Financial aid basics presentation 2013


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An introduction to financial aid for post-secondary education. Target audience: High school Seniors and their families.

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Financial aid basics presentation 2013

  1. 1. FINANCIAL AID 101for High School Seniors & Their Families High School 1 Presentation Date
  2. 2. This presentation was developed by Stacey Musulin in concert with other staff members at the University of ConnecticutOffice of Student Financial Aid Services. This presentation uses materials created by the National Association of Student Financial Aid Administrators The information in this presentation was based on rules and regulations interpreted as of the date of its creation. Pleasenote that programs may change over time. Also, many forms of aid are based on individual schools’ policies and available funding. Examples used in this presentation should not beconsidered guarantees of aid a student would receive. Contact your school for details about application procedures and eligibility questions. 2
  3. 3. 3 Topics to Discuss  Cost of attendance (COA)  Expected Family Contribution (EFC)  “Financial Need”  Types of financial aid  Free Application for Federal Student Aid (FAFSA)  Post-Application processes  Special circumstances appeals
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  5. 5. What is Cost of Attendance (COA)?Combined direct and indirect costs related to educational program  Direct: Billed by the college (e.g., tuition, room & board)  Indirect: Usually estimates not on the fee bill, but needed (e.g., books, computer expenses, dependent care, mileage)Varies according to:  School (tuition/fee rates differ)  Student status (in-state vs. out-of-state, full-time vs. part-time)  Housing status (on-campus, off-campus, with parent) 5
  6. 6. What is the Expected Family Contribution (EFC)?9 Misnomer: EFC is NOT necessarily what a family will actually pay!  Measurement of a family’s financial strength Calculated using data from a federal application (FAFSA) form and a federal formula Stays the same regardless of college  Exception: Special Circumstance appeal Two components for dependent students:  Parent contribution  Student contribution Determines the types and amounts of aid that students are eligible to receive
  7. 7. EFC for Dependent Student(very basic Federal Methodology version) Parental contribution from (adjusted if more than one dependent in income & assets college)+ Student contribution from available income & assets= Expected Family Contribution 7
  8. 8. Financial “Need” - Federal Methodology NB: The official “Need” figure is not necessarily what is needed to pay the bill (billed & miscellaneous non- Cost of Attendance (COA) billed expenses)- Expected Family Contribution (EFC) (schools will use this figure= Financial Need to determine eligibility for need-based aid) 8
  9. 9. “Need” Based on Cost 1 X 2 Y 3 Z EFC EFC Cost of Expected Family NeedAttendance Contribution (Variable) (V ariable) (Constant) 9
  10. 10. Institutional Methodology Some schools, through the CSS Profileapplication or their own financial aid applications,may require different information to calculate aseparate, Institutional EFC The Institutional EFC and those schools’ policiesdetermine how institutional aid is distributed 10
  11. 11. Important Tips: Cost of Attendance KNOW YOUR COST OF ATTENDANCE!COA may be adjusted to meet individual students’needs, if the school accepts an appeal COA increase may result in more need-based aid Must be able to document additional expenses  E.g., fee bill for more-expensive meal plan or receipt for computer purchase Contact your school for details! 11
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  13. 13. Types of Financial Aid Scholarships (not repaid) Need or merit-based Grants (not repaid) Need-based Loans (must be repaid) Need and non-need types Federal or private lenders Student or parent as borrower Employment ($ earned through work) Need and non-need types Work-Study (need-based) 13
  14. 14. Scholarship SearchesLocal businesses and Internet - many sites, including: civic organizations State Dept. of Education  School Counselors College or UniversityPlaces of employment  Academic, athletic, and other talent-based  Student or parent scholarshipsImportant Tip: There are scholarship scams! Do notpay for scholarship searches/ applications.Important Tip: Start Early! Application deadlinesand procedures vary depending on source of aid! 14
  15. 15. Federal Grant Programs(FAFSA needed for all – Apply annually) Federal Pell Grant Federal Supplemental Educational Opportunity Grant (SEOG) Federal Teacher Education Assistance for College and Higher Education (TEACH) Grant 15
  16. 16. Pell GrantAwarded to high-need, eligible undergraduates pursuing first Bachelor’s degree and certain students enrolled in post-baccalaureate teacher certification or licensing programsPortable (not attached to a particular school)Actual need-based award amount based on COA, EFC, and enrollment status (more to come later)Maximum authorized award for 2012-2013 academic year was $5,550 16
