College Financing Workshop Greg Ball Assistant Vice Chancellor Brandman University Chapman University System
Workshop Agenda • Getting ready – the college calendar • College costs • Debunking college financing myths • Types of financial aid - grants, scholarships, work & loans • The application process - (FAFSA, GPA Verification Form, CSS Financial Aid PROFILE and other forms) • Evaluating Financial Aid Awards • Next steps in the process
The College Calendar Check out the specific deadlines for schools of interest • October - March • IF REQUIRED BY THE SCHOOL, complete the CSS Financial Aid Profile form. (Only required by about 500 schools) • Apply for scholarships • Apply for admission • November – March: Obtain FAFSA-on-the-Web Pre-Application Worksheet (www.fafsa.ed.gov) • December 15: Notification date for early admission at some schools
The College Calendar • January - February: • Submit FAFSA & Cal Grant GPA Verification Form • Check on housing application deadlines • February - April: • Notifications for regular admission followed by financial aid award letters. • Send add’l documents as requested (IRS tax return transcripts and other forms) • Before deciding where to attend, visit the colleges, if possible
The College Calendar • May 1: Send tuition & housing deposits (most 4-year schools) • Summer: • Orientation • Pre-registration • August – September: • Hit the books!
Strategy • Work with Your Guidance Counselor • Stay Organized • Keep a file on each college • Admissions application deadline and required documents, copies and dates of each document submitted and all correspondence • Record of campus visits and telephone conferences • Financial aid application deadline and required documents, copies and dates each document was submitted and all correspondence. • Costs for tuition, fees, residence hall, etc.
Strategy • Stay Organized • Financial Aid File • FAFSA • CSS Profile Form (if required) • Student Aid Report Information Acknowledgement (received after filing FAFSA) • Copies of Tax Returns and W-2s • Copies of corrections
Deadline Dates & Mailing Procedures • Assume deadline date means “received” date - both for electronic and paper submissions • Mail at least one week before the deadline date • Certificate of Mailing ($1.15) is recommended • Do not send “Certified Mail” to a PO Box • If mailing to a PO Box, do not use private overnight delivery services (i.e., FedEx, etc.) as they don’t have access to PO boxes • You may use U.S. Post Office Priority Mail to mail to a PO Box ($4.95 up to 1 lb. 2-3 days or $13.05 for next day (noon) delivery
Common Errors • Failing to submit all required application forms and documents • Missing application deadlines • Submitting incomplete application forms or documents
The Financial Aid Equation Cost of Attendance -Expected Family Contribution (EFC) = Estimated financial need or eligibility for financial aid
The Costs Of Going To College Tuition & Fees Books & Supplies Room & Board Personal Expenses Transportation
How Expensive is it? • College A charges $10,000 • College B charges $20,000 • Which is more expensive? • College A if College B provides $15,000 in scholarships and College A provides no assistance. • What if College B provided no scholarship assistance but provided $15,000 in low interest loans instead?
To assess costs, you need to know: • The Sticker Price • The Amount and type of Financial Aid • Few Families at high cost schools pay the full sticker price.
Theoretical Financial Aid Packages PS 1PS 2INDEP COST: $15,000 $20,000 $38,000 FAMILY CONTRIBUTION:$ 5,000$ 5,000$ 5,000 AID ELIGIBILITY (NEED):$10,000 $15,000 $33,000 AWARDS: GRANT/SCHOLARSHIP: $ 2,500 $ 7,000 $26,500 EMPLOYMENT: $ 3,000 $ 3,000 $ 2,500 LOANS:$ 2,500$ 5,000$ 4,000 TOTAL $ 10,000 $15,000 $33,000
Financial Aid Award Packaging • Availability of funds and institutional policy will influence amount and type of aid offered • Many schools are unable to meet full federal financial aid eligibility (need) due to limited resources • Schools may use different need analysis methodologies to distribute aid • Schools may use the federal need analysis methodology but under-award each student by a fixed amount or by a percentage of eligibility
Possible Financial Aid Packages PS 1PS 2INDEP COST: $15,000 $20,000 $38,000 FAMILY CONTRIBUTION:$ 5,000$ 5,000$ 8,000 AID ELIGIBILITY (NEED):$10,000 $15,000 $30,000 AWARDS: GRANT/SCHOLARSHIP: $ 0 $ 5,000 $23,000 EMPLOYMENT: $ 3,000 $ 3,000 $ 3,000 LOANS:$ 2,625$ 5,000$ 4,000 TOTAL $ 5,625 $ 13,000 $30,000
Reduce Costs By: • Take AP, IB, and CLEP tests and attend a college that accepts the results. • Attend summer school • If attending a different college in the summer, be sure the units will transfer and are applicable to your degree. • Max out on credits each term. • Choose a major early.
