Financial Aid: What You Need to Know

South High SchoolDecember 1, 2015

Sandy SundstromSt. Olaf College

Agenda0 General Overview and Philosophy of Financial Aid0 Family Contribution0 Financial Need0 Types of Financial Aid0 Financial Aid Applications0 Financial Aid Notifications/Award Letters0 Myths and Realities0 Questions

What is Financial Aid?

Financial aid is money (i.e., grants, scholarships, work, loans) provided to

students and their families to help supplement their ability to pay for postsecondary

educational expenses.

Philosophy of Financial Aid

Savings

LoansCurrent Income

• Primary responsibility for postsecondary educational expenses rests with the student and his/her family

• Families with like circumstances will be treated in a similar manner

• Family contribution assumes a contribution from savings, current income, and future income

How is Aid Eligibility Determined?0The Free Application for Federal Student Aid (FAFSA)

Required for federal, state and institutional aid programs

0The CSS/Financial Aid PROFILE

May be required by higher-cost, private colleges to determine eligibility for institutional aid programs

0College supplemental application

May be required

Always check with individual colleges to find out required applications and deadlines!

How is the Family Contribution Calculated?

0 Data from applications is used to determine eligibility for federal, state and institutional aid

0 “EFC” or “Expected Family Contribution” is calculated

Cost of Attendance

Direct Costs

Tuition & Fees

Room & Board* (*if on campus)

Indirect Costs

Books & Supplies

Transportation

Personal Expenses

What is “Financial Need”?

* Family share

Note: This is not the same as the student’s bill or the amount a familywill actually pay for the student to attend college

Total Cost of Attendance

Expected Family

Contribution (EFC)*

Financial Need

Financial Need at Three Schools

School A School B School C

Cost of Attendance $52,000 $26,000 $14,000

(-) EFC $4,000 $2,000 $2,000

Financial Need $48,000 $24,000 $12,000

Types of Financial Aid

0 Grants0Based on financial need

0 Scholarships 0Typically based on merit, academic achievement,

talent, etc.

0Employment (Work-Study)0 Loans0Student loans0Parent loans

Sources of Assistance

Federal Government

• Pell Grant• Supplemental

Grant• TEACH Grant • Perkins Loan• Direct Loan• Submit the FAFSA

State Government

• Submit the FAFSA• Each state has a

different FAFSA submission deadline

• Eligibility criteria is different from state to state

Colleges & Universities

• Scholarships & grants

• Loan programs• Applications• FAFSA• Possibly

additional aid application

Private Organizations

• Community Foundations

• Fortune 500 Companies

• Non-Profit Agencies

• Application requirements vary

Federal Grants

0Federal Pell Grant0Up to $5,775 in 2015-160Need-based, based on EFC and enrollment

0Federal SEOG0Up to $4,0000Undergraduates only0Exceptional financial need0Based on school’s funding level

State Grant Programs0 The Free Application for Federal Student

Aid (FAFSA) is used to apply for most state loan, grant, and scholarship programs, in addition to the federal loans and grants. 0 When you submit the FAFSA to the US

Department of Education, they forward the information on the form to the state student assistance agency.0 MN HS graduates attending a MN college

may be eligible for MN State Grant.

Student Employment/Work-Study

0 Federal Work-Study0 Institutional campus employment0 Some states have work-study0 Typically students work up to 20 hours per

week while enrolled0 Paid hourly, at variable wage rate, around

class schedule

Loans

0 Student or parent debt0 Must be repaid0 Payments can be deferred while enrolled0 Repayment typically 10 years0 Students don’t need to borrow every dollar

in their financial aid package0 Repayment calculator available at www.

finaid.org

Federal Direct Subsidized Loans0Interest subsidized while student is enrolled06 month grace period0$3,500 1st year max0$4,500 2nd year max0$5,500 3rd and 4th year max