  17. 17. Federal Supplemental EducationalOpportunity Grant (FSEOG)Need-based – High-need students a priorityMaximum award $4,000, but dependent on school packaging policy and available funds 17
  18. 18. TEACH GrantSchools choose whether to participate and what specific requirements areU.S. citizen or eligible non-citizenFAFSA completion required, but not need-basedAward amounts up to $4000 per yearConditions  GPA 3.25 or qualifying score on admissions test  Sign “Agreement to Serve”: Teach in school serving low-income students (Title I) for 4 years within 8 years of leaving university for each agreement signed  Must teach in identified high-need field  If conditions not met, grant will turn into Unsubsidized Stafford loan with accumulated interest from time of initial disbursement 18
  19. 19. Federal “Self-Help” AidFederal Work-Study (FWS)Federal Perkins LoanFederal Stafford Loan  Subsidized Stafford Loan  Unsubsidized Stafford LoanFederal Parent PLUS Loan 19
  20. 20. Federal Work Study (FWS) Eligibility based on need, available funding, and school policies Allows student to earn money to help pay educational costs Paycheck or other compensation (e.g., payments off fee bill)  Determined by school policy Employment may be on or off-campus (per school policies) Eligible employers may be:  School that student attends  Federal, state, or local public agencies  Certain private nonprofit and for-profit organizationsTip: FWS earnings, if indicated specially on the FAFSA, do not count inthe expected family contribution (EFC) calculation for the followingschool year! 20
  21. 21. Federal Perkins Loan School lends Federal funds Student is borrower – no cosigner or credit check No fees! Amount dependent on funding and school policies but there are maximums Interest rate: 5%  Does not accrue while in school or in grace period 9-month grace period after graduation (or if student drops below ½-time status) Repayment period may be up to 10 years Deferment and cancellation provisions available 21
  22. 22. Federal Direct Stafford Loans Student is borrower – no cosigner or credit check Amount undergraduate and graduate students can borrow varies by academic year/ # of completed credits 1 % fee charged  i.e., if $100 borrowed, $99.00 will disburse No repayment required while in school at least ½-time 6-month grace period after graduation or if drop below ½- time status Maximum repayment period between 10 and 30 years depending on repayment plan chosen Deferment and cancellation provisions available 22
  23. 23. Federal Direct Stafford LoansSubsidized: Must demonstrate “need”Unsubsidized: Not based on “need”Annual loan limits (combined subsidized and unsubsidized) for dependent students:  $5,500 for 1st year undergraduates  $3,500 maximum subsidized  $6,500 for 2nd year undergraduates  $4,500 maximum subsidized  $7,500 for each remaining undergraduate year  $5,500 maximum subsidizedTotal/aggregate limit for dependent undergrads: $31,000  $23,000 maximum subsidized 23
  24. 24. Federal DirectSubsidized Stafford Need-based, dependent on Cost of Attendance (COA), Expected Family Contribution (EFC) figures, and other aid sources Annual maximum eligibility to borrow dependent on student status Expected interest rate fixed 6.8% for undergrads as of the 2013-2014 school year (currently 3.4%) Interest does not accrue while in school at least ½-time 24
  25. 25. Federal DirectUnsubsidized Stafford Not need-based, but should fill out FAFSA to borrow maximum possible subsidized loan Interest Rate fixed 6.8% and accrues from time money is disbursed  Can pay interest while in school! Amount eligible to borrow dependent on student status Students whose parents refuse to complete a FAFSA may be able to borrow a limited amount of unsubsidized Stafford loan in special circumstances 25
  26. 26. Parent Direct PLUS Loans Loan program for parents (biological, adoptive, or step-parent in household) of dependent undergraduate students Applicants must be considered “credit–worthy” Annual loan limit: COA minus other aid Fixed interest rates  7.9% Direct PLUS Loans 4% fee charged  i.e., if $100 borrowed, $96.00 will disburse Repayment begins 60 days after loan is fully disbursed for parent borrowers  Parents may defer payment while student is in school at least ½-time  Must apply for deferment with Dept of Education – not automatic!  Other deferments, forbearances, cancellations possible in special circumstances 26
  27. 27. Financing AlternativesMonthly Payment Plans  Allows payments to be spread over 10 months or less  Dependent on school  Contact school for informationAlternative/Private Loans  Applicants must be “credit–worthy”  Payments may be deferred while student is in school  Dependent on lender  Usually the loan of “last resort”  Interest rates, fees, and repayment policies determined by individual lenders and subject to change 27
  28. 28. Tips for Borrowing Additional unsubsidized loan eligibility available forindependent undergraduate and dependent students whoseparents are unable to borrow PLUS (credit denied):  $4,000 per year for 1st and 2nd year undergraduates  $5,000 per year for remaining years of undergraduate studyParents and students who will be applying for PLUS orprivate/alternative loans should:  Consider lower-cost/interest Federal loan options first Consider the total cost of borrowing Double-check credit scores ( prior to filling out applications Consider co-signing options for better interest rates 28