Financial Aid Myths • Scholarships will pay our student’s college costs. • Reality: Only 4% of total financial aid is in the form of merit or talent-based scholarships. • Our family makes too much money to qualify for financial aid. • Reality: Many factors beyond annual income are considered in determining a family’s ability to pay for college expenses. These include family size, net value of assets, age of parents, number of children in college, and special circumstances.
Financial Aid Myths • The equity in our home will make our child ineligible for financial aid. • Reality: Federal and state formulae do not consider home equity. Some independent institutions do review home equity but often adjust it relative to family income. Home equity is requested on the CSS Profile Form. • Our other assets will make our child ineligible. • Reality: Parental assets are protected for retirement. Parental assets have no effect on eligibility for 95% of applications. For the remaining five percent, no more than 5.7% of parents’ net assets (savings, investments, equity) are used in determining eligibility for aid. Retirement funds (IRA, 401K, 403b, etc.) are not considered assets (except for CSS Profile Form) but pre-tax amounts contributed in the prior tax year are considered untaxed income.
Financial Aid Myths • I am not an A student or an athlete, so I will not be eligible for financial aid • Reality: Most financial aid is awarded on the basis of the economic situation of the parents and student. There also are funds available to students with special talents. • Financial aid is available only to minorities • Reality: Although a few scholarships are based on race, gender, disability, or other special factors, the overwhelming amount of moneys are awarded on the basis of financial need. Awards based on academic ability, athletic and other special talents, and community service also exceed awards based on minority status. • Loans are not a form of financial aid • Reality: Loans provide cash flow assistance by allowing students to spread the costs of college over a longer period of time. They are subsidized by the federal government.
Financial Aid Myths • Big, prestigious colleges will award more aid • Reality: Every college makes its own decisions about how much aid to offer. Big colleges have big expenses, and some small colleges have large endowments or other financial aid resources. • More non-education debt will get me more financial aid • Reality: Need analysis formulas do not consider consumer or mortgage debt. Families that have borrowed excessively will find paying for college more difficult. Debt is debt, and unwise borrowing is always unwise, especially if the purpose is to get more financial aid.
Financial Aid Myths • I will have to go deeply into debt in order to go to college • Reality: Most students graduate with less debt than the cost of a single year of private school tuition. A good rule of thumb is not to borrow more during college than your expected starting annual salary when you graduate. • We cannot afford the high cost of college • Reality: Only the wealthiest families pay the full cost of college. The highest cost colleges tend to provide the biggest financial aid and scholarship awards. • Student employment hurts grades • Reality: On average, students who work up to 15 hours per week actually get better grades than those who do not work.
Financial Aid Myths • Millions of dollars go unclaimed each year • Reality: The only aid that goes unclaimed is aid that is so restricted that it cannot be claimed. • Colleges cut support during the junior and senior years • Reality: Some college might engage in this practice, but no one has been able reliably to name one. The most common reason for reducing support is a change in eligibility due to an older sibling graduating from college and consequently no longer considered in the eligibility analysis. • My neighbor did not get financial aid, so neither will I • Reality: Your neighbor is not you. He or she may have significantly different financial circumstances than you do, despite outward appearances. Your neighbor’s child may have attended a lower cost school, or your neighbor may want you to think he or she is not receiving support. The only way to learn if you are eligible for financial aid is to apply for it. If you do not apply, you definitely will not receive assistance.
Financial Aid Myths • There is no point in applying for financial aid this year because I was denied assistance last year. • Reality: Eligibility rules for financial aid change each year as do family circumstances. The only way to know if you are eligible is to apply. • I should wait until I have filed tax returns before applying for financial aid. • Reality: Meet the application deadlines! It is easier to complete the FAFSA after tax returns have been completed, but it is far worse to miss a deadline. If you have not completed your tax returns by the application deadlines, estimate as closely as possible the information you report on the FAFSA and provide corrections later if needed.
Financial Aid Myths • Prenuptial agreements and trust funds are good tools for sheltering money from the eligibility analysis • Reality: A prenuptial agreement is between a husband and wife before they are married. It is not binding on a third party, such as the federal government or a college, and cannot be used to change financial aid eligibility rules. Likewise, restrictions established in a trust fund, such as access to income or principal, also have no affect on eligibility. • Applying for financial aid will hurt my chances for admission • Reality: Most colleges practice “aid blind” admission, which means they make admissions decisions without regard to ability to pay. If you are interested in one of the very few schools that does consider financial aid applicants differently from non-applicants, you still should apply. If you need financial aid to attend there and do not apply for it, you will not receive assistance and consequently still will be unable to attend.
