the FAFSA is required in order to apply for federal student aid. The Federal Pell Grant is available to financially needy students and eligibility is based directly on the EFC. The maximum amount for 2011-12 is $5,550 per year. There are three federal programs that are called the campus based aid programs. Participating schools receive allocations of these funds to award to students with financial need. Award amounts may vary by school. The Federal Supplemental Opportunity Grant is for exceptionally need students and typically is given to students who qualify for Pell Grants. The Federal Perkins Loan Program provides loans at a fixed rate of 5 percent to students. The Federal Work Study Program provides part-time employment, usually on campus, to students with financial need.
The Teacher Education Assistance for College and Higher Ed Grant is available to students who plan to enroll in coursework required to become a teacher. In general, Participating students must annually sign an agreement to teach full-time in a high need field in a public or private elementary or secondary school that serves low-income students. - Grant is $4,000 per year but must be repaid as a loan if student fails to meet the requirements. Iraq and Afghanistan Service Grant - A student whose parent or guardian was a member of the U.S. Armed Forces and died as a result of service performed in Iraq or Afghanistan after September 11, 2001 may be eligible to receive the Iraq and Afghanistan Service Grant. Additional Student Eligibility Requirements - Must be ineligible for a Federal Pell Grant due only to having less financial need than is required to receive Pell funds, and - Be under 24 years old, or - Enrolled in college at least part-time at the time of the parent’s or guardian’s death.The grant award is equal to the amount of a maximum Pell Grant for the award year – not to exceed the cost of attendance for that award yearAmericorps is an opportunity for students to work and thus, earn educational awards to pay for school or to repay students loans.
o Community College - $2,313o State University - $3,700o State Related - $3,978o Private Institution - $4,348
State Work Study provides employment opportunities to students. You must be state grant eligible to participate in the program. The application and list of participating employers can be found on www.pheaa.org. SWSPwas created to help the local economy while offering Pennsylvania employers a chance to assist in training future Pennsylvania employees and provide on-the-job experiences to Pennsylvania students.Students may work for a non-profit or a for-profit employer in Pennsylvania. The job will be related to a student’s major or minor field of study. Employers are reimbursed a portion of the wages paid to student employees thus encouraging their hiring.EAP -This is a state-funded program which PHEAA co-administers with the Department of Military and Veterans Affairs. It provides financial assistance for students who join the PA National Guard and commit to a six year enlistment. If the enlistment commitment is not fulfilled, the grant funds they received convert to a loan with interest.Students apply through local National Guard units and sign a Master Promissory Note (MPN). The National Guard then forwards approved applications to PHEAA for processing. Chafee Education and Training Grant Program : This is a federally funded program administered by PHEAA for the PA Department of Public Welfare (DPW). It targets children who are in foster care or who were adopted out of or discharged from foster care after the age of 16.DPW identifies eligible students – New applicants must file both the FAFSA and Chafee Education Training Grant applications. Renewal students are only required to file the FAFSA. The deadline date is June 30 of the academic year in which Chafee funds would be received. Applications are available on pheaa.org.Maximum award for 2012-13 is $2500Blind and Deaf Beneficiary Grant - Provides awards of up to $500 per year to assist with postsecondary school expenses for blind or deaf students.Applications available on pheaa.org. The Postsecondary Educational Gratuity Program - This program is for children of PA police officers, firefighters, rescue and ambulance squad members, corrections officers and National Guard members who died in the line of duty since January 1, 1976. In addition, on November 30, 2004, an amendment was signed into law which included sheriffs and deputy sheriffs, National Guard members and certain other individuals on federal or state active military duty who died in the line of duty beginning September 11, 2001.waiver of institutional tuition, fees, room and board (minus any grant or scholarship aid received) at any PA community college, state university, or state-related institution. Students must file a FAFSA each year.For additional information and to complete an application go to pheaa.orgPartnerships for Access to Higher Education (PATH): PHEAA partners with community-based PA organizations that offer grants or scholarships to eligible PA residents.A PHEAA PATH grant may match a community organization grant, thereby doubling grant aid to needy students enrolled at least half-time in a PHEAA approved postsecondary institution. The maximum award is $2,500 per year.Additional details are available at www.pheaa.org.
This table illustrates the maximum amounts that a dependent student could borrow through the subsidized and unsubsidized direct loan program based on if they are a freshman, sophomore, junior or senior. You will note that they can borrow the least amount of money in their freshman year.
Home Equity Loans - With mortgage interest rates still at relatively low levels, some families decide to use their home equity as leverage to secure funds to pay for college expenses. In some cases, this may be a more attractive option than borrowing through the federal PLUS Loan ProgramIt generally is NOT a good idea to tap into family resources such as retirement funds or life insurance, or to take out large cash advances on credit cards
Many institutions offer tuition payment plans that allow students to spread their payments out over the semester or the year. These plans are typically interest free, charge only a nominal set-up fee, and provide very flexible payment terms. For many families this is a very affordable way to manage college costs.
Families will continue to struggle with college costsUnderstand that in higher education there is no correlation between cost and qualityBe open minded in college searches - meet with admissions staff AND Financial aid staffHave these discussions with your child up frontOptions for cutting costs: commute, take summer classes, buy used books, Start searching for scholarships now!
Financial Aid 101Paying for Postsecondary Education
3 things to take away…• File the FAFSA• On Time• Follow up
Recent Trends• College costs are rising more than inflation• Family income and gift aid not keeping up• Families are relying more heavily on debt• 4 yr grads in PA avg. $27,000 in debt ($300/month)• Avg. debt will climb to $31,000 ($350/month)• Student loan default rates are on the rise• Federal parent loans are fixed at 7.9% $10,000 = $125/month; $40,000 = $500/month What if you have 2 or 3 kids to put through college?
The EconomyEffects still being felt at the family level • Unemployment, reduced hours, lost overtime, stagnant wages, increasing taxes, rising utility bills, strained savingsColleges not holding the line on cost increases fortuition, fees, room, board (up 5 - 8% per year)State budgets are strapped; colleges, schooldistricts, counties, local municipalities, and familiesall feel the pinch as it trickles down
What is Financial Aid?Financial aid consists of funds providedto students and families to help pay forpostsecondary educational expenses
Where does the money come from?• Federal Government• State Government• School/Colleges• Private Scholarship Sources: » HS Counselors » Clubs and organizations » Employers » Internet scholarship searches
Basis for awarding aid…• Merit – scholarships usually based on: » Academic or athletic ability » Special talent or achievement » Program of study• Need-based grants, loans, and employment usually based on: » Income » Assets » Other factors
Basic Principles• Joint responsibility of the student and parent(s) to pay, to the extent possible, unless student is independent per federal determination• Need-based financial aid subjected to federal formula to determine financial need• Not all families qualify for need-based aid. There is no guarantee that you will get any need-based financial aid to pay for higher education.
The Free Application for Federal Student Aid (FAFSA)• The FAFSA (Free Application for Federal Student Aid) is a federal form used to determine student eligibility for the following: » Federal programs, such as Pell Grants, work-study, and student loans » State programs, such as Pennsylvania State Grant, state work-study, and other special programs » School programs, such as need-based grants and scholarships.
When to Apply• The FAFSA may be filed beginning on January 1 of the upcoming award year. For the 2012-13 award year this would be January 1, 2012.
Ways to apply• Complete the FAFSA as soon as possible after January 1 of the year for which the student is seeking financial aid » Online at www.fafsa.gov • safe, secure, fast, skip logic, built in edits • complete FAFSA on the Web Worksheet • print the confirmation page when complete
Personal Identification Number (PIN)• Website: www.pin.ed.gov• Sign FAFSA electronically• Student and one parent signs electronically with PIN• Do NOT lose it. Write it down and store in a safe place• Do NOT share it with anyone
IRS Data Retrieval Tool• While completing FAFSA on the Web (FOTW), applicant may submit real-time request to IRS for tax data• IRS will authenticate taxpayer’s identity• If match found, IRS sends real-time results to applicant in new window• Applicant chooses whether or not to transfer data to FOTW• IRS Data Retrieval Tool will be available early February, 2012 for 2012-2013 award year
Who is independent?• 24 or older on Jan 1st of award year (January 1, 1989)• Veteran (includes active duty personnel)• Working on graduate level degree• Emancipated minor in legal guardianship• Orphan, in foster care, or ward of the court at anytime when student was age 13 or older• Have legal dependents other than spouse• Student deemed homeless by proper authority
Applying for Financial Aid• Know what financial aid forms each school requires: » FAFSA required by all schools, PHEAA, and some scholarship organizations » SGF (State Grant Form) required for first year students (and may be requested for subsequent years) » CSS Profile required by some postsecondary schools and scholarship organizations » Institutional financial aid forms• Know deadlines – this is critical!
Know your Deadlines!• The federal deadline is the end of the award year - for 2012-2013, this would be June 30, 2013• PA State Grant deadlines – » May 1, 2012 • First Time and Renewal Applicants that plan to enroll in a degree program or a college transferable program at a junior college or other college or university » August 1, 2012 • First Time applicants that plan to enroll in a community college; a business, trade, or technical school; a hospital school of nursing; or a 2-year program that is not transferable to another institution• School Deadlines
Expected Family Contribution (EFC)• The EFC is a number derived from a federal formula which considers a family’s income, assets, and other factors• In theory, the EFC is the amount a family can reasonably be expected to pay toward college expenses each year• In reality, it is not the amount a family is required to pay and it rarely is the amount a family actually pays.