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  30. 30. The FormsFAFSA (Free Application for Federal Student Aid) Required for all types of Federal and some state and institutional aid  DO NOT go on the .com site – that’s a service for feeCSS Financial Aid PROFILE Used primarily by private colleges Pay for each report sent to a school plus small registration fee https://profileonline.collegeboard.comInstitutional Applications  Check school publications and websites 30
  31. 31. What is the FAFSA?A standard form that collect demographic and financial information about the student and family  Information is used to calculate the EFC using the federal formulaElectronic version is preferred & faster  English and Spanish versionsInformation is sent to secure Dept. of Education system called CPSDid I mention it’s free? 31
  32. 32. General Federal Aid CriteriaMust be enrolled or accepted for enrollment in eligible program of studyMust be pursuing degree, certificate, or other recognized credentialMust be U.S. citizen or eligible noncitizenMust be registered with Selective Service (if male and required)May not have eligibility suspended or terminated due to drug-related conviction 32
  33. 33. General Federal Aid Criteria(Continued) Must have valid Social Security Number (SSN)  Including parent of dependent student Must not be in default on a federal student loan  Applies to parent applying for PLUS loan Must not owe an overpayment of federal grant or loan funds Must continue to make Satisfactory Academic Progress (as defined by school)  GPA , % of completed credits, maximum credit limit 33
  34. 34. About Deadlines:Each college may set its own deadline for filing the FAFSA, the Profile, or an additional institutional financial aid application  Know the deadline for each school to which you apply!For the 2013-2014 academic year, the FAFSA is available on January 1, 2013The FAFSA may be filed at any time during the academic year to be considered for Pell Grant and Stafford and/or PLUS loans  Understand that if you file late, you may miss out on forms of aid that are limited 34
  35. 35. First Step: Get Student & Parent Financial AidPersonal Identification Numbers (PINs) Web site: Can request PIN now Sign FAFSA electronically May be used by students and parents throughout aid process, including subsequent school years’ FAFSAs and signing Federal Direct Loan MPNs Tip: Get student AND parent PINs (1 each) now! 35
  36. 36. What information to collectbefore starting the FAFSA: Social Security Numbers (student and parents) Alien Registration # (permanent residents only) Student’s driver’s license number State residency information Marital information (dates) 2012 W-2 Forms (statement of earned wages)  May estimate for initial completion by deadlines 2012 Tax forms (student & parent, if applicable)  May use last year’s data to estimate for initial completion by deadlines Email addresses Other income info (contributions to tax-deferred pensions/savings, child support paid/received, etc.) Investment information (NOT IRAs) School codes (also available on online FAFSA) 36
  37. 37. FAFSA on the Web Worksheet 4-page PDF booklet Tips: Cautions:  Using this  Worksheet does not include all FAFSA questions worksheet might help to  Section #s on Worksheet don’t necessarily coincide organize with section #s on FAFSA information prior to going  Many families will be asked to provide additional online information  Have this and  Child Support Paid supplemental information  Untaxed Income (including untaxed interest, IRA deductions, Child Support received) handy to make data entry  Assets (NOT IRAs) Businesses/Investment Farm easier value 37
  38. 38. Good reasons to file electronically40  Built-in edits to prevent errors  Skip logic allows student and/or parent to skip unnecessary questions  Option to use Internal Revenue Service (IRS) data retrieval  More timely submission of original application and any necessary corrections  More detailed instructions and “help” for common questions  Ability to check application status on-line  Simplified application process in the future
  39. 39. 39 FAFSA on the Web Website: 2013-14 FAFSA on the Web available on January 1, 2013 FAFSA on the Web Worksheet:  Used as “pre- application” worksheet  Questions follow order of FAFSA on the Web
  40. 40. General Tips for completing theFAFSA: Read each question carefully  Some questions apply to students, others to parents – don’t mix!  Some questions tell you what income/ asset data NOT to include – be careful! Double-check all data entry If estimating income/ asset information, supply your best HONEST guess  You may go back and make corrections (possibly IRS Data Retrieval) if there are significant changes When using tax forms, double-check the type of form you are using (1040EZ, 1040A, 1040) to reference the correct specific line numbers 40
  41. 41. General Info Section Citizenship information TIPS for General Information: Drug conviction status  “Your” and Parent’s educational background “Yourself” refer to the Student! Grade level for the 2013-2014 school year  Use full, legal  First year undergraduate names – no nicknames! Type of Program?  Certificate/ Diploma  You are not a 1st year Graduate  Associates degree student - yet  Bachelor’s degree 41
