financing education beyond high school

National Association of Student Financial Aid Administrators Presents…

© NASFAA 2004

Financing Education Financing Education Beyond Beyond

High SchoolHigh School

2005-06

© NASFAA 2004

Financing Your Education

•How do I apply?

• Where does it come from?

•What aid is available?

•Who is eligible?

•What if financial Aid?

© NASFAA 2004

Agenda

• Definition of financial aid

• Definition of financial need & how it is determined

• Description of major federal financial aid programs

• How to apply for financial aid, including paper FAFSA & how to avoid errors

• Description of other government resources

• Where to look for information about private sources of aid, including how to avoid being scammed

© NASFAA 2004

What is Financial Aid?

• Scholarships

• Grants

• Loans

• Employment opportunities

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Types of Need-Based Aid

• Gift aid: Grants & scholarships (need-based or merit-based)

• Self-help aid: Loans & employment (need- or non-need-based)

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Goals of Financial Aid

• Primary goal is to assist students in paying for college & is achieved by:

-Evaluating family’s ability to pay for educational costs

-Distributing limited resources in an equitable manner

-Providing balance of gift aid & self-help aid

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Definition of Need

Cost of attendance (COA)

Financial need

Expected family contribution (EFC)–

=

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Cost of Attendance

• Tuition & fees

• Room & board

• Books, supplies, transportation, & miscellaneous personal expenses, including documented costs for personal computer

• Loan fees

• Study abroad costs

• Dependent care expenses

• Disability-related expenses

• Cooperative education program costs

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Need Varies Based on Cost

X

Y

Z

Cost of Expected Family NeedAttendance Contribution (Variable) (Variable) (Constant)

1

2

3

EFC EFC

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• To extent they are able, parents have primary responsibility to pay for dependent child’s education

• Students also have responsibility to contribute to educational costs

• Families should be evaluated in their present financial condition

• Family’s estimated ability to pay for educational costs must be evaluated in equitable & consistent manner, recognizing that special circumstances may affect family’s ability to pay

Principles of Need Analysis

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Federal Methodology

Federal Methodology is the formula

created by Congress to determine the expected family

contribution (EFC).

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Independent Student Definition

• At least 24 years old by December 31 of award year covered by FAFSA;

• Graduate or professional student;

• Married;

• Has legal dependents other than a spouse;

• Orphan or ward/dependent of the court;

• Veteran of U.S. Armed Forces; or

• Determined to be “independent” by financial aid administrator

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EFC for Dependent Student

Total income (taxable & untaxed)

– Excludable income (e.g., child support paid)

– Taxes paid (i.e., federal, state, local, Social Security)

– Income protection allowance for basic living expenses (e.g., food, shelter, etc.)

– Employment allowance (if eligible)

1. Determine available parent income:

= Available income (may be negative)

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Cash, savings, & checking accounts+ Adjusted farm/business net worth (value minus

debt, adjusted to protect earning capacity)+ Investment/real estate net worth (excluding home)– Education savings & asset protection

allowance (determined by age of older parent)x Asset conversion rate (12%)

2. Determine available parental assets:

= Parental contribution from assets

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Available income

+ Contribution from assets

= Adjusted available income (AAI)

x Assessment rate

= Total parent contribution

÷ Number attending college (excluding parents)

= Parental contribution for student

3. Determine portion of available parental income & assets for education:

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Total income (i.e., taxable & untaxed)

– Excludable income

– Taxes paid (i.e., federal, state, local, & Social Security)

– Income protection allowance

– Parent’s adjusted available income if < $0

4. Determine student contribution:

= Student’s available income

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Student’s available income

x 50% assessment rate

= Income contribution from student

+ 35% of the student’s net asset worth

4. Determine student contribution:

= Student contribution

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Parental contribution from income & assets (as adjusted, if more than 1 household member in college)

+ Student contribution from available income & assets

= EFC

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EFC for Independent Student

•No parental contribution Independent with dependents

-Student contribution similar to calculation for parent of dependent student-Variable percentage of available income-12% of net assets after protection allowance

