Financing Education Beyond High School

1. Financing Education Beyond High School 2003-2004

2. Agenda • Definition of financial aid • Definition of financial need and how it is determined • Description of the major federal financial aid programs • How to apply for financial aid, including 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

3. What is Financial Aid? • Scholarships • Grants • Loans • Employment opportunities

4. Types of Need-Based Aid • Gift aid: Grants and scholarships • Self-help aid: Loans and employment

5. Goal of Financial Aid • Primary goal is to assist students in paying for college and is achieved by: • Evaluating family’s ability to pay for educational costs • Distributing limited resources in an equitable manner • Providing a balance of gift aid and self-help aid

6. Definition of Need Cost of Attendance (COA) – Expected Family Contribution (EFC) = Financial Need

7. Cost of Attendance • Tuition and fees • Room and board • Books and supplies, equipment, transportation, and miscellaneous personal expenses • Loan fees • Study abroad costs • Dependent care expenses • Expenses related to a disability • Expenses for cooperative education program

8. Need Varies Based on Cost

9. Principles of Need Analysis • To the extent they are able, parents have primary responsibility to pay for their dependent children’s education • Students also have a responsibility to contribute to their educational costs • Families should be evaluated in their present financial condition • A family’s ability to pay for educational costs must be evaluated in an equitable and consistent manner, recognizing that special circumstances can and do affect its ability to pay

10. Federal Methodology Federal Methodology is the formula created by Congress to determine the Expected Family Contribution (EFC).

11. Independent Student Definition • At least 24 years old by December 31st of the award year covered by the FAFSA; • Graduate or professional student; • Married; • Has legal dependents other than a spouse; • Orphan or ward of the court; • Veteran of the U.S. Armed Forces; or • Determined to be independent by the financial aid administrator

12. EFC for Dependent Student 1. Determine available parent income: Total income (taxable and untaxed) – Excludable income (e.g., child support paid) – Taxes paid (federal, state, local, Social Security) – Income protection allowance for basic living expenses (food, shelter, etc.) – Employment allowance (if eligible) = Available income (may be negative)

13. EFC for Dependent Student 2. Determine available parental assets: Cash, savings, checking accounts + Adjusted farm/business net worth (value minus debt, adjusted to protect earning capacity) + Investment/real estate equity (excluding home) – Education savings and asset protection allowance (amount determined by age of older parent) x Asset conversion rate (12%) = Contribution from assets

14. EFC for Dependent Student • Determine portion of available parental income and assets for education: Available income + Contribution from assets = Adjusted available income (AAI) x Assessment rate = Total parent contribution ÷ Number attending college (excluding parents) = Parental contribution for student

15. EFC for Dependent Student 4. Determine student contribution: Total income (taxable and untaxed) – Excludable income – Taxes paid (federal, state, local, Social Security) – Income protection allowance – Parent’s adjusted available income if < 0 = Student’s available Income

16. EFC for Dependent Student 4. Determine student contribution: (continued) Student’s available Income x 50% assessment rate = Income contribution from student + 35% of the student’s net assets = Student contribution

17. EFC for Dependent Student Parent contribution from income and assets (as adjusted if more than one household member in college) + Student contribution from available income and assets = EFC

18. 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

19. Federal Pell Grant • Awarded to eligible undergraduates pursuing first bachelor’s or professional degree and certain students enrolled in post-baccalaureate teacher certification or licensing programs • Portable • Actual award amount based on Cost of Attendance, Expected Family Contribution (EFC), and enrollment status

20. Federal Supplemental Educational Opportunity Grant (FSEOG) • Eligible students • Undergraduates pursuing first bachelor’s or professional degree • Awarded first to students with exceptional financial need (i.e., students with the lowest EFCs at that school) • Priority to Federal Pell Grant recipients • Annual award amounts • $100 minimum • $4,000 maximum

21. Federal Work-Study • Undergraduate or graduate students are eligible • Employment may be on or off campus • Eligible employers • School • Federal, state, or local public agency • Private non-profit organization • For-profit organization • Schools must use portion of FWS funds for community service activities

22. Federal Perkins Loan • Eligible students • Undergraduate or graduate students • Priority to students who show exceptional need • Loan amount varies • Maximum annual loan • $4,000 undergraduate students • $6,000 graduate and professional degree students

23. Federal Perkins Loan • Interest rate: 5% • Nine-month grace period • Repayment period may be up to10 years • Deferment and cancellation provisions available

24. Stafford Loans • Available under: • Federal Family Education Loan Program (FFEL Program) with funds provided by lender (e.g., bank or credit union) • William D. Ford Federal Direct Loan Program (Direct Loan Program) with funds provided directly by the federal government • School determines loan eligibility and delivers loan proceeds to the student

25. Stafford Loans (Subsidized and Unsubsidized) • Subsidized Stafford: Must demonstrate “need” • Unsubsidized Stafford: Need is not a consideration • Base annual loan limits (combined subsidized and 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

26. Additional Eligibility for Unsubsidized Stafford Loan • Additional unsubsidized loan eligibility for independent undergraduates, graduate students, and dependent students whose parents are unable to borrow under the PLUS Program: • $4,000 per year for first and second years of undergraduate study • $5,000 per year for remaining years of undergraduate study • $10,000 per year for graduate and professional students