  42. 42. Dependency Status(Whether or not parent information required on FAFSA)Students may be only considered Independent if they are:  Born before January 1, 1990  Married at time of application  Have children/ dependents for whom student provides over ½ financial support during upcoming year  In Graduate school (already earned a Bachelor’s degree) Tip: In extreme circumstances,  On active duty stats in US Armed Forces dependency status may  A veteran of the US Armed Forces be appealed. Contact your  An orphan, Ward of the Court, or in foster care school’s financial aid  anytime when age 13+ office for more details.  Considered “unaccompanied youth” and “homeless” / “at risk of being homeless”  As determined by director/ professional staff of shelter or program any time on/after 7/1/2012  Legally considered “emancipated minor” or in “legal guardianship”  NOTE: THIS IS DIFFERENT FROM A DIVORCED PARENT HAVING CUSTODIAL STATUS!!!! 42
  43. 43. Who is a “Parent?” “Parents” do not include grandparents or other relatives/ friends/ legal guardians with whom the student may live, but who have not formally adopted the student When parents are divorced, give information about the primary custodial parent (with whom the student lived longer during the past year)  To break a tie, give information about which parent provided more financial support When parents are remarried, given information about the primary custodial parent AND that parent’s spouse (the stepparent in whose household the student lives most) 43
  44. 44. Tips for Household Info Include student and siblings if parent(s) will provide over half support from 7/1/2013- 6/30/2014 even if the student will not be living with the parent during that time (i.e., in college) Include other dependents if they live in the house and if parent(s) will provide over half support from 7/1/2013- 6/30/2014 # in college figure must be children/ dependents counted in the household who are enrolled at least ½-time Do not include parents in # in college even if the parents are in college Dislocated Worker Status for Parents:  Receiving unemployment benefits and unlikely to return to that field/job  Is “displaced homemaker,” laid-off, or lost own business due to economic conditions 44
  45. 45. IRS Data Retrieval41 Available early February 2013 for 2013-2014 processing cycle Participation is voluntary Makes updating FAFSA information easier Reduces documents requested by financial aid office Not available when filing status is Married-Separately
  46. 46. How IRS Data Retrieval WorksSo long as the tax returns have already been processed:While completing FAFSA, the student and/or parent 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Student and parent choose whether or not to transfer data to the online FAFSA  These are separate transfers, one for the student and one for the parent 46
  47. 47. Tips for Student/Parent Income Info OK to estimate and correct later! Tax Filing Status and type of return (1040EZ, 1040A, 1040)  Eligible to file 1040 EZ or A if make less than $100,000, does not itemize, and does not have income from self-employment, own farm, alimony, or capital gains on a required Schedule D Adjusted Gross Income for 2012 – not always the same as income from work on W-2  May include income from other sources and certain deductions Income earned from work – May be different than AGI – Include Self- Employment! Federal Income Tax for 2012 (What was tax liability on 1040 – NOT necessarily paid on W-2) 47
  48. 48. Additional Tips for Income Info Untaxed Income :  DO include specified IRA/pension savings, Workman’s Compensation, untaxed disability, untaxed IRA distributions/pension/interest, and child support RECEIVED  Do NOT include Unemployment Compensation, untaxed Social Security benefits, SSI, IRA rollovers, and other such specified income. Do NOT include scholarship/ financial aid amounts as income UNLESS you will pay taxes on it (i.e., if you must include this as taxable income on 1040)  This usually occurs only if the scholarship exceeds the billed educational expenses 48
  49. 49. Tips for Asset InfoDo NOT include these in assets questions:  Net worth of the home you live in  Retirement accounts (e.g., 410K, IRA, pensions)  Net worth of family-owned (greater than 50% ownership) business employing less than 100 people  Net worth of family farm on which you live 49
  50. 50. Tips for Asset Info (continued)Do include these in assets questions: Cash, savings, checking account balances Net worth (Value – Debt/Mortgage) of rental/investment properties  If you live in your investment property, do NOT include the percentage of the area in which you reside Educational benefit/ savings accounts (e.g., 529, Coverdell)  Include as parent asset even if the student is the beneficiary Net worth of family business if employ over 100 employees Net worth of investment farm 50