•Independent with no dependents

-50% of available income-35% of net assets after protection allowance

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Federal Pell Grant

• Awarded to eligible undergraduates pursuing first bachelor’s or professional degree & certain students enrolled in post-baccalaureate teacher certification or licensing programs

• Portable

• Actual award amount based on COA, EFC, & enrollment status

• Maximum award for 2004-05 = $4,050

© NASFAA 2004

Federal Supplemental Educational Opportunity Grant (FSEOG)

•Eligible students-Undergraduates pursuing first baccalaureate or professional degree-Awarded first to students with exceptional financial need (i.e., students with lowest EFCs at that school)-Priority to Federal Pell Grant recipients

•Annual award amounts-$100 minimum-$4,000 maximum

© NASFAA 2004

Federal Work-Study (FWS)

•Undergraduate and graduate students are eligible•Employment may be on or off campus•Eligible employers

-School-Federal, state, or local public agency-Private nonprofit organization-Private for-profit organization

•Schools must use portion of FWS funds for community service employment activities

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Federal Perkins Loan

•Eligible students-Undergraduate and graduate students-Priority to students who show “exceptional need,” as defined by school

•Maximum annual loan-$4,000—undergraduate students-$6,000—graduate & professional students

•Loan amount varies

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Federal Perkins Loan

• Interest rate: 5%

• 9-month grace period

• Repayment period may be up to 10 years

• Deferment & cancellation provisions available

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Stafford Loans

• Available under: – Federal Family Education Loan (FFEL)

Program with funds provided by lenders(e.g., banks or credit unions)

– Federal Direct Student Loan (Direct Loan) Program with funds provided directly by federal government via participating schools

• School determines loan eligibility & delivers loan proceeds to students

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Stafford Loans

• Subsidized: Must demonstrate “need”

• Unsubsidized: Need is not considered

• Base annual loan limits (combined subsidized & unsubsidized):

– $2,625 for 1st year undergraduates

– $3,500 for 2nd year undergraduates

– $5,500 for each remaining undergraduate year

– $8,500 for each year of graduate/professional study

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Stafford Loans

• Additional unsubsidized loan eligibility for independent undergraduate, graduate, & dependent students whose parents are unable to borrow PLUS:

– $4,000 per year for first & second years of undergraduate study

– $5,000 per year for remaining years of undergraduate study

– $10,000 per year for graduate & professional students

© NASFAA 2004

Stafford Loans: Costs of Borrowing

• Variable interest rate, capped at 8.25%

– Interest rate for 7/1/2004 – 6/30/2005 is:

• 2.77% in school, grace, & deferment periods

• 3.37% during repayment

• Loan fees based on principal amount of each loan:

– FFEL: Up to 3% origination fee and 1% insurance premium

– Direct Loan: Up to 4% loan fee

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Stafford Loans: Repayment

• 6-month grace period

• Maximum repayment period between 10 & 30 years depending on repayment plan chosen

• Deferment & cancellation provisions available

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PLUS

• Parent loan program for parents of dependent undergraduate students

• Annual loan limit: COA minus other aid• Variable interest rate, not to exceed 9%

– Interest rate for 7/1/2004 – 6/30/2005 is 4.17%• Loan fees based on principal amount of each

loan:– FFEL: Up to 3% origination fee & 1% insurance

premium– Direct Loan: 4% loan fee

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PLUS

• Repayment begins 60 days after loan is fully disbursed

• Only principal may be deferred under certain conditions; interest may be capitalized

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General Student Eligibility Criteria

• Must be enrolled or accepted for enrollment in eligible program of study

• Must be pursuing degree, certificate, or other recognized credential

• Must be U.S. citizen or eligible noncitizen• Must be registered with Selective Service

(if male & required)• May not have eligibility suspended or

terminated due to drug-related conviction

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General Student Eligibility Criteria

• Must have valid Social Security Number

• May not be in default on federal student loan

• Must not owe overpayment of federal grant

or loan• Must be making satisfactory academic

progress (as defined by school)

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Role of Financial Aid Office

• Determines aid eligibility using federal formula• Packages aid depending on availability of funds• Sends award notification including:

– Student’s COA– Student’s EFC– Amount of student’s financial need– Award amount for each program for which student

is eligible– Disbursement methods & time frames– Terms & conditions of each award

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Application Process

• Submit Free Application for Federal Student Aid (FAFSA) prior to school’s deadline

• Most aid on “first-come, first-served” basis

• To ensure maximum consideration for federal, state, & institutional aid, check information from each school to determine:

– Required application materials

– Application deadlines

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FAFSA

• Collects family’s personal & financial information used to calculate student’s EFC

• May file FAFSA in one of two ways:

– Electronically via FAFSA on the Web

– Paper FAFSA

© NASFAA 2004

FAFSA on the Web

• Web site: www.fafsa.ed.gov

• 2005-06 FAFSA available on or after January 1, 2005

• Pre-Application Worksheet & built-in edits to help prevent costly errors

© NASFAA 2004

PIN Registration

• Web site: www.pin.ed.gov

• Not required, but speeds processing

• May be used throughout aid process

• Can get PIN before January 1, 2005

© NASFAA 2004

Paper FAFSA

2005-06 FAFSA is 8-page booklet containing:

• General & specific instructions

• 103 questions in 7 steps• Worksheets A, B, & C• Pre-addressed envelope

to mail completed form & return-receipt postcard

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FAFSA: Step One

• Name & address • SSN & date of birth• Telephone number• Driver’s license &

state• E-mail address

General student information:

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FAFSA: Step One

• Citizenship• Marital status• State & date of legal

residence• Selective Service• Degree type• Grade level

General student information (Questions 14 – 24):

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FAFSA: Step One

• High school diploma

• First bachelor’s degree

• Self-help preferences

• Parent(s) educational background

• Drug conviction

General student information (Questions 25 – 31):

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FAFSA: Step Two

• Student’s (& spouse’s, if married) income & asset information

• Questions 32 – 34:– Student (& spouse, if married) 2004 IRS income tax

return status & type

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FAFSA: Step Two

Questions 35 – 42:

• Student (& spouse, if married) 2004 income & wages

• Worksheets A & B – 2004 untaxed income

• Worksheet C – 2004 income excluded from EFC calculation

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FAFSA: Step Two

Questions 43 – 47:• Total cash, savings, & checking• Net worth of investments• Net worth of businesses & investment farms• Monthly amount & number of months student is receiving

veteran’s educational benefits

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FAFSA: Step Three

Student’s dependency status questions:• If all “no” responses, student is dependent• If “yes” to any question, student is independent

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FAFSA: Step Four

• Financial & household data for parents of dependent students

• Questions 55 – 64:– Marital status– SSNs, last names, first initials, & dates of birth

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FAFSA: Step Four

Questions 65 – 69 for parents’:• Household size• Number in college• State & date of legal residency

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FAFSA: Step Four

Questions 70 – 77 for parents’ 2004:• Federal tax return filing status• Taxable income & wages

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FAFSA: Step Four

Questions 78 – 80 for parents’ 2004:• Untaxed income (Worksheets A & B) • Income excluded from EFC calculation

(Worksheet C)

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FAFSA: Step Four

Questions 81 – 83 for parents’:• Total cash, savings, & checking accounts• Net worth of investments• Net worth of businesses & investment farms

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FAFSA: Step Five

Questions 84 – 85:• Independent student’s & spouse’s (if married)

household size & number in college

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FAFSA: Step Six

Questions 86 – 98:• Federal school

code for each school

• Housing plans for each school

• Enrollment status

List of up to 6 schools to receive FAFSA datawww.fafsa.ed.gov/fotw0405/fslookup.htm

© NASFAA 2004

FAFSA: Step Seven

• Signatures– Student– Parent– Preparer

Signatures & Certifications (Questions 99 – 103):

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CAUTION!

