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College financial aid what's new what's changing

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What's new and changing in the world of financial aid in 2009. ( Presentation does not reflect changes under HCERA (Enactment of the Student Aid Provisions of the Health Care and …

What's new and changing in the world of financial aid in 2009. ( Presentation does not reflect changes under HCERA (Enactment of the Student Aid Provisions of the Health Care and Education
Reconciliation Act of 2010), such as the change from FFELP to Direct Lending.)


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  • How many of us offer financial aid services as part of their consulting practice? How many of us in here are already familiar with how the Federal methodology works?
  • Changes regularly –with each election. The recent Reathorization Act changed quite a number of things Parents= OUR CLIENTS Where does fin aid come from? Federal Gov, State Gov, college itself from funds, endowments or from simply discounting the tuition. What aid is available? Who is eligible? Students apply via the FAFSA-
  • 2009 The bill includes a $500 increase in the maximum Pell Grant (discretionary funding) for 2009-10, a $700 increase in the Hope Scholarship tax credit from $1,800 to $2,500 for 2009 and 2010 (along with partial 40%/$1,000 refundability, an increase from 2 years to 4 years and expanded income phaseouts), $200 million in additional Federal Work-Study funding and $200 million in AmeriCorps funding. 2008 Congress finally reauthorized the Higher Education Act of 1965 after more than a dozen extension acts. The Higher Education Opportunity Act of 2008 (PL 110-315) added numerous new disclosure requirements including the Student Loan Sunshine Act. Veterans' education benefits will no longer be treated as a resource starting in 2010-11 , new up-front loan forgiveness programs , requires education lenders to report repayment status information to all national consumer credit reporting agencies, authorizes a simplified EZ FAFSA form, requires standardization of the financial aid award letter, and softens the 90/10 rule Congress passed the Ensuring Continued Access to Student Loans Act of 2008 (P.L. 110-227), known as ECASLA, to help avert a crisis in the FFEL program. This legislation allows the US Department of Education to buy unemcumbered Stafford and PLUS loans originated from 10/1/03 to 9/30/09. The legislation also increased the annual and aggregate loan limits on the unsubsidized Stafford loan for undergraduate students and allows parents to defer repayment on the Parent PLUS loan while the student is in school and for six months afterward. Congress also passed the Ensuring Continued Access to Student Loans Act Extension (P.L. 110-350) to extend ECASLA to the 2009-10 academic year.
  • How do “they”calculate what they think the family can pay? IM – Mr. David Gelinas Aid Leveraging: Mike Davila Mike- please cover issue of how institution needs to meet its institutional goals via- coming up with creative ways to make their financial aid dollars go farther – aid going from need to merit. Cyndy –PJ= individualized process of allocating aid funds.
  • 5 Although the COA varies by school and student, theoretically, the EFC, or the amount a family must pay for educational expenses, remains constant no matter which school the student decides to attend. Thus, a student’s “need” for assistance will vary because costs vary. This is a very important concept, and one our clients need to keep in mind when deciding which school to attend. Students must be sure to have realistic expectations about their family’s ability to manage educational costs not only for the first year, but for all the years of college and beyond. Sandy Baum: “Higher education is not unique in selling the same product to different consumers at different prices”. the implications of this pricing policy in general, shows the issues that finaid professionals are grappling with. College pricing and financial aid policy decisions, and strengthen the arguments of those committed to the equitable and efficient allocation of student aid. Some more general economic concepts: opportunity has a cost. The concept of opportunity cost, for example, is one that even students who are not drawn into an economic mode of reasoning find staying with them as a useful way of thinking about daily life. Opportunity cost refers to the idea that any choice we make involves a sacrifice,
  • What objective ways do we have of looking at FAIRNESS? (complex and subjective idea). Economists divide the concept of equity or fairness into two basic categories: Horizontal equity refers to the equal treatment of people in similar situations. Vertical equity refers to involves treating people in different circumstances in appropriately different ways . –Often may involved PJ- and Cyndy will talk about PJ later. What’s a good example of examining the complexity of horizontal and vertical equity? What do we all do each year by April 15? Horizontal equity requires that people with the same amount of income pay the same amount of tax. Should households with equal incomes pay equal taxes? Is a couple where the husband earns 80K a year and the wife stays at home the same as the couple where each spouse earns $40K a year? The need analysis system (FM & IM) faces these types of situations and complications relating to horizontal equity. Opportunity cost refers to the idea that any choice we make involves a sacrifice, a foregone opportunity. The cost of attending college is not just the tuition, but also includes the wages foregone by students who choose to postpone entry into the labor market.
  • Standard economic concept of price discrimination. Higher Ed is not unique in selling the same product to different consumers @different prices. Equitable allocation of student aid is not an easy thing. Opportunity costs: loss of wages As a family is evaluated through the FM a family’s final cost for college differs. This is not a transparent process, and families don’t know the final cost until April or May. What’s not changing on College campuses around the country, is ongoing debate about whether net price differentials should be based on ability to pay (need), on merit, or on willingness to pay. Look at net price: Full pay students may pay less because of a merit schol=tuition discount – even though he could well afford to pay the entire bill. Should a very good student who’s worked really hard and done well pay as much as the one who are coasted by, but got in because his parents can pay the full price?
  • What The Gov has in mind for standard of living is very different than what a family may have in mind for itself. Formula looks at the family’s ability to absorb debt over the long range – how far away are parents from retirement? Treatment of multiple children in college: Parental contribution from income and assets (as adjusted, if more than one household member in college)
  • EFCs are only rough estimates, the bare minimum (It’s not truly what families will pay) Why is it only a minimum? Because the colleges are leveraging aid, doing hybrid work between need & merit
  • ACG= Academic Competitiveness Grant – for those who qualify for PELL Student HAS to be eligible for PELL in order to receive consideration for the other grants. As you will see, it’s very, very difficult to qualify for Pell. This single mom with 4 kids makes $45 a year and her daughter does not qualify for Pell. IF they qualify for -subsidized school lunch – then they are likely to qualify for PELL. Any amount of aid that will leverage the institutional interest and make the student enroll. From the student perspective, students who are neediest are most susceptible to these recruitment practices.
  • Family values relative to money and education
  • Transcript