2015-2016

Interest Rate 4.29%

Origination Fee 1.068%

Federal Direct Unsubsidized Loans0Not need-based0 Interest NOT subsidized at any time06-month grace period0Between Subsidized and Unsubsidized Federal Direct Loans

students can receive:0$5,500 1st year max0$6,500 2nd year max0$7,500 3rd and 4th year max

2015-2016

Interest Rate 4.29%

Origination Fee 1.068%

Federal Direct PLUS Loans

0Parent loan for a dependent undergraduate0Interest NOT subsidized at any time06.84% fixed interest rate04.272% origination fee0No grace period0Not need-based0Must file FAFSA0Credit worthiness (credit check)

Private/Alternative Loans

0NOT federal loans0Direct from banks, lenders0Based on student’s credit, plus often co-

signer0Higher interest, possible fees0Fewer repayment options0To be used only as last resort

How Much Is Too Much?For the Class of 2014, nationally, 69% borrowed. Of those who

borrowed, average indebtedness was $28,950. (Source: The Project on Student Loan Debt)

Translates into a monthly payment of approximately $320/month for 10 years. (Source: finaid.org)o

One rule of thumb: Student’s total borrowing shouldn’t exceed what he/she expects to make the first year out of school.

This is a family discussion and decision – how much should/can the student borrow, and how much should/can parents borrow?

Institutional Aid

0Many schools have their own funds to award students, including:0 Need-based grants0 Merit-based (non need-based) scholarships (i.e., academic, leadership,

athletics, etc.)0 Student loans0 Employment

0Spectrum – some institutions (very selective) offer no merit and & lots of need-based aid, others (less selective) offer lots of merit aid but very little need-based aid.

0 Institutions vary in ability to meet demonstrated need

Private Scholarships

0Scholarships the student receives from private organizations (high school, church, service organizations, companies, foundations, etc.)0Outside scholarships must be considered as a

financial resource in the aid package0Each school determines their policy

Other Resources

0Designed to help students/families meet their part of educational expenses0Programs0529 Plans0Monthly payment plan0Reciprocity Programs0ROTC0VA benefits

Financial Aid Applications:Used to Determine Your EFC (Expected Family Contribution)

FAFSA On The Webwww.fafsa.gov

FAFSA on the Web

0Never pay a fee to file a FAFSA 02016-2017 FAFSA available January 1, 20160Also Available in Spanish

FAFSA on the Web Worksheet (FOTW)0“Pre-application” worksheet 0Questions follow order of the FAFSA on the Web

www.fafsa.gov

Information Needed for FAFSA

Student and Parent(s)0Prior year federal tax returns, including W-2 form(s)0Driver’s license and Social Security Numbers0Checking, savings, other investment account values0Federal PIN # for electronic signatures (www.pin.ed.gov)

Separated/Divorced Parents0Determine which parent to report

Who is Considered a Parent on FAFSA?

0If your legal parents (biological/adoptive) are married to each other, report information about both of them regardless of whether they are same or opposite sex.

0If your legal parents are not married to each other and live together, report information about both of them regardless of whether they are same or opposite sex.

Who is Considered a Parenton FAFSA? (Continued)

0 If your parents are divorced or separated and don’t live together, answer the questions about the parent with whom you lived more during the past 12 months.0 If that parent has remarried, report information for the stepparent too.

0 If you lived the same amount of time with each divorced or separated parent, report information about the parent who provided more financial support during the past 12 months.

0 If your divorced/separated parents live together, report information about both of them.

0Grandparents, foster parents, legal guardians, aunts and uncles, and other family members ARE NOT considered parents unless they have legally adopted the student.

More detailed information available at: https://studentaid.ed.gov/fafsa/filling-out/parent-info#divorced-separated-living-together

Independent Student Criteria0 At least 24 years old by December 31 of the award year –born

before January 1, 1993.0 Graduate student0 Married0 Has legal dependents who receive more than half of their support from the student0 Is an orphan, in foster care, or ward of the court0 On active duty or veteran of U.S. Armed forces0 Emancipated minor or in legal guardianship as determined by court0 Has been determined to be homeless by an authorized official

Not living with parents or not being claimed by them on tax forms does not automatically make the student an independent student for federal aid purposes.

