What Parents need to know about College Financial Aid

FINANCIAL AID STRATEGY
presents

What every parent needs to know about financial aid

www.financialaidstrategy.com

1. College Statistics TOPICS
2. College Facts
3. College Costs
4. Financial Aid
5. 529 Plans
6. UTMA/UGMA
7. GPA,SATs.ACT
8. Expected Family
9. Contribution (EFC)
10. Understanding Financial
Aid Forms
11. Sources of Financial Aid
12. Financial Aid Statistics
13. Awards & Appeals
14. Summation
http://www.financialaidstrategy.com

Our Philosophy
An excerpt from a quote by the Honorable Learned Hand, U.S.
Appeals Court Judge, Helvering v Gregory, 69F.2D, 809
(1934)…..

“Over and over again the courts have said there is nothing sinister in
so arranging ones affairs as to keep taxes as low as possible.
Everyone does it, rich and poor alike and all do right, for nobody
owes any public duty to pay more than the law demands. Taxes are
enforced exactions, not voluntary contributions. To demand more in
the name of morals is mere cant.”

The same can be said about college financial aid planning in so
much as there is nothing sinister in arranging ones affairs as
such to keep tuition costs as low as possible. Everyone does
it, rich and poor alike.


Sharing Our Knowledge

• Our goal today is to
educate you as to the
rules of the game and
how to win.
• The common theme all
parents share is to send
their children to the best
college that they can
afford in order to give
their child a leg up in life
without jeopardizing their
retirement.


GPA, Class Ranking, SAT & ACT
Scores Matter
• All of the above have a major impact on both Merit Awards and Acceptance into the
University of your Choice……
•
• A Helpful Hint regarding taking the SATs………..
• Did you know that College Board reports only the “highest score” for each section of
the SAT…?
• Therefore if your student takes the SAT test 3 times but concentrates his/her studies
to only 1 section at a time he/she will increase the likelihood of much higher scores
…
•
• Hypothetical example….
•
• SAT #1 Math score 610 Critical Reading 0 Writing 0
• SAT #2 Critical reading 625 Math 0 Writing 0
• SAT #3 Writing 640 Math 0 Critical reading 0
• College Board would report your SAT scores as 1875


Ugma/Utma owned by the student

• Beginning with the 2009-2010 school year, student- and UGMA/UTMA-
owned 529 accounts are to be reported as parental assets, if the student
files the FAFSA as a dependent and has to include parent assets and
income. This treatment confers a financial aid benefit as the parental rate of
5.64% is considerably less prejudicial than the 20% rate on non-529 assets
owned by the student.

*This rule does NOT apply to private universities…..


529 plans held by parents or other
non-beneficiary
• A 529 account owned by a
parent for a dependent student
is reported on the federal
financial aid application
(FAFSA) as a parental asset.
Parental assets are assessed
at a maximum 5.64% rate in
determining the student's
Expected Family Contribution
(EFC).

*This rule does NOT apply to private universities

College Statistics
• Nationwide there are 2533
accredited four year colleges.
• There are 1683 accredited two-
year colleges.
• Four year colleges: 2533
• Public 639 (25%)
• Private 1894 (75%)
• Non-profit (80%)
• Two year colleges: 1683
• Public 1061 (63%)
• Private 622 (37%)
• Non-profit (18%)

Source: National Center for Education Statistics


College Statistics
Graduation Rates for Undergraduates:

• Four years
35.3%
• Public 27.9%
• Private 50.2%
• Private Non-profit 22.1%
• Five years
52.3%
• Public 48.3%
• Private 61%
• Six years
57.1%
• Public 54.1%
• Private 64%

Source: National Center for Education Statistics


College Facts
Financial Aid

 Many families qualify for financial aid
even though they think they earn too
much money.

 Many families qualify for financial aid
even though they have substantial
equity – almost 90% of colleges don’t
care.

 Many families can send their child to a
private college for less money “out-of-
pocket” than a public school.

 There are 75 colleges that meet 100%
of a family’s financial need.


College Costs
Annual College Costs
• Average Public University - $15,000
• Average Private University - $30,000
• Many Private Universities < $45,000
• Annual costs increasing @ 6% per yr.
• Direct costs:
-Tuition and fees
-Room and board
• Indirect costs:
-Books
-Living expenses
-Transportation


College Costs
Financial Aid….the breakdown
 Need based financial aid includes:
-Grants (free money)
-Loans (pay it back…with interest)
-Work study (earn it)
*Parents most often equate financial aid solely to grant (free) money, but work
study programs and loans are also included.

