College Affordability and Access: Strategies for College Savings and Making Higher Education Affordable

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Presented by American Student Assistance and MEFA at the 6th annual NPEA conference on April 24-25, 2014 in Minneapolis, MN.

Presented by American Student Assistance and MEFA at the 6th annual NPEA conference on April 24-25, 2014 in Minneapolis, MN.

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  • 1. 1 Celebrating 30 years of Excellence Planning, Saving & Paying for College Financial Aid Trends and Regulatory Updates NPEA Conference April 2014
  • 2. 2 •  Massachusetts Educational Financing Authority •  Not-for-profit state authority that works to make higher education more accessible and affordable •  Created in 1982 by the State Legislature •  Helping families: o  Plan: Extensive community outreach o  Save: U.Fund® and U.Plan® college savings plans o  Pay: Affordable fixed interest rate college loans for over 30 years Facts About MEFA
  • 3. 3 •  Private non-profit organization based in Boston, MA •  Public purpose mission = empower students to successfully manage and repay their college loan debt •  Provides student loan education and advocacy •  Develops financial competencies through innovative web-based tools and trusted, neutral advice •  All free of charge to students and alumni Facts About ASA
  • 4. 4 •  President is concerned about accountability and student debt •  Federal Government is concerned about transparency •  Families are concerned about costs •  Institutions are concerned about helping students enroll and complete and funding levels Current Climate
  • 5. 5 •  Paying for Performance –  College rating system determining aid funding –  Aid to students based on student performance •  Promoting Innovation and Competition –  Encourage online courses & innovative learning •  Ensuring that Student Debt Remains Affordable –  Cap repayment at 10% of monthly income –  Outreach A Better Bargain for the Middle Class: Making College More Affordable
  • 6. 6 •  Grants vs. Loans •  Federal Methodology – FAFSA •  Independent Student/Dependency Overrides •  Citizen/Eligible-Non Citizen •  Verification – IRS Data Retrieval How Does The Government Define Affordability?
  • 7. 7 Overview of Financial Aid Undergraduate Student Aid 2011-12 ($185.1 Billion) Source: The College Board, Trends in Student Aid 2012
  • 8. 8 •  Student is the borrower – no credit check •  Annual limits: $5,500 for freshman year •  Fixed interest rate changes annually: 3.86% for 2013-14 •  Two types: –  Subsidized – Interest accrues after graduation –  Unsubsidized – Interest accrues immediately •  1.072% fee deducted from loan amount •  Promissory Note & Entrance Counseling: StudentLoans.gov •  No payments while in school •  Several repayment options: StudentAid.gov Federal Direct Student Loans
  • 9. 9 •  Free Application for Federal Student Aid (FAFSA) –  Required by all colleges for federal and MA state aid –  Open January 1st: FAFSA.gov –  Must sign with a PIN: PIN.ed.gov –  IRS Data Retrieval Tool – available February 1st –  Requires data from all parents who live together, married or not The FAFSA Must be completed every year!
  • 10. 10 •  Auto Zero EFC income cutoff remains $24,000 or less •  Skip logic •  Defining Parents: –  All parents who live together, married or not –  Same-sex parents –  No noncustodial parents •  The PIN –  Requires a SSN – parents without should sign the signature page •  IRS Data Retrieval – available Feb 2nd FAFSA: Reminders & Updates New!
  • 11. 11 Federally Independent Students •  24 or older •  Married •  Graduate Student •  Active duty in U.S. Armed Forces •  Veteran of U.S. Armed Forces •  Provide more than half of support for children or dependents •  In foster care any time after age 13 or parents are deceased •  Emancipated minor •  In legal guardianship •  Homeless, risk of being homeless, or unaccompanied youth •  No Parent Information Collected •  Criteria:
  • 12. 12 Dependency Overrides Students who do not qualify: • Parents refuse to financially contribute or provide data • Parents do not claim the student as a tax dependent • Student demonstrates total self-sufficiency Students who may qualify: • Abusive household • Abandonment • Incarceration or institutionalization of both parents • Parents lacking the physical or mental capacity to raise the child • Parents’ whereabouts unknown • Parents’ extended hospitalization
  • 13. 13 Dependency Overrides Students should submit to each school: •  A letter of explanation •  Relevant documentation (court, medical, police, financial) •  At least one third-party letter from non-family member: member of clergy, lawyer, social worker, etc.
  • 14. 14 •  U.S. nationals •  U.S. permanent residents with Form I-551, I-151, or I-551C •  Those with Arrival-Departure Record (I-94) from U.S. Citizen and Immigration Services (USCIS) showing Refugee, Asylum Granted, Cuban- Haitian Entrant (Status Pending), Conditional Entrant (if issued before April 1, 1980), or Parolee (paroled at least one year and intending to become a U.S. citizen or permanent resident). •  Those who hold a T-visa or have parents with a T-1 visa. •  Any “battered immigrant-qualified alien” or a child of such a person under the Violence Against Women Act. •  Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau. Eligible Non-Citizens
  • 15. 15 Verification •  Colleges verify accuracy of FAFSA data •  Students selected by Department of Education •  In 2013-14, of 18.8million FAFSAs, 5.7million were selected •  Customized •  Additional documentation collected •  New in 2013-14: High school completion Identity/statement of educational purpose •  New in 2014-15: Removed SNAP-only group Household Resources: if insufficient income reported for family size
  • 16. 16 Verification Acceptable Documentation •  Tax return items: −  IRS Data Retrieval Tool (unchanged data) −  IRS Tax Return Transcript via Get Transcript −  Provides immediate PDF of tax return transcript −  Paper tax returns only accepted for amended, foreign, identity theft victims, and authentication difficulties •  All other items: –  Verification Worksheet provided by the institution –  Possible additional documentation •  Free tax prep for low-income families: irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers New!
  • 17. 17 IRS Data Retrieval Tool •  9 million folks used it in 2012-13 •  When can it NOT be used: – Married individuals who file married filing separately or head of household tax returns – Change in the marital status after the end of tax year – Amended Tax Returns – Foreign Tax Returns (even if U.S. return is also filed) – Filers with Tax ID Number (TIN) – FAFSA and tax return address do not match
  • 18. 18 •  Institutional Methodology – CSS PROFILE •  Professional Judgment •  Need-Based Aid •  Merit-Based Aid How Do Colleges Define Affordability?
  • 19. 19 Cost of Attendance (COA) – Expected Family Contribution (EFC) = Financial Aid Eligibility Financial Aid Formula Colleges fill in Financial Aid Eligibility with financial aid from multiple sources
  • 20. 20 •  CSS/Financial Aid PROFILE® –  Some colleges require for institutional aid –  $25 for 1st school, $16 for each additional –  Online application required: CollegeBoard.org –  Noncustodial Parent PROFILE required when applicable •  College Financial Aid Application –  Required by some colleges –  Usually part of the admissions packet Other Financial Aid Applications Don’t wait until you’re accepted to apply!
  • 21. 21 CSS/Financial Aid PROFILE •  For institutional aid •  More detailed questions: o  untaxed income, home, expenses, household, special •  Customized based on registration & college selection •  Noncustodial PROFILE & waivers •  Updates sent to colleges on paper •  PROFILE FAQs and Glossary •  Customer Service: o  305-829-9793 o  help@cssprofile.org MEFA PROFILE webinar on Trainings & Events page
  • 22. 22 PROFILE Participating Institutions and Programs
  • 23. 23 •  $25 first school, $16 each additional •  Fee waivers –  Automatically granted based on family finances –  For first-time, undergraduate applicants –  Parents must live in the U.S. and not be self-employed –  Automatic for orphans & wards of the court –  Covers up to 8 institutions •  Fee Payment Codes –  Purchased by colleges and organizations for students –  Each pays for one college –  Limit of 16 per year PROFILE Costs
  • 24. 24 Changes in circumstance, special situations not already reported, and requests for additional funds (appeals) should be submitted to the Financial Aid Office to include: •  Letter of explanation •  Documentation (bills, financial statements, medical records, layoff notices, final paystubs) •  Summary of current financial plan Special Circumstances/Appeals
  • 25. 25 •  Awarded based on family’s financial eligibility as determined by standardized formula •  Includes grants, loans and/or work-study •  Most federal, state and institutional aid is awarded based on financial eligibility Need-Based Aid
  • 26. 26 •  Awarded in recognition of student achievements (academic, artistic, athletic, etc.) •  Applicants often compared against one another •  May or may not be renewable •  Not offered at every school Merit-Based Aid
  • 27. 27 •  What College Gives Me The Most Free Money? – Grants – Scholarships* •  Unclaimed Scholarship Myth They Tell Their Child –  There s tons of FREE MONEY out there!! •  Focus on current student, not others next in line to go to college, or current student s possible grad study *average 3rd party award = $500-$2500 How Do Parents Define Affordability?
