Go to College Without Going Broke: Managing Student Debt

1. Go To College Without Going Broke

2. Student debt has surpassed $1,000,000,000 (1 trillion) • Costs at 4-year colleges have risen 3 times faster than rate of inflation. • 50 million Americans now hold some kind of student loan…slightly more than the number of people on Medicare and almost as many as receive SSI. How Much Is Too Much? • The federal government suggests that no more than 15 percent of your income should go toward paying off student-loan debt. • Another good rule of thumb—your total undergraduate borrowing should be limited to what you might expect to make your first year after graduation. • Excessive borrowing is the biggest problem facing higher education, and it hurts everyone. For graduates, it means a decade or more of making choices with that debt hanging over their heads, governing the types of careers and jobs to pursue, when to get married, when to buy a house, and when to have kids. • Taken from “College Unbound” by Jeff Selingo

3. How Much Money is Given Annually in Scholarships? • $46 Billion in free scholarship money is awarded each year by the Department of Education and colleges. • $35 million in college scholarships are available through private companies, foundations, and civic groups.

4. DOE & College Philosophy of FinAid • Primary responsibility to pay for college lies with the student and his/her parents. • Any scholarship or grant money available is only to supplement the family’s contribution. • Colleges give out approximately 97% of all free scholarship money. • While much of the focus is on searching for scholarships for college freshmen, keep in mind that there are specific scholarships for college sophomores, juniors, and seniors in certain majors.

5. Who Determines How Much Financial Aid a Student Receives • Colleges make the determination how much financial aid a family will receive. • The college is not required to meet the family’s entire aid eligibility as determined by completing the FAFSA. • After determining what they expect the family to contribute, the college will put together a financial aid package. This package will consist of: • Federal student loans (Stafford/subsidized and unsubsidized) • Work study • Free scholarship money in the form of educational grants (comes mostly from college endowment funds).

6. Typical College Costs • Room and Board (food and housing) • Tuition and Fees • Books and supplies (computer, printer, paper, etc) • Transportation • Personal expenses (miscellaneous items like laundry, toiletries, clothes, etc.) • These expense are called Cost of Attendance (COA)

7. The Starting Point for Financial Aid • The FAFSA (www.fafsa.gov) • What you will need to complete the FAFSA • Social Security Numbers (parents and student) • 2015 Tax forms (If possible, file taxes first. If you have not filed your taxes, you can still see approximately how much aid will be available to the student by using the FAFSA4caster.) • Current bank statements (parents and student) • Savings and investment information • You should fill out the FAFSA even if you think you don’t qualify After submitting the FAFSA you will receive (usually within 24 hours) your Student Aid Report (SAR). Your SAR will include your Expected Family Contribution (EFC). COA – EFC = Need The SAR is sent to the schools on your list. You may be selected for verification. If not, you will receive an award letter from the college after you have been accepted as a student by the college.

8. Special Circumstances • FAFSA Reevaluation The EFC is not always “set in stone.” A Financial Aid Administrator may reevaluate the FAFSA and decrease the EFC if special circumstances are met. • Job loss/salary cut • High medical costs not covered by insurance • Death of a parent • Loss of at least $5,000 in untaxed income • Private school tuition for siblings • Caring for an elderly parent or special-needs child A form must be submitted to the Financial Aid Office for review. This is called a professional judgment review.

9. New FAFSA Beginning Oct. 2016 • You can file your FAFSA as early as October 1, 2016 this year for the 2017-2018 school year. • Students will also be able to electronically retrieve and use tax information from earlier year tax returns rather than wait until tax season to complete the FAFSA. No estimating anymore and refiling. • The DOE has redesigned an interactive Web site called College Scorecard to help families compare graduation rates, financial aid and alumni earningshttps://collegescorecard.ed.gov/ • The new scorecard and FAFSA will give students a better picture of the costs and benefits of a college education. • Starting October 2016, students seeking federal financial aid for the 2017-2018 school year will be able to submit a FAFSA using their parents’ 2015 tax returns, instead of waiting for 2016 tax documents. They will no longer have to estimate family income. Since the information will come directly from the IRS, there will be no need for schools to spend hours verifying the data. • This will give students more time to meet deadlines for early application.