 Merit based financial aid includes:
-Grants/Scholarships only


College Costs
Financial Aid – Need Based

 The Needs Based Formula

COA (Cost of Attending)
- EFC (Expected Family Contribution)
= Financial Need

Example: $41,000 (COA)
- $16,000 (EFC)
= $25,000 (NEED)


Effective Family Contribution
 The Importance of EFC
 Qualifying factor for the majority of financial aid
 Directly determines eligibility of family
 EFC can sometimes be lowered IF you understand
how the calculation works ahead of time
 Financial Aid Eligibility
 You will not qualify for need based financial aid if....
 Your EFC is greater than COA (cost of attendance)
unless you receive merit based money and in some
instances “research scholarships


Methodologies Used to Determine EFC
The Federal Formula (FAFSA)
• Used by 89% of all 2533 colleges
• 99.7% of Public College (637 of 639)
• 86% of Private Colleges (1628 of 1894)

The Institutional Formula
(CSS Profile)
• 11% of colleges (268 of 2533) require it
• Local examples….Boston College,
Boston University, Brandeis University,
Bentley, College of the Holy Cross,
Brown University
• Highly Selective


The Breakdown
EFC as determined by FAFSA
– Parent contribution from income 22%-47%
– Parent contribution from assets 2.6%- 5.6%
– Student contribution from income 50%
– Student contribution from assets 20%

Other variables
– # of household members
– # of family members currently attending
college


FORMS
FAFSA (Free Application for Student Aid)
• The FAFSA form is used to collect the family’s financial
information (www.fafsa.ed.gov)
• The U.S. Government Dept. of Education determines a
family’s EFC
• Used by all accredited Public & Private Colleges and
Universities
• It is required in order to qualify for Federal and State
financial aid, grants and loans


FORMS
ABOUT FAFSA
• Assesses liquid funds-cash,savings,checking accounts,C.D.s,money
market,stocks,bonds,mutual funds & rental or other property
• Does not assess Primary Residence home equity
• Does not assess Retirement funds 401k, 403b.IRA’s
• Everyone should submit a FAFSA form regardless of income &
assets
• WHY?
• Qualification for loan programs
• Insurance for appeals
• Often required for Merit aid


Divorced/Separated Parents

Clarifying the facts for students of
divorced or separated parents:
• Question: Who’s information goes on the FAFSA?
• Answer: Whichever parent the student lived with
the most during the base year defined as physical
custody for 6 months+ 1 day
• The base year is the year before high school
graduation
• Seniors 2012
• Juniors 2013
• Sophomores 2014
• Freshman 2015
• Assets are valued as of the date on which you sign
off on and submit the financial aid form


FAFSA Multiple Students
• Parent contribution is split
equally
• Does not require both
students to attend the same
college
• The younger student
typically qualifies for more
need based financial aid
• Student contribution is not
split


Forms / Institutional Methodology
• CSS Profile is used to collect the financial
data( www.collegeboard.com)
• Used by some (Primary) and 268 Private
colleges to distribute endowment funds
• In addition to (not in lieu of) the Fafsa form
• Several Public schools began using this form
beginning in the 2005-06 academic year
• More assets are assessable
• Primary residence home equity is considered
• Younger siblings assets
• Small business value
• These assessment often result in an EFC
which is “much higher” than the Fafsa
calculation
• Required by most Private schools
• Asks for additional information
• Typically an easier form to understand (1-2
pages)


Sources of Financial Aid
Over 90% of all financial aid is from:
• Federal Government
• State Government
• Endowment funds (private
colleges)

STATS
• Federal aid 66%
• Endowment aid 19%
• State aid 6%
• Employer provided aid 6%
• VA 2%
• Private scholarships 1%


Sources of Financial Aid/ Federal
Government
Stafford Loan:
• Student loan
• No credit check
• Deferred payments
• Subsidized or unsubsidized
• 10 year repayment
• Entitlement program
• Loan limits
5500/5500/6500/7500


Loans
Plus Loans
• Parent loan
• No deferred payment
• Always unsubsidized
• 10 year repayment
• Can be used toward EFC “gas”
Federal Work Study
Program (FWS)
• Colleges determine qualification
• Pays part of student wages
• Helps build work experience
• Does not impact financial aid
• Wages are subject to income tax


Sources of Financial Aid / Private Universities
Endowment funds
• Often offer 70% -100% of family's need
• Offer the most grant (free) money
• Often offer merit-based aid

Financial aid statistics
• Some schools meet 90% or more of need
• Some schools meet 50% or even less of need

Example
COA= $45,000
EFC= $14,000
NEED=$31,000

XYZ University meets 65% of need:
$31,000(need) x 65%=$20,150(award)
ABC University meets 45% of need:
$31,000(need) x 45%=$13,950(award)

XYZ University (unmet need) $31,000 x 35%= $10,850
ABC University (unmet need) $31,000 x 55%= $17,050

At XYZ University it would cost you:
$14,000(EFC) + $10,850(unmet need)= $24,850
At ABC University it would cost you:
$14,000(EFC) +$17,050(unmet need)= $31,050


Sticker Shock
• A common mistake most parents make is allowing the “sticker price” to influence
their decision by simply avoiding those schools that carry a high price tag.
• Don’t let this happen to you!

The example below illustrates the actual cost of attending a private “more expensive school” vs. attending a
public “less expensive school”. *(2009 tuition costs)

College of the Holy Cross
COA=$43,181
EFC= $14,000
Need=$26,181 Holy Cross meets 100% of need of which 75% is Gift aid
Gift= $19635 ($26,181 x 75%) Money you do not have to pay back
Loan= $6546( