IDSL 855 - Student Financial Aid PowerPoint

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IDSL 855 - Student Financial Aid PowerPoint

IDSL 855 - Student Financial Aid PowerPoint

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  • 1. The life blood of public community colleges
  • 2.  It is estimated that over 50% of community college students receive federal financial aid  A decreased availability of financial aid may impact the ability of all of these students to attend, thus cutting tuition revenue by 50% or more.  Because of state funding cuts, community colleges are increasingly dependent of tuition as their major source of revenue. A loss of this nature could have dramatic effects on community colleges and their ability to operate.
  • 3. Consider this sample snap shot of one fiscal year for a community college with a total revenue of $21.0 million: Total Tuition and fee revenue $9.7 million (46.2% of total revenue) Federal Financial Aid awards *$12.3 million State and other awards *$1.9 million *Not all award dollars go to tuition or fees. After tuition, fees and book expenses any remaining funds are given directly to students in the form of disbursements to cover other expenses.
  • 4.  As you can see from the previous slide, close to 50% of the college’s revenue comes from tuition and a major part of that tuition is funded through Federal Financial Aid, primarily Pell Grants.  For the 2013-2014 fiscal year the maximum Pell Grant award for any student is $5,500.  Federal and state financial award programs are tied to rigorous eligibility rules that apply to the student, and implementation guidelines to which the college must adhere.
  • 5. From a student’s perspective there are 4 types of financial aid – grants, loans, work-study and tax relief for educational expenses. 1. Grants are awarded on the basis of need or merit and do not require repayment. Grants can be federal, state or private. 2. Loans must be repaid and may or may not include subsidized interest and do not require collateral.
  • 6. 3. Federal dollars also subsidize work-study programs, which are need based programs that provide on-campus employment for eligible students. 4. Under certain conditions, there may be state and/or federal tax credits for education expenses.
  • 7.  Of the biggest impact to the community college are Federal Financial Aid and then, as a distant second, State Financial Aid.  Federal Financial Aid includes 1. Pell Grants – need based, portable funding for degree and certificate programs 2. Direct Loans – low interest federal loans 3. Perkins Loans – low interest federal loans for specific occupational programs 4. Federal Work-Study – federally subsidized on- campus student employment (for Title IV eligible colleges there is no institutional match required for all others it is 20%)
  • 8. State funded Programs in Michigan include:  TIP (need based award based on eligibility for Medicare)  Michigan Competitive Scholarship – academic merit based award based on completion of pre-approved high school curricula
  • 9. Consider this example of annual financial aid awards from our sample college with the $21million annual budget. Federal Financial Aid Awards Amount % of Total Pell $6,750,000 48% Direct Loan 4,900,000 35% Perkins Loans 304,000 2% Work Study 112,000 <1% Total Federal Awards $12,266,000 85% State Financial Aid Awards TIP 410,500 3% MI Competitive Grants 20,00 <1% Total State Awards $430,000 3% Internal Endowment Awards $1,333,500 9% Private Awards $400,000 3% Total Financial Aid Awards $14,200,000
  • 10.  In order to become eligible for federal financial aid students and their parents or legal guardians, if they are dependents, must submit a FAFSA (Free Application for Federal Student Aid).  The federal government does a need analysis to determine the expected family contribution (EFC) compared to the “cost of attendance” in order to determine the amount of the award.  Colleges must provide “cost of attendance” information that include tuition, fees, room and board, and related expenses. This information must be updated annually.
  • 11.  As tuition continues to grow as a source of revenue for the college, risks related to federal aid increase.  Pell legislation is constantly changing. Consider that for the 2009-10 and 2010-11 academic years Pell funding could be used throughout the summer. Most community college summer enrollments dramatically increased. Beginning in 2012, “summer Pell” was no longer available. Community colleges in general experienced a dramatic decline in summer enrollments in 2012.
  • 12.  Federal Financial Aid legislation is changing rapidly. Sweeping changes took effect in July of 2011 that have overwhelmed many Financial Aid offices and changed the landscape for students.  If students from your college have too high a default rate on their federal loans, over 30% for 3 years, your college can lose all Pell funding for its students. Such a lose could put some colleges out of business. Therefore, colleges must have aggressive loan counseling and follow-up programs.  Another strategy to reduce the college’s risks related to Pell dependence is to build internal scholarship endowments.
  • 13.  Financial aid, in particular Federal Financial Aid to students makes up a very large portion of the revenue of most community colleges.  For this reason, colleges must carefully attend to all of the implementation and reporting requirements required by the federal government. These requirements change on a regular basis so it is important that college personnel, in particular financial aid staff and institutional research staff keep abreast of these guidelines.  It is also in the best interest of the college to make financial aid information readily accessible to potential students and to assist them in applying for financial aid.  Finally, colleges may want to find ways to reduce their dependence on Pell awards in order to mitigate the risks that this dependence creates.