10. Types of Financial Aid • Loans (Stafford, Parent PLUS, Perkins, etc) • Scholarships (may come with requirements) • Grants (requirements-need based) • Federal (Pell Grant, SEOG, etc) • Savings (personal or 529 savings account) • Work (before and during college)

11. Recent Trends in College Aid • Several states have reduced scholarships or toughened eligibility criteria for financial aid. • Eligibility for the maximum Pell Grant has also been tightened. • The number of families applying for financial aid continues to increase every year. • More states each year are making aid available on a first-come, first-served basis. It is important for seniors in high school to file the FAFSA as early as possible. • Because of tightened state budgets it is increasingly important to apply for as many private scholarships as possible. The number of private scholarships is increasing after several years of stagnant growth. College Students Face Stiff Competition for Financial Aid by Sandra Block, USA Today 1/23/2012

12. Federal Grants • Federal Pell Grant • Maximum amount - $609-$5,815 for 2016-2017 school year • Awarded to students with family income of less than $38,000/year with no reportable assets • Does not have to be repaid • Federal Supplemental Educational Opportunity Grant (SEOG) • For undergrads with exceptional financial need • Pell Grant recipients take priority • Funds depend on availability at school • $100-$4,000 • Awarded to students with family income of less than $38,000/year with no reportable assets • Does not have to be repaid • Teacher Education Assistance for College and Higher Education (TEACH Grant) • Grant does not have to be repaid unless you fail to meet obligation • For those students studying to be elementary or secondary teachers • Must sign agreement to teach full-time for 4 years in a high-need field at a low-income elementary or secondary school • Up to $4,000/year ($16,000 max) for undergrads

13. Federal Grants • Iraq and Afghanistan Service Grant • $ Same as Pell Grant • Does not have to be repaid • For students who are not Pell eligible and whose parent/guardian died as a result of military service in Iraq/Afghanistan after Sept. 11, 2001 • Student must be less than 24 years old at time of parent/guardian’s death and enrolled at least part-time in school • Federal Work-Study • Money earned while attending school • Does not have to be repaid • For undergrad and grad students • No annual minimum or maximum amounts • Jobs can be on-campus or off-campus • Federal Academic Competitiveness Grant • Awarded to Pell Grant recipients with a 3.0 GPA on a 4.0 scale in their first 2 years • National SMART Grant • Awarded to Pell Grant recepients in degree programs deemed critical by the DOE who are in their 3rd or 4th years of college

14. Stafford Loans • Federal government loans • Low interest rate • Subsidized (no interest or payment until graduation or out of school 6 months) • 4.29% interest rate (2015-2016). Capped at 8.25% • 5.84% interest rate for grad and professional students. Capped at 9.5% • Each year’s loans will have new rates based on 10-year Treasury rate plus a fixed margin. But each year’s loan rates will be fixed and will not fluctuate. • Unsubsidized (interest accrues upon disbursement; payments start 6 months after graduation) • 4.29% interest rate (same as subsidized) • Fees on Stafford loans are 1.068% • No payments while in school at least half-time • 12 hours or more per semester/full time • 6-8 hours per semester/half-time • Increased borrowing limits - up to $12,500 per year depending on degree status and years in school. Graduate degrees up to $20,500/year • Acceptance not based on credit • Up to $2,500 total in interest on federal and private student loans may be deducted on the borrower’s federal income tax return each year. The deduction occurs as an above-the-line exclusion from income and so may be claimed even if the borrower doesn’t itemize deductions. This reduces the cost of the loan, the equivalent of a small reduction in the interest rate

15. PLUS Loans • Parents of dependent students can take out loans to supplement their children's financial aid packages. The Federal PLUS Loan is a Federal student loan that allows parents to borrow money to cover any costs not already covered by the student's financial aid package, up to the full cost of attendance.Graduate students are also eligible to borrow through the PLUSloan program. • Parents must apply and pass a credit check • Graduate students can apply on their own and must pass a credit check • The yearly limit for the PLUS loan is equal to the cost of attendance minus any other financial aid your child receives. For example, if your cost of attendance is $8,000 and you receive $3,000 in financial aid, you can borrow up to $5,000 with a PLUS loan. • Fixed rate (6.31%/2016-2017) Based on 10-year Treasury plus fixed margin of 4.6%. Capped at 10.5%. Rate changes every year on new loans. Fees 4.272% • 10 years to repay (min. paymt. $50/month; payments start 60 days after disbursement)

16. Perkins Loans • Federal student loan for undergrad and grad students. • Exceptional financial need based on FAFSA • Low interest (5%) • College is the lender (through the financial aid office) and loan is made with government funds • You must repay the loan to your school • $4,000/year undergrad (max. $20,000) • $8,000/year grad or professional (max. $60,000 cumulative) • Subsidized with no loan fees. • 9-month grace period to pay upon graduation. • 10 years to repay (min. payment $40/month).