Financial Aid Myths • I should wait until I am admitted before applying for financial aid • Reality: Meet the application deadlines! Many application deadlines for financial aid are earlier than the dates the college announces admissions decisions. If you do not meet the financial aid deadline, you may not be awarded some aid because funds will be exhausted by the time you do apply. By meeting the deadline, you will be considered fully for all financial aid funds and will be notified shortly after learning of your admission. • If I win a scholarship, it will reduce my financial aid package • Reality: This might be true to some extent. Federal rules prohibit a student receiving more than needed to attend school. If you have already received all the aid the government calculates you need, additional assistance requires a reduction in previously awarded funds. In most cases, students have not been awarded their full eligibility, and a scholarship is simply added to the amount they are receiving. When aid must be reduced, most colleges reduce loans and employment rather than grants and scholarships.
Financial Aid Myths • I will not qualify for financial aid because I have saved money for college. • Reality: Not as true as it used to be. With passage of the Higher Education Reconciliation Act, the federal government uses only 20% of student assets as part of the family contribution. For instance, if a student has $5,000 in savings, the change to the family contribution would be $1,000: $5,000 X 20% = $1,000. In some special circumstances, student assets are not considered at all. • If my parents do not claim me on their tax return, I will get more aid • Reality: Not true since 1992 and not always true then.
Independent Student Criteria . . . • The student MUST: • be born before January 1, 1990, or • be married, or • have a dependent child and be providing at least 50% support, or • be a Veteran of Armed Services or on active duty for purposes other than training, or • at age 13 or older, be an orphan, foster child, or Ward of the Court, or • be a graduate student, or
Independent Student Criteria Continued… • be an emancipated minor as determined by a court, or • be in legal guardianship as determined by a court, or • be an unaccompanied youth who is homeless as determined by your high school homeless liaison, the director of an emergency shelter program funded by the US Dept. of Housing and Urban Development, or the director of a runaway or homeless youth basic center or transitional learning program, or • special circumstances as determined by the Financial Aid Office • If “dependent,” parental financial information must be included on the FAFSA
Types of Financial Aid • Grants (gift aid based on need) • Scholarships (gift aid based on merit/talent) • Work-Study • Educational Loans (student & parent loans) Depending on circumstances, students may obtain all types of aid (and several different grants, scholarships, loans and work-study)
Need-Based Grants • Federal Pell Grants ($5,550 maximum per year) • Federal Supplemental Educational Opportunity Grant (FSEOG) • $4,000 annual maximum • State Cal Grants (financial need; sophomore and junior years cumulative GPA) • CSUs - full educationally-related, system-wide fees • UCs - full educationally-related, system-wide fees • Independents – up to $9,223 • College Grants • Community College Fee Waiver (BOG) • CSU State Univ Grant (SUG) • UC Grant • Independent college grants
Cal Grants • For California residents attending a California college or university • Cal Grant A Entitlement Awards based on: a financial need of at least $1,500; GPA of at least 3.00 in sophomore-junior years in high school; and family’s total 2012 income and assets are below State ceilings • Cal Grant B awarded to very low-income families with at least a 2.0 GPA and financial need of at least $700 • Cal Grant C for occupational or vocational programs • By March 2, 2013, submit • FAFSA to www.fafsa.ed.gov • Cal Grant GPA Verification Form to the California Student Aid Commission
2 $72,000 $62,000 3 $73,700 $62,000 4 $80,100 $62,000 5 $85,900 $62,000 6 or more $92,600 $62,000 NOTE: 2013-2014 income & asset ceilings subject to change 2012-2013 Cal Grant A Income & Asset Ceilings Source: California Student Aid Commission (CSAC)
Community College Fee Waiver • The California Community College Board of Governors’ Enrollment Fee Waiver (BOG Fee Waiver) waives the California Community College’s enrollment fee for California residents: • who are eligible for need-based financial aid, or • who receive CalWORKs/TANF, SSI, or General Assistance payments, or • whose family income falls below published income ceilings • To learn more about this BOG Fee Waiver, go to www.cccco.edu
Scholarships • Available from colleges, companies, community-based groups and other organizations • Usually require separate applications • May require transcript, essay, interview, or audition • Beware of scholarship search companies that charge a fee • At least once each week, check with the high school guidance office about scholarship opportunities • Make use of freescholarship searches
