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1
Celebrating 30 years of Excellence
Planning, Saving & Paying for College
Financial Aid Trends and
Regulatory Updates
NPE...
2
•  Massachusetts Educational Financing Authority
•  Not-for-profit state authority that works to
make higher education m...
3
•  Private non-profit organization based in Boston, MA
•  Public purpose mission = empower students to
successfully mana...
4
•  President is concerned about accountability and
student debt
•  Federal Government is concerned about
transparency
• ...
5
•  Paying for Performance
–  College rating system determining aid funding
–  Aid to students based on student performan...
6
•  Grants vs. Loans
•  Federal Methodology
– FAFSA
•  Independent Student/Dependency Overrides
•  Citizen/Eligible-Non C...
7
Overview of Financial Aid
Undergraduate Student Aid 2011-12 ($185.1 Billion)
Source: The College Board, Trends in Studen...
8
•  Student is the borrower – no credit check
•  Annual limits: $5,500 for freshman year
•  Fixed interest rate changes a...
9
•  Free Application for Federal Student Aid (FAFSA)
–  Required by all colleges for federal and MA state aid
–  Open Jan...
10
•  Auto Zero EFC income cutoff remains $24,000 or less
•  Skip logic
•  Defining Parents:
–  All parents who live toget...
11
Federally Independent Students
•  24 or older
•  Married
•  Graduate Student
•  Active duty in U.S. Armed
Forces
•  Vet...
12
Dependency Overrides
Students who do not qualify:
• Parents refuse to financially contribute or provide data
• Parents ...
13
Dependency Overrides
Students should submit to each school:
•  A letter of explanation
•  Relevant documentation (court...
14
•  U.S. nationals
•  U.S. permanent residents with Form I-551, I-151, or I-551C
•  Those with Arrival-Departure Record ...
15
Verification
•  Colleges verify accuracy of FAFSA data
•  Students selected by Department of Education
•  In 2013-14, o...
16
Verification Acceptable Documentation
•  Tax return items:
−  IRS Data Retrieval Tool (unchanged data)
−  IRS Tax Retur...
17
IRS Data Retrieval Tool
•  9 million folks used it in 2012-13
•  When can it NOT be used:
– Married individuals who fil...
18
•  Institutional Methodology
– CSS PROFILE
•  Professional Judgment
•  Need-Based Aid
•  Merit-Based Aid
How Do College...
19
Cost of Attendance (COA)
– Expected Family Contribution (EFC)
= Financial Aid Eligibility
Financial Aid Formula
College...
20
•  CSS/Financial Aid PROFILE®
–  Some colleges require for institutional aid
–  $25 for 1st school, $16 for each additi...
21
CSS/Financial Aid PROFILE
•  For institutional aid
•  More detailed questions:
o  untaxed income, home, expenses, house...
22
PROFILE Participating Institutions and Programs
23
•  $25 first school, $16 each additional
•  Fee waivers
–  Automatically granted based on family finances
–  For first-...
24
Changes in circumstance, special situations not already
reported, and requests for additional funds (appeals)
should be...
25
•  Awarded based on family’s financial eligibility
as determined by standardized formula
•  Includes grants, loans and/...
26
•  Awarded in recognition of student achievements
(academic, artistic, athletic, etc.)
•  Applicants often compared aga...
27
•  What College Gives Me The Most Free Money?
– Grants
– Scholarships*
•  Unclaimed Scholarship Myth They Tell Their Ch...
28
Calculating the Balance Due: Direct vs. Indirect Costs
Direct Costs: Billed from the
college:
–  Tuition
–  Fees
–  Roo...
29
Comparing Award Letters: Award Totals Vary
COA: $30,000 EFC: $5,000 Total Eligibility: $25,000
College A College B Coll...
30
•  Types of aid:
1.  Grants/Scholarships
2.  Work-study
3.  Loans
•  Not all financial aid award
letters are the same
•...
31
•  Deadlines and application requirements are IMPORTANT
•  Most applications are due in Feb or March, before the admiss...
32
•  Small Business Owner – $50,000 yearly income
•  Family Size = 6
•  Limited assets
•  1 child in college in 2014-2015...
33
A ‘Full Ride’ Isn’t Always What It Seems
In-State Out-of-State Private
Grants/Scholarships $13,550 $18,280 $20,780
Stud...
34
–  Saving for college means no financial aid.
–  It s not worth saving for college if I can t
save the entire cost.
–  ...
35
Expected Family Contribution (EFC)
35
+ + + =
$
Parent
Income
0% to 47% of
adjusted gross
income minus
all taxes and
al...
36
An example. 4 in the family, 1 child in college:
Income & Asset Impact on EFC
Family A Family B Family C Family D
Incom...
37
*Based on 10 years at
an interest rate of 7%.
This example is an
estimate only and
market conditions
may change.
Saving...
3838
Strategies for Saving
•  Start saving as early as
possible. Use time to your
advantage.
•  Use automatic transfers
• ...
39
How Do Students Define Affordability?
40
•  Family size – 4
•  Family yearly income – $12,887
•  Kenny = only student in college 2011-2012
•  Sought help in dec...
41
Strategies for College Affordability
•  Use tools to identify
‘affordable’ schools
•  Prioritize saving
•  Apply for sc...
42
•  Online tool in graphic format
•  Compare colleges:
o  Average net price
o  Graduation rate
o  Loan default rate
o  M...
43
Financial Aid Shopping Sheet
•  Provides institution’s cost
and student’s financial
aid
•  Intended to illustrate net
p...
44
FinancialAidToolkit.ed.gov
Financial Aid Toolkit
•  New tool for counselors and educators
•  Financial aid information,...
45
Tools and Resources – DURING COLLEGE
•  Q: How does your program support students
during college?
– Does your program o...
46
•  Online college search tool
•  General institutional info: admission requirements,
academic programs, graduation rate...
47
•  Online tool – on each institution’s website
•  Provides personal, estimated net college price
•  Questions about fin...
48
•  In-State College graduate
•  $30,000 yearly income
•  Family Size = 1
•  $45,000 in FEDERAL student loan debt
•  Cur...
49
Loan Repayment Comparison
Standard	
  