    • 1. C. Claire Law, M.S. Certified Educational Planner www.eduave.com Financial Aid What’s New, What’s Changing
    • 2. Helping IECA Consultants help their client families
      • Financial Aid: Past Present Future
      • Federal Methodology & Economics
      • How to Incorporate Financial Aid Services into Your Practice (forms)
      IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 3. Present and Future
      • 2010 HCERA Enactment of the Student Aid Provisions of the Health Care and Education Reconciliation Act of 2010 (change from FFELP to Direct Lending)
      • 2009 - The American Recovery and Reinvestment Act of 2009 was passed by the House and Senate on February 13, largely along party lines.
      • The Higher Education Opportunity Act of 2008
      • Congress passed the Ensuring Continued Access to Student Loans Act of 2008 to help avert a crisis in the FFEL program.
      • 2005 Higher Education Reconciliation Act of 2005 (HERA 2005) cuts $12.7 billion from student aid: switches Stafford and PLUS interest rates to fixed rates
      IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 4. Federal Financial Aid: The Past
      • Senator Pell
      • Pres Ronald Reagan – “loans are financial aid”
      • Reauthorization – every 4 yrs
      • Until 1988 colleges could choose IM/FM – before UF
      • Obama 2010 – HCERA – Feds lend directly to students through Stafford loan and sometimes Perkins, to parents through the PLUS loan. Loan rates are fixed. Aggregate amounts increase for Stafford.
      IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 5.
      • To extent they are able, parents have primary responsibility to pay for dependent child’s education
      • Students have a responsibility to contribute to educational costs
      • Families should be evaluated in their present financial condition
      • Family’s estimated ability to pay educational costs must be evaluated in equitable manner.
      Principles of Needs Analysis* *from NAFSAA-National Association for Student Financial Aid Administrators IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 6. 2 methodologies / myriad packages
      • Federal Methodology (FM)-
      • Institutional Methodology (
      • Enrollment Management – the college perspective
      • When Professional Judgment?
      IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 7. Definition of Need*
      • Cost of attendance (COA)
      • – Expected family contribution (EFC)
      • = Need
      • * from NAFSAA-National Association for Student Financial Aid Administrators
      IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 8. Need Varies Based on Cost* *from NAFSAA-National Association for Student Financial Aid Administrators IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 9. Basic Economic Principles*
      • Looking at FAIRNESS
      • Horizontal equity: the equal treatment of people in similar situations.
      • Vertical equity: treating people in different circumstances in appropriately different ways .
      • ongoing debate about whether net price differentials should be based on ability to pay (need), on merit, or on willingness to pay.
      • Opportunity Cost (Source: Sandy Baum: Primer for Financial Aid Administrators) The College Board
      IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 10. IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing DIFFERENT PRICES FOR DIFFERENT PEOPLE (Horizontal & Vertical Equity) Sandy Baum’s Chart
    • 11. Need Analysis Methodology
      • Defining necessities
      • Snapshot versus long-term fin capacity
      • Defining living standards
      • Treatment of multiple children in college
      • Defining income
      • Whose income is relevant?
      IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 12. Need Analysis Methodology
      • Allowances against income
      • Income protection allowance
      • Taxes paid
      • Employment allowance annual education savings allowance & other allowances against income
      IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 13. Federal Methodology* *from NAFSAA-National Association for Student Financial Aid Administrators
      • Federal Methodology is a formula created by Congress to determine the EFC.
      • EFC calculators:
      • http://www.finaid.org/calculators
      • www.collegeboard.com/parents/
      IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 14. What is Federal Financial Aid?
      • Self-Help : Loans : Stafford (sub & unsub), PLUS, Perkins, Alternative (Major component of financial aid packages)
      • Gifts: Grants: Pell , SEOG (need-based), SMART & ACG (merit-based)
      • Self-help employment : Federal Work Study (FAFSA form is required)
      IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 15. Parents need the facts
      • What are the family’s values?
      • Where does the family fit in within the financial aid formulas?
      • Where does the students fit in within the academic applicant pool?
      • What is their actual ability to pay? Their actual EFC?
      IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 16. Role of Educational Consultant who offers financial aid advising
      • Ideally, helps families understand their cost of college in Junior year.
      • Still based on college list, that has colleges that benefit their child academically, socially, affordable over the four years.
      • Be clear with families about what you as a consultant can/cannot do for them
      IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing
    • 17. Avoid this unhappy ending IECA Fall Conference Charlotte November 2009 Financial Aid: What's New & What's Changing