How is the EFC calculated?• Parent contribution + student contribution = EFC• Bulk of EFC comes from income• Home, personal property, qualified retirement funds, and value of life insurance excluded from assets• Asset protection allowance (based on age of older parent, or the parent if single parent household)• Parent asset contribution usually = roughly 6%• Student income contribution = 50% of amount over $6,000• Student asset contribution = 20% of assets• Parent contribution divided by number of children in college at the same time
Cost of Attendance or Student BudgetThe Financial Aid Office will include the following indetermining the student’s annual cost of attendance at thatschool:• Direct College Costs » Tuition » Required Fees » Room » Meals » Books and Supplies
Cost of Attendance or Student BudgetThe Financial Aid Office will include the following indetermining the student’s annual cost of attendance at thatschool:• Indirect College Costs » Transportation and miscellaneous personal expenses, including documented costs for a personal computer » Study abroad costs » Dependent care expenses » Disability-related expenses
Calculating Financial NeedSchools/colleges receive financial aid information andcalculate financial need. School cost……………………. $26,000 EFC…………………………….. - 3,000 Financial need………………… $23,000FAO “packages” student based on financial need andavailable funding (varies from school to school).Financial aid award letter sent to student.
Financial Aid Award Letter• Is official notification from school about financial aid, terms, and conditions.• Lists the type and amount of each award to be received• Describes what must be done to accept or reject any award.• Discloses students rights, responsibilities, and academic requirements.
Reviewing the Financial Aid Package• After reviewing their packages, students should be sure they know and understand the following: » How much of their financial aid is gift aid, and how much is not? » Which awards are based on need, and which are based on merit? » Are there any conditions on the gift aid; in particular, is there a GPA requirement? » Will their awards change from year to year? » Will institutional awards increase as tuition increases?
Financial Aid 101Federal, state, and school/college financial aid programs See PA Guide to Student Aid for more details
Federal Programs• Pell Grant (2011-12 award $5550) *….must have high need• Campus-based aid – amounts determined by FAO FSEOG………………… up to $4000 Perkins loan….……….. up to $5500 Federal work-study…… FAO determines• For most programs, student must be enrolled at least half- time.* Goes to most financially needy students
Federal Programs• TEACH (must meet teaching commitment)• Iraq and Afghanistan Service Grant• Americorps (for details, go to www.americorps.gov)
PA State Grant Program• PA State Grant* » Full-time, in PA…...….up to $4,348 » Part time, in PA………up to $2,174• Out of state….. Up to $600 in CT, DE, MA, ME, OH, RI, VT, WV, and DC• All other states….up to $400 (NJ, NY, and MD = $0)• Amount determined in part by the cost of the school* Must be at least half-time to be eligible
Other State Programs• State Work-Study - job related to major• Educational Assistance Grant (EAP) – National Guard• Chafee Education and Training Grant – administered by the Department of Public Welfare• Blind and Deaf Beneficiary Grant• Postsecondary Educational Gratuity Program (PEGP)• Partnerships for Access to Higher Education (PATH):For details, see the PA Guide to Student Aid, or visit www.pheaa.org
Federal Student Loans• On March 30, 2010, President Obama signed the Health Care and Education Reconciliation Act of 2010, which mandates all schools process loans through the Federal Direct Loan Program (FDLP).• Effective July 1, 2010, all federal student loans are made directly through the U.S. Department of Education.• Students and parents may apply for Direct Stafford and Direct PLUS loans through their post-secondary school’s website or at www.studentloans.gov
Federal Direct Loan Program• Stafford student loan: » Subsidized = no interest in school or grace period • Interest rate 7/1/11 – 6/30/12 = 3.4% • 6.8% fixed rate beginning 7/1/12 if this rate provision expires• Unsubsidized = interest accrues in school and grace • Interest rate = 6.8% • Any interest unpaid during grace will be capitalized at repayment
Federal Direct Stafford Loan ProgramBorrowing Limits Base Stafford Dependent Students Additional Loan Amount (excluding students whose Unsubsidized Stafford Subsidized/ parents cannot borrow PLUS) Loan Amount UnsubsidizedFreshmen $3,500 $2,000Sophomores $4,500 $2,000Juniors, Seniors $5,500 $2,000Graduate or Professional $8,500 $12,000
Additional eligibility Independent Students Base Stafford Loan Additional AND students whose Amount Subsidized/ Unsubsidized Stafford parents cannot borrow PLUS. Unsubsidized Loan AmountFreshmen $3,500 $6,000Sophomores $4,500 $6,000Juniors, Seniors $5,500 $7000Graduate or Professional $8,500 $12,000
Federal Direct PLUS Loan• For parents students• There is no borrowing limit on the Parent PLUS Loan• Education Cost minus Financial Aid equals the amount of which you can borrow• Credit check is required on this loan, but no debt-to-income test• Fees will be deducted from disbursements• Principal payment can be deferred while student is in school (interest will continue to accrue).• All loans must be repaid within 10 years• Parent PLUS loan • Principal payment may be deferred • Interest rate = 7.9%
Alternative/Private Education Loans• Student borrows in his or her own name• Based on credit scoring and debt-to-income ratio• Repayment may be deferred until education completed• Fees, interest rates, loan amounts, and repayment provisions vary by lender and are generally higher than federal student loans• Co-signers usually required. Some loan products have a co-signer release option• Compare loans before making choice and read the fine print!