17. Scholarships • Athletic • Based on talent and GPA • Merit • Based on College Entrance Exams, GPA • Need-based • College specific • Child of alumnus, Christian worker, etc. • Major specific • Engineering, nursing, etc • State specific • Hope, Life, Bright Futures, etc • Miscellaneous • Civic organizations, student/parents’ employer, DAR, etc.)

18. Ways To Reduce College Costs • Control your costs (4 year plan for college) • According to UCLA's Higher Education Research Institute, only 28% of students at public universities graduate in four years. When college classes drag past the traditional eight semesters, debt piles up. • Get a job (on or off campus) • Take college courses while in high school • Many colleges give discounts to high school students • Use credit wisely • More protections in place for students • Be responsible…NOW! • Start showing some restraint on what you buy. Now is the time to start managing your own money

19. Ways To Reduce College Costs • Be realistic about borrowing • Good rule of thumb: Borrow no more than you will typically earn during your initial year in the work force. • Research loans • Don’t sign anything until you understand it. • Max out federal loans first • APPLY FOR ALL THE SCHOLARSHIPS YOU CAN!

20. What You Do Inside and Outside the Classroom Influences Scholarship Money • Scholarship judges want to know that the money they are giving away is going to the kinds of people for whom the money is intended. • The activities you participate in during summer break can indicate to colleges what you’re passionate about. • What you did before entering high school is maybe not as important as your junior or senior year, but your activities can lay a good foundation which scholarship judges notice. • Extracurricular activities-Probably the most important thing next to academic achievement for scholarships

21. Strategies and Tips on College Financing • Go to college despite the job market. • File your FAFSA as quickly as possible. • Choose your major carefully. Very Important! • Meet the deadlines. • Max out federal loans first. • If you have student loan debt after graduation, think seriously about income-based repayment. • Know the loopholes in financial aid and how it affects your EFC. • Consider 529 savings plans • Take accelerated classes. • Check out graduation rates of colleges. IMPORTANT!

22. Searching for Scholarships • Start the search in your own backyard • High school counselor or college financial aid officer • High school websites • Go to local colleges and ask for help finding scholarships • Local businesses • Parents’ employers • Parents’ or grandparents military service • Your (high school student) employer • Parents’ union • Local interest clubs • Church or religious organizations • Local government • Local newspaper • Local civic organizations *Taken from “The Ultimate Scholarship Book”

23. A Few Tips For Scholarship Applications • No scholarship is too small ($250 x 10 adds up!) • Judges who evaluate scholarships know who has put in the time and effort so double-check all your submissions. • Plan ahead. Start your search early (usually sophomore year in HS) because your senior year is going to be a hectic year. • Take good notes when filling out applications. If you hit a roadblock, make a note of what you need and move on. When you have what you need you can come back to it. • DON’T MISS DEADLINES!

24. More Tips for Scholarship Applications • Schedule a time each week to work on scholarship applications. The work will “pay off” if you are determined. If you want financial aid for college in the form of scholarships/grants, it depends on your determination. The difference between the impossible and the possible lies in a person’s determination • Set some measurable and attainable goals in your scholarship search. • Students…do not be afraid to ask for help from your parents, but don’t expect them to do the job for you. It is your education. You will appreciate your college education more when you do your best to help pay for it. • Keep folders (on computer and in file cabinet) for each scholarship application. • Some scholarships should never be passed up.

25. Even More Tips for Scholarships • How many scholarships should I apply for? No set number • Don’t select only a couple and spend all your time on those and don’t apply for 75-100, putting same info on every application. Strike a balance. • Don’t apply for every scholarship. You’re wasting your time. Focus on the ones you have the best chance of winning. • Don’t put all your accomplishments on every app. Be selective. • Look for scholarships with a group of friends (motivation). • Beware of scholarship scams (175,000 reported last year/$22 million)

26. Scholarship/Grant File • 200+ pages of websites, recommended books, articles, tips and hundreds of scholarships to help high school students in their search for financial aid. • Scholarship information specific to states • Instructions on how to apply for Federal aid, scholarships, and grants. FREE! • Send email to ckittrel@bju.edu and ask for scholarship file