  • 28. 28 Calculating the Balance Due: Direct vs. Indirect Costs Direct Costs: Billed from the college: –  Tuition –  Fees –  Room –  Board/Meal Plan –  Health Insurance Indirect Costs: Incidentals throughout enrollment: –  Books –  Transportation –  Laptop –  Personal expenses
  • 29. 29 Comparing Award Letters: Award Totals Vary COA: $30,000 EFC: $5,000 Total Eligibility: $25,000 College A College B College C Grants/Scholarships $18,000 $15,000 $10,000 Student Loans $5,500 $5,500 $5,500 Work-Study $1,500 $1,500 $1,500 Total $25,000 $22,000 $17,000 Unmet Need $0 $3,000 $8,000
  • 30. 30 •  Types of aid: 1.  Grants/Scholarships 2.  Work-study 3.  Loans •  Not all financial aid award letters are the same •  Financial aid could be from federal, state & college sources •  Formally accept all or part of the financial aid award by May 1st This example is an estimate only. Understand Your Financial Aid Award
  • 31. 31 •  Deadlines and application requirements are IMPORTANT •  Most applications are due in Feb or March, before the admissions decisions are mailed •  Estimate information if necessary •  Use online options whenever possible •  Apply every year •  KNOW YOUR NUMBER! –  Stick to your family’s definition of affordability Applying for Aid: What Parents Need to Know
  • 32. 32 •  Small Business Owner – $50,000 yearly income •  Family Size = 6 •  Limited assets •  1 child in college in 2014-2015 •  Currently debating where to send his son: •  In state - $22,500; received $20,500 in aid •  Out of state - $43,000; received $43,000 in aid •  Q: Where should he send his son to college? Case Study - Evan
  • 33. 33 A ‘Full Ride’ Isn’t Always What It Seems In-State Out-of-State Private Grants/Scholarships $13,550 $18,280 $20,780 Student Loans/Work Study $7,000 $5,500 $7,800 PARENT LOAN $0 $20,056 $0 Total $20,550 $43,836 $28,580 Unmet Need $2,039 $0 $23,420
  • 34. 34 –  Saving for college means no financial aid. –  It s not worth saving for college if I can t save the entire cost. –  Times are tough. I can t save at all. Myths about saving for college
  • 35. 35 Expected Family Contribution (EFC) 35 + + + = $ Parent Income 0% to 47% of adjusted gross income minus all taxes and allowances 50% over $6,130 20% of all assets 3% to 5.6% of nonretirement assets •  529 College Savings Plans •  Brokerage and/or mutual funds •  Coverdell Education Savings Accounts •  Prepaid Tuition Programs •  UGMA/UTMA accounts •  Other savings $ Parent Assets $ Student Income $ Student Assets $ EFC
  • 36. 36 An example. 4 in the family, 1 child in college: Income & Asset Impact on EFC Family A Family B Family C Family D Income $40,000 $60,000 $60,000 $60,000 Assets $0 $0 $30,000 $60,000 EFC $934 $4,227 $4,227 $4,939 Difference $3,293 $3,293 $4,005 Based on 2014-15 Federal Methodology
  • 37. 37 *Based on 10 years at an interest rate of 7%. This example is an estimate only and market conditions may change. Saving vs. Borrowing
  • 38. 3838 Strategies for Saving •  Start saving as early as possible. Use time to your advantage. •  Use automatic transfers •  Get the word out and let your family and friends know they may contribute or open a plan up on behalf of your child. •  Involve your child in the process. There are great savings tools for kids online.