Put your name and SSN on FAFSA exactly how it appears on your social security card

Refer to completed federal income tax return and consult instructions for proper line references

If entry is zero or none, enter 0--don’t leave blank

Enter school code(s)

Student and one parent must both sign dependent student’s FAFSA

Be careful…

FAFSA data with most impact on EFC calculation

Dependent Student

• Parents’ income (majority of EFC comes from income) and assets

• Household size• Number of dependents attending

college• Student’s income and assets

CSS/Financial Aid PROFILE

0May be required by private, high-cost, selective colleges to award their institutional need-based grant dollars

0Asks for more detailed information than the FAFSA

0May require application information from non-custodial parent too

0Fee is charged ($25 for application and 1 school report; $16 for each additional school). Fee waivers are granted for low-income filers

CSS/Financial Aid PROFILE®

https://student.collegeboard.org/css-financial-aid-profile

To Save or Not to Save

0For parents – value of retirement accounts and primary residence are not included in the federal formula.

0Other assets are protected in part (or full) by Education Savings and Asset Protection Allowance.

0Approximately 12% of parent net worth exceeding the allowance is included in EFC.

0There is no asset protection allowance for student savings – federal formula assesses student assets at 20%.

Special Circumstances

Adjustments may be made on a case-by-case basis for:

Change in employment statusOne-time incomeMedical expenses not covered by

insuranceChange in parents’ marital statusUnusual dependent or elder care

expenses

Net Price Calculator

0Colleges are required to post a net price calculator on their websites 0Net price = cost of attendance less

scholarship/grant aid0Net Price Calculator = ESTIMATE of a

family’s net price based on data students can input into calculator

Review Aid Awards CarefullyCompare:

Costs of Attendance (COA)

Total amount of aid

Types of aid offered

Amount of gift aid (grant/scholarship)

Amount of loan (interest rate, repayment terms, etc.)

Ask Questions:

Is the grant and/or scholarship renewable?

What are the terms for renewing? (GPA, number of credits, course of study, etc.)

Is the amount of work-study realistic?

Will aid change from year to year?

Will aid increase if costs increases?

Financial Aid Notification/Award Letter

0Notifications are sent at different times based upon each school’s admissions cycle

0No set standard0Financial Aid

Notification comparison tools are available

https://bigfuture.collegeboard.org/pay-for-college/financial-aid-awards/compare-aid-calculator

Myths and Realities

“The college with the lowest price tag is the cheapest to attend.”Colleges with the lowest price tags may not be the cheapest,

nor the best option.

“We make too much money to qualify for financial aid.”There is no income cut-off to qualify for federal student aid.

Many factors besides income – from the size of your family and number of siblings in college to the age of the parents – are taken into account. A student’s eligibility is determined by a mathematical formula, not by income alone. Don’t make assumptions – fill out the applications to determine your financial aid eligibility.

Myths and Realities Continued

“We are receiving less (no) financial aid because we have saved.”

Saving for college is always a good idea. Savings could mean fewer loans to repay or more options. A family’s share of college costs is based mostly on income, not assets such as savings.

“We can negotiate a better deal.” Many colleges will be sensitive to a family’s specific

financial situation. But most colleges adhere to specific financial aid award guidelines and will not adjust an award for a family who feels they got a better deal from another school.

2011

Where can I get more information?

U.S. Department of Education: www.studentaid.ed.gov

Minnesota Office of Higher Education: www.ohe.state.mn.us

FinAid! - The Financial Aid Information Page: www.finaid.org

The College Board: www.collegeboard.org

FAFSA (Free Application for Federal Student Aid) – fafsa.gov