• Avoid being charged a fee to file the Free Application for Federal Student Aid– Processes of completing & processing

FAFSA are FREE– If filing via FAFSA on the Web, be sure to go

directly to www.fafsa.ed.gov– Contact financial aid office for help

completing FAFSA

© NASFAA 2004

Avoid ERRORS!

Errors on the FAFSA or supplemental forms may DELAY application processing & result in the LOSS of financial aid funds.

Please read the instructions & complete all forms carefully!

© NASFAA 2004

Frequent FAFSA Errors

• Parent & student Social Security Numbers

• Divorced/remarried parental information

• Income earned by parents/stepparents

• Untaxed income

• U.S. income taxes paid

• Household size

• Number of household members in college

• Real estate & investment net worth

© NASFAA 2004

FAFSA Processing Results

• Central Processing System (CPS) notifies student of FAFSA processing results by:

– Paper Student Aid Report (SAR) if paper FAFSA was filed & student’s e-mail address was not provided

– SAR Information Acknowledgement if filed via FAFSA on the Web & student’s e-mail address was not provided

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FAFSA Processing Results

• CPS notifies student of FAFSA processing results by:

– E-mail notification containing direct link to student’s on-line SAR if student’s e-mail was provided on paper FAFSA or FAFSA on the Web

• Student with PIN can view on-line SAR at www.fafsa.ed.gov/studentaccess.htm

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Corrections

• If necessary, corrections to FAFSA data may be made: – On paper SAR;– Using Corrections on the Web

(www.fafsa.ed.gov/studentaccess.htm) if student has PIN; or

– By school’s financial aid office

• SAR Information Acknowledgement cannot be used to make corrections

© NASFAA 2004

Where Do I Go From Here?

• Obtain & review admissions & financial aid materials from each school to which you are applying

• Meet all application deadlines

– Complete FAFSA & any other application materials, such as College Scholarship Service’s PROFILE application, required by school or state agency

• Investigate other sources of aid

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Leveraging Educational Assistance Partnership Program

• Federal funds matched by state funds to establish or expand state scholarship, grant, & work programs

• Some states use unique names for LEAP grants

• Students apply to state agency or through school

• Award amounts may vary by state

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Robert C. Byrd Honors Scholarship Program

• Federally-funded, merit-based program administered by states

• Recognizes & promotes student excellence & achievement

• States establish selection criteria & select recipients

• Recipients may receive up to $1,500 a year, for up to 4 years of undergraduate assistance

© NASFAA 2004

Other Government Resources

• Corporation for National & Community Service (AmeriCorps) – http://www.americorps.gov

• Veteran’s benefits – http://www.gibill.va.gov

• ROTC scholarships or stipends

• Bureau of Indian Affairs (BIA) Grants

• State Divisions of Vocational Rehabilitation

• Health & Human Services (HHS) Bureau of Health Professions – www.bhpr.hrsa.gov/dsa

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Other Sources of Funds

• State grants, scholarships, loans, & work programs

• School need-based & non-need-based programs

– Academic, athletic, & other talent-based scholarships & grants

• Private business scholarships

• Civic organization scholarships

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Avoid Being Scammed

• To check legitimacy of scholarship search services or individuals, for information about financial aid scams, & tips to avoid being scammed visit these Web sites:– Better Business Bureau: http://www.bbb.com

– U.S. Department of Education: http://studentaid.ed.gov/students/publications/lsa/index.html

– Federal Trade Commission: www.ftc.gov/bcp/conline/publs/alerts/ouchart.htm

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Private Scholarship Search

• Free Internet scholarship search engines:– FinAid.org – http://www.finaid.org– The College Board –

http://www.collegeboard.com– FastWeb.com – www.fastweb.com– Scholarship Resource Network Express –

www.srnexpress.com– GoCollege.com: The Collegiate Websource –

http://www.gocollege.com

© NASFAA 2004

Private Scholarship Search

• Local library resources

• Local businesses & civic organizations

• Parents’ employers

financing education beyond high school

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