A Lot Has Been Said About Students And Parents Getting Hooked By Fraudulent Scholarship Scams • Beware false claims! • “Thousands of dollars in scholarships go unclaimed each year” • “Guaranteed or your money back!” • “Give me your credit card or bank account number to hold this scholarship” • “The scholarship will cost some money” • “You’ve been selected. . .” • “You’re a finalist in a contest” (that your child never entered)
Free Scholarship Searches • www.fastweb.com • www.finaid.org • www.collegeboard.com These sites also contain useful financial aid information
This one’s on the level Supported by: U.S. Department of Education Over 1,300 colleges use their logo Check out www.fastweb.comon the Web! • Praised by: LA and NY Times, Business Week, Money Magazine, Kiplinger’s, Wall Street Journal, CNN Financial News, CNBC, MSNBC. . . • Many happy student testimonials
www.fastweb.com • Has over 1,000,000 scholarships in database • These are worth over $3 billion • Each scholarship updated quarterly to maintain accuracy of database • Parent’s page offers unique perspectives from financial aid experts • Supported with an advisory board of educators
Contact data: Name and address of student Demographics: Birth date, gender, race, heritage, religion, marital status, citizenship, disabilities Parent employer, education, and veteran status Education, work and activities: High school and colleges attended, year in school, GPA, SAT/ACT scores, community service and employment history Student sports, hobbies, special talents/skills, and other interests Sample Scholarship Application Questions
Easy to use - just go on the web page using the above URL address Give yourself a password Answer the questions Wait a few minutes for the search to take place Then print out a letter to any sponsor chosen & submit it Follow up with sponsors Features of www.fastweb.com
Additional features: • Go back and visit your mailbox periodically-- fastWEB updates it with new scholarships listings for which you might be eligible • Link with important sources for general financial aid information • Get tips for making a good search • Parents can use parent chat room
Gates Millennium Scholarship • Funded by the Bill and Melinda Gates Foundation • Minimum 3.3 high school GPA • African American, Asian, Hispanic or Native American students who are Federal Pell Grant eligible in their first year of college • Application deadline – January 16, 2013 • Renewable for undergraduate and graduate studies • Maintain minimum cumulative college GPA of 3.0 • Continue to demonstrate financial need • Meet renewal deadlines • Application and more information available at www.gmsp.org
Student Work Earnings • Work-Study - Work program during school year or summer for students with financial need • Regular work earnings during school year • Summer jobs • Studies show that students who work in campus-sponsored jobs earn, on average, better grades than non-working students and are more likely to graduate in four years
Educational Loans: An Investment in the Future • Federal Perkins Loans • Federal Direct Stafford Loan • Federal PLUS (Parental) Loan for Undergraduate Students • Private or Institutional Loans for students and parents • Institutional Monthly Payment Plans • Some families use home equity loan for college • Interest paid on student loans is deductible on federal tax returns for many middle income students and parents
Federal Direct Stafford Loans • Student’s educational loan • From federal government “direct” to school for students • 2 types: subsidized or unsubsidized • Separate application/promissory note required (at least for the 1st year) • Virtually all students (if enrolled half-time in a degree or certificate program and a U.S. citizen or eligible non-citizen) are eligible, regardless of financial need
Subsidized Direct Loans • Need-based • No payments or interest while in school • How much? $3,500 for freshmen; $4,500 for sophomores; $5,500 for juniors and seniors; $8,500 for graduate students • Payments & interest begin 6 months after graduation • Interest rate: 3.4% • Repayment options from 10 to 25 years
Unsubsidized Direct Loans • Eligibility not based on income or need • Interest rate of 6.8% begins when funds are disbursed • Defer interest or pay interest while in school • Maximum amount: $2,000 plus the borrowing maximum for the subsidized Direct Loan if student is ineligible for a subsidized Direct Loan • Additional borrowing - independent undergrads and dependents whose parents are ineligible for PLUS: • $4,000 for freshmen/sophomores; $5,000 for juniors/seniors; grads up to $10,000
Federal PLUS (Parental) Loans • Parents may borrow the total cost of education less any financial aid received (can be used to replace parent and student EFC) • Interest rate: 7.9% • monthly repayment ~ $100 per month for every $10K borrowed • Minimal credit check required • Separate application is necessary (in late spring/early summer) • Interest on loans is income tax deductible for many middle income parents
Net Price Calculator • Federal rules require that most colleges provide “Net Price Calculators” on their websites to give families information about the net cost (tuition minus estimated financial aid) to attend that college. • Limitations • Some schools use sophisticated analysis; others use averages. • Only as good as the information submitted. • Bottom Line: Results may be unreliable.