Financial Aid 101Financial Aid Forms are Filed - What’s Next?
How to Cover the Actual Family Contribution• Savings – Family• 529 Plans – Family• Scholarships – Various Sources• Grants – Federal and State• Tuition Payment Plans – School• Federal Student Loans – Department of Education• Institutional Loans – School• Private Education Loans – Bank• Home Equity Loans – Bank
Borrowing for Higher Education• Always consider federal loans first. They have the best interest rates and repayment provisions.• Borrow in the following order: » Perkins Loan (5% fixed) – student » Stafford Loan (max of 6.8% fixed) – student » PLUS Loan (7.9% fixed) – parent and graduate student » Alternative Loan (variable rates) – last resort
Special Circumstances• Divorced or separated parents• Stepparents• Adoptive parents• Foster parents• Legal guardians• Living with others• Recent death or disability• Reduced income
What you can be doing now…prior to completing the FAFSA• Student and parent apply for a PIN at www.pin.ed.gov• Visit websites with free information about college, financial aid and careers• Explore scholarship opportunities – locally, regionally and nationally• Use the FAFSA4caster – to estimate EFC and eligibility for federal financial aid » Free online tool, available at www.fafsa4caster.ed.gov
How do you identify offers that should be avoided?• Anyone who charges you a fee: • for information about financial aid • to complete the FAFSA • Do not use: www.fafsa.com • to apply/receive a scholarship
Did you know?• For the first time, student loan debt will be approaching $1 trillion. In 2000, that number was around $200 billion.• For the first time, last year student loan debt outpaced credit card debt.• In the 1990s, less than half of those graduating with a bachelors degree did so with debt. Now its two-thirds.• The average 2011 graduate entered the job market carrying around $27,200 of debt, according to Mark Kantrowitz of the financial aid websites Fastweb.com and Finaid.org.
Think loan balances are no big deal?• Stafford borrowing (est. based on sub./unsub. loans &10 year repay)• $20,000 @ 5.0% = $212.13/mo• $50,000 @ 5.0% = $530.32/mo• $80,000 @ 5.0% = $848.52/mo• $140,000 @ 5.0% = $1,484.91/mo• $200,000 @ 5.0% = $2,121.13/mo• Parent PLUS (assuming no cap. Int., 10 year repay)• $20,000 @ 7.9% = $327.48/mo• $50,000 @ 7.9% = 818.72/mo• $80,000 @ 7.9% = $1,309.95/mo• $140,000 @ 7.9% = $2,292.41/mo• $200,000 @ 7.9% = $3,274.88/mo
Beware the 5 Year Plan!Things like double majors, study abroad, internships, andathletics can enhance the educational experience and improvemarketability. But it comes at a price:• Total cost just increased by 25%.• The fifth year likely costs 20% more than the 1st year did.• Loss of institutional funds if they only allow for four years.• Loss of PA State Grant if all four years have been received.• Reduction in student borrowing capacity if maximum loans received in the first four years (only $4,000 left).• Talk it over and plan ahead!
Things to Talk About• Keep borrowing in line with future earning power (estimate loan payments at pheaa.org or youcandealwithit.com)• Clearly determine who will pay for what• How much debt can the family take on?• Are there options for cutting costs?• Give yourself a low-cost alternative• How much will the student work?• How many years will college take?
Resources• pheaa.org• EducationPlanner.org• Youcandealwithit.com• Myfedloan.org• PHEAA toll free: 1-800-692-7392• Federal Student Aid Info Center – 1-800-433-3243• www.fafsa.gov• www.federalstudentaid.ed.gov – general financial aid info• www.studentloans.gov – information on federal loans