27. Costs of Borrowing Stafford Loans • Variable interest rate, capped at 8.25% • Interest rate for 7/1/2002 – 6/30/2003 is 3.46% • Loan fees based on principal amount of each loan: • FFEL Program: 1% insurance premium and up to 3% origination fee • Direct Loan Program: Up to 4% loan fee

28. Repayment of Stafford Loans • Six-month grace period • Maximum repayment period between 10 and 20 years depending on repayment plan chosen • Deferment and cancellation provisions available

29. PLUS Loans • Borrowers are parents of dependent undergraduate students • Annual loan limit: cost of attendance minus other aid • Variable interest rate, not to exceed 9% • Interest rate for 7/1/2002 – 6/30/2003 is 4.86% • Loan fees based on principal amount of each loan: • FFEL Program: 1% insurance premium and 3% origination fee • Direct Loan Program: 4% loan fee

30. PLUS Loans • Repayment begins 60 days after loan is fully disbursed • Deferment provisions; only principal is deferred, but interest may be capitalized

31. General Eligibility Requirements • Must be enrolled or accepted for enrollment in an eligible program of study • Must be pursuing a degree, certificate, or other recognized credential • Must be a U.S. citizen or eligible noncitizen • Must be registered with Selective Service (if male and required to be) • May not have eligibility suspended or terminated due to a drug-related conviction

32. General Eligibility Requirements • Must have a valid Social Security Number • May not be in default on a federal student loan • May not owe repayment of a federal grant • Must be making satisfactory academic progress as defined by the school

33. Role of the Financial Aid Office • Determines eligibility for financial aid • Packages aid • Sends an award notification which includes: • Student’s cost of attendance • Student’s EFC • Amount of student’s financial need • Programs and amount from each program for which the student is eligible • How and when aid will be disbursed • Terms and conditions of student’s award

34. Application Process • Submit the Free Application for Federal Student Aid (FAFSA) prior to your school’s deadline • To ensure maximum consideration for federal, state, and institutional aid, check information from each school to determine: • Required application materials • Application deadlines

35. Free Application for Federal Student Aid (FAFSA) • Collects family’s personal and financial information used to calculate the student’s EFC • May file the FAFSA in one of two ways • Paper FAFSA • FAFSA on the Web at www.fafsa.ed.gov

36. Paper FAFSA

37. FAFSA on the Web: www.fafsa.ed.gov

38. To Register for a PIN: www.pin.ed.gov

39. CAUTION! • Avoid being charged a fee to file the FAFSA • Processes of completing and processing the FAFSA are FREE • If filing FAFSA on the Web, make sure you go directly to: www.fafsa.ed.gov • Contact the financial aid office if you need help in completing the FAFSA

40. Avoid ERRORS! Errors made in completing the FAFSA and/or supplemental forms may delay application processing and result in the loss of financial aid funds. Please complete all forms carefully!

41. Frequent FAFSA Errors • Divorced/remarried parent information • Income earned by parents/stepparents • Untaxed income • U.S. income taxes paid • Household size • Number in postsecondary education • Real estate and investment net worth

42. FAFSA Processing Results • CPS notifies the student of the FAFSA’s processing results by: • Paper Student Aid Report (SAR) if paper FAFSA filed and student’s e-mail address was not provided • SAR Acknowledgement if filed via FAFSA on the Web and student’s e-mail address was not provided

43. FAFSA Processing Results • CPS notifies the student of the FAFSA’s processing results by: • E-mail notification containing a direct link to student’s SAR online if student’s e-mail provided on paper FAFSA or FAFSA on the Web • If student has a PIN, can view SAR online at www.fafsa.ed.gov/studentaccess.htm

44. Corrections • If a correction to applicant data is needed, correction may be made: • On the paper SAR; • Using Corrections on the Web if student has a PIN; or • By the school • SAR Acknowledgement cannot be used to make corrections

45. Where Do I Go From Here? • Obtain and review admission and financial aid materials from each school to which you are applying • Meet all application deadlines • Complete FAFSA and any other application materials required by the school or your state agency • Investigate other sources of aid

46. Leveraging Educational Assistance Partnership Program • Federal allocation matched by state funds to establish or expand state scholarship, grant, and loan programs • Some states use unique names for state grants • Students apply to state agency or through school • $5,000 maximum annual award permitted for full-time study, but states may set lower annual maximum

47. Robert C. Byrd Honors Scholarship Program • Federally-funded, merit-based program administered by states • Recognizes and promotes student excellence and achievement • States establish selection criteria and select recipients • Recipients may receive up to $1,500 a year, for up to 4 years of undergraduate assistance

48. Other Government Resources • Corporation for National and Community Service • Veterans Benefits • ROTC Scholarships and/or stipends • Bureau of Indian Affairs (BIA) Grants • State Divisions of Vocational Rehabilitation • Health and Human Services Loan and Scholarship Programs

49. Other Sources of Funds • State grants, scholarships, loans, and work programs • School need-based and non-need based programs • Academic, athletic, and other talent-based scholarships and grants • Private business scholarships • Civic organization scholarships

50. Avoid Being Scammed • For information about financial aid scams and tips to avoid being scammed check: • Department of Education’s web site at: www.ed.gov/prog_info/SFA/LSA • Federal Trade Commission’s web site at: www.ftc.gov/bcp/conline/publs/alerts/ouchart.htm • To check the legitimacy of scholarship search organizations or individuals check Better Business Bureau’s web site at: • http://search.bbb.org/search.html