  • 39. 39 How Do Students Define Affordability?
  • 40. 40 •  Family size – 4 •  Family yearly income – $12,887 •  Kenny = only student in college 2011-2012 •  Sought help in deciding where to go to college: •  In state - $4,500; received $5,500 in aid •  Out of state - $39,170; received $34,150 in aid •  Q: Where should he go to college? Case Study - Kenny
  • 41. 41 Strategies for College Affordability •  Use tools to identify ‘affordable’ schools •  Prioritize saving •  Apply for scholarships •  Use payment plan •  Graduate in fewer semesters •  Choose a specific major for its career prospects •  Work while in school* •  Rent textbooks •  Live at home •  Understand your student loan options *don t sacrifice grades for earnings – students are better off going to school part-time if working is priority or necessity
  • 42. 42 •  Online tool in graphic format •  Compare colleges: o  Average net price o  Graduation rate o  Loan default rate o  Median loan borrowing •  Coming soon: alumni employment College Scorecard CollegeCost.ed.gov/Scorecard/
  • 43. 43 Financial Aid Shopping Sheet •  Provides institution’s cost and student’s financial aid •  Intended to illustrate net price (for comparison) •  School data: grad rate, loan default rate, median borrower debt •  2nd page added for 2014-15 with glossary •  Used by 1,937 institutions
  • 44. 44 FinancialAidToolkit.ed.gov Financial Aid Toolkit •  New tool for counselors and educators •  Financial aid information, outreach tactics & resources •  New tools will continually be posted New!
  • 45. 45 Tools and Resources – DURING COLLEGE •  Q: How does your program support students during college? – Does your program offer alumni support? – How is it working? Areas for improvement? •  Q: How do you support students during college? – What resources/recommendations do you give them? – Do you just have contact with the student or do you have contact with the parent as well?
  • 46. 46 •  Online college search tool •  General institutional info: admission requirements, academic programs, graduation rate, average net price, loan default rate •  Can save a search and return to it later •  Can compare schools side by side •  CollegeNavigator/gov College Navigator
  • 47. 47 •  Online tool – on each institution’s website •  Provides personal, estimated net college price •  Questions about finances and academics •  Displays federal & institutional aid •  Merit-based aid may be calculated Net Price Calculators
  • 48. 48 •  In-State College graduate •  $30,000 yearly income •  Family Size = 1 •  $45,000 in FEDERAL student loan debt •  Currently wrestling with how to repay her loans: •  Standard repayment = $518/month •  Income-based repayment = $166/month Q: Which repayment plan should she choose? Case Study – Chelsea
  • 49. 49 Loan Repayment Comparison Standard   Repayment   Income-­‐Based   Repayment   Monthly  Payment   $518   $166   Repayment  Term   10  years   25  years   Total  Interest   $17,143   $65,854   Total  Paid   $62,143   $95,564   Source: Texas Guaranteed Student Loan Corporation (TGSLC)
  • 50. 50 Tools and Resources – AFTER COLLEGE •  KNOW WHAT YOU OWE! – www.nslds.ed.gov – www.studentloans.gov •  Income Based Repayment – www.ibrinfo.org •  Public Service Loan Forgiveness – www.studentaid.ed.gov •  Potential tuition reimbursement/loan forgiveness employer benefit
  • 51. 51 •  Loan Counseling Demos: Entrance, Exit, & Financial Awareness (FACT) –  Understand your loans –  Manage your spending –  Plan to repay –  Avoid default –  Make finances a priority •  Students with loans can log-in for personalized info •  Repayment Estimator without log-in StudentLoans.gov New!
  • 52. 52 •  Full of information on all federal financial aid programs •  Repayment Estimator •  1-800-4-Fed-Aid Studentaid.gov New!
  • 53. 53 Thank You Questions? Contact Us: Julie Shields-Rutyna jshields-rutyna@mefa.org 617-224-4839 www.mefa.org Kevin Fudge kfudge@asa.org 617-728-4649 www.asa.org