Repayment	
  
Income-­‐Based	
  
Repayment	
  
Monthly	
  Payment	
   $518	
   $...
50
Tools and Resources – AFTER COLLEGE
•  KNOW WHAT YOU OWE!
– www.nslds.ed.gov
– www.studentloans.gov
•  Income Based Rep...
51
•  Loan Counseling Demos: Entrance, Exit, & Financial
Awareness (FACT)
–  Understand your loans
–  Manage your spending...
52
•  Full of information on all federal financial aid programs
•  Repayment Estimator
•  1-800-4-Fed-Aid
Studentaid.gov
N...
53
Thank You
Questions? Contact Us:
Julie Shields-Rutyna
jshields-rutyna@mefa.org
617-224-4839
www.mefa.org
Kevin Fudge
kf...
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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.

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

  1. 1. 1 Celebrating 30 years of Excellence Planning, Saving & Paying for College Financial Aid Trends and Regulatory Updates NPEA Conference April 2014
  2. 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. 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. 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. 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. 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. 7 Overview of Financial Aid Undergraduate Student Aid 2011-12 ($185.1 Billion) Source: The College Board, Trends in Student Aid 2012
  8. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 18 •  Institutional Methodology – CSS PROFILE •  Professional Judgment •  Need-Based Aid •  Merit-Based Aid How Do Colleges Define Affordability?
  19. 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. 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. 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. 22 PROFILE Participating Institutions and Programs
  23. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 39 How Do Students Define Affordability?
  40. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 52 •  Full of information on all federal financial aid programs •  Repayment Estimator •  1-800-4-Fed-Aid Studentaid.gov New!
  53. 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

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