/private)  Fund availability  Program participation  Recruitment goals  Retention strategies

31.  Policy considerations include:  Merit-based vs. need-based aid (level of need met/”gapping”)  Price sensitivity of admit pool/school tolerance for ”discounting”  Enrollment management goals/leveraging  Packaging loans  Continuing students’ aid packages

32.  What level of detail does your school provide concerning its awarding policies? How is that decision made, and who makes it?  What format(s) do you use for award notifications? How do you assess the effectiveness of the format(s)? Do you assess it?

33.  Net price calculators  Required of all colleges that participate in Title IV programs

34.  Financial Aid Shopping Sheet  A “model financial aid letter” that schools are encouraged to use

35.  Explain and show direct and indirect costs  Direct Costs  Tuition and fees$38,510  On-campus housing and meals$11,116  Total direct costs$49,626  Indirect Costs  Books and supplies$ 1,050  Transportation$ 720  Personal$ 900  Total indirect costs$ 2,670  Cost of Attendance $52,296

36.  Separate aid categories in award notifications  Gift aid  Presidential Scholarship$15,000  Federal Pell Grant$ 4,180  Oregon Opportunity Grant$ 2,000  Pacific Grant$11,700  Total gift aid$32,880  Self-Help aid  Federal Work-Study$ 2,000  Federal Direct subsidized loan$ 3,500  Federal Direct unsubsidized loan$ 2,000  Total self-help aid$ 7,500

37.  Provide information about the full cost of borrowing  Average loan debt$29,000  Adjusted loan debt (1.072% fee)$29,314  Monthly repayment (10 years)$ 295  Total repayment (10 years)$35,381  Monthly repayment (20 years)$ 175  Total repayment (20 years)$42,116

38.  Provide estimates of (and justifications for) future cost increases Tuition and feesTotal  First year$38,510$52,296  Second year (4%)$40,050$54,388  Third year (4%)$41,652$56,564  Fourth year (4%)$43,318$58,827

39.  Provide financial literacy information, especially to promote the importance of:  Weekly budgeting  Reducing expenses  Developing savings plans  Borrowing wisely

40.  What concepts do you use to tell students and parents how affordable your school is?  Value of higher education/return on investment  Comparisons with similar schools  Comparisons with regional or national averages  Based on certain metrics

41. Public 4-yearPrivate 4-year Cost of attendance $24,000$52,000 Gift aid $5,000$20,000 Net price - Year 1 $19,000$32,000 Annual increase 7%4% Net price - Year 2 $20,860$34,080 - Year 3 $22,478$36,243 - Year 4 $24,401$38,493 - Year 5 $26,459 --- - Year 6 $28,661 --- Totals $141,679$140,816

42. Cost of obtaining a Bachelor’s degree More than $140,000

43.  College Scorecard  Web tool created to allow easy comparisons between schools based on certain metrics

44.  College Navigator  More robust college comparison tool that uses information from the Integrated Postsecondary Education Data System (IPEDS)

45.  How do you respond when students and parents ask about previous or future price increases?  Cost to the institution of educating students  Comparisons with similar schools’ patterns  Comparisons with regional or national averages  Are you comfortable defending your schools’ decisions in this area?

46.  Thanks for participating  Enjoy the rest of the conference!