  51. 51. Additional Info & Tips Federal School Codes needed for each college  Up to 10 codes allowed – Feds will send data to schools  Available online if you don’t have them handy (follow prompts) Housing plans for each college (used by schools to determine Cost of Attendance)  On-campus (allows for billed room & board/meals)  Off-campus (allows for rent & meals)  With parent (allows for meals) For Dependent Students: Both Parent and Student must sign with separate PINs! 51
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  53. 53. FAFSA Processing Results:Central Processing System (CPS) calculates and sends info including EFC: Tip: Review your SAR carefully for Student gets Student Aid Report (SAR) accuracy and  …by email with direct link to online SAR keep a hard  …by snail mail if no email address provided copy!  Students with PINs may view SARs online anytime at Schools get Institutional Student information Record (ISIR)  Information sent electronically within 7-14 days after FAFSA submitted to CPS 53
  54. 54. After the FAFSA is processed…Students check SARs for accuracy of informationStudents log in and make corrections online  Remember IRS Data Retrieval Option Schools review ISIRs and then develop financial aid packages  Schools may request additional information for verification or to resolve database mismatches or conflicting informationFederal Verification  CPS/ Dept of Ed. determines which applicants must supply documentation verifying FAFSA info  Give specific documentation to schools only if they request it  Remember IRS Data Retrieval option  If selected, provide requested documentation to schools ASAP! 54
  55. 55. Special Circumstances Contact each financial aid office about unusual/ extreme circumstances such as: (not exhaustive list)  Change in employment status  Medical expenses not covered by insurance  Change in marital status or household size  Student inability to obtain parent information Schools may request additional documentation to review on case-by-case basis Different schools may interpret cases differently per their policies School decisions are final and cannot be appealed to US Dept. of Education 55
  56. 56. How it works - Summary Student submits completed FAFSA Federal processor determines Expected Family Contribution (EFC) Federal processor sends Student Aid Report (SAR), which includes your EFC Using your EFC, your prospective college determines your financial need Prospective college develops a financial aid package to try and meet need. Sends student an award package 56
  57. 57. The Award NotificationMay be sent by email, letter, or made available via a online system  Continue to check email or online systems in case aid office requests additional informationMeet all deadlines to respond to the award notificationsKeep copies for your records! 57
  58. 58. Tips: Making Decisions @ AidNever decline aid you don’t understand!Know whether or not aid is guaranteed throughout program!  Need-based aid is reconsidered each year after annual renewal of FAFSA  Are there GPA or Major requirements for renewal of institutional aid?  Are there aggregate maximums for institutional aid?Consider Federal loans before private ones, as these offer fixed interest rates and guaranteed benefits:  Perkins  Subsidized Direct Stafford  Unsubsidized Direct Stafford  Direct Parent PLUS 58
  59. 59. Tips: Making Decisions @ Aid(continued)  If applicable, shop around for private loan lenders  Fees may vary by lender  Private loan interest rates, dependent on credit, can vary significantly  Repayment terms/ benefits (e.g., auto-withdrawal for reduced interest?)  Customer Service/ Reputation (e.g., selling loans)  Ask if school has “suggested” lender list and review their selection criteria 59
  60. 60. Tips: Making Decisions @ Aid(continued)Consider the long-term costs of borrowing  Will student be borrowing the same amount for 4+ years?  Will student/parent pay the interest while in school? (best)  Will interest not be paid while in school? (interest accrues on interest, increasing total cost)  – Great Resource!  See calculator section to see total cost of borrowing over various terms, including monthly payment estimates and amount of interest paid 60
  61. 61. Where Do I Go From Here? Obtain aid application requirements from each school  Forms  Deadlines Research private scholarships  Applications  Deadlines Apply for PIN for FAFSA Assemble financial information  FAFSA Worksheet 61
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  63. 63. ResourcesFederal Student Aid  (US Dept of Education) – links to FAFSA sites   1-800-4-FED-AID (1-800-433-3243)  TTY: 1-800-730-8913  FAFSA4caster online tool (early estimate – not EFC guarantee: - to get PIN – to fill out FAFSA  See in Help  “Getting Started/Before You Apply”  “General Questions” and “Completing Your FAFSA” 63
  64. 64. Resources (continued)More from Federal Student Aid:www.  Funding Your Education: The Guide to Federal Student Aid  Federal Grant/ Federal Student Loan Programs  Videos/ PDFs/ calculatorsCollege Goal Sunday:  January 27, 2013  Locations across the state  Get 1-1 assistance in filling out the FAFSA 64
  65. 65. Resources (continued)FinAid! (independent and objective financial aid information) Mapping Your Future (tips on applying for aid, saving for college, budgeting, etc) Individual School/ College Financial Aid Office websites  Check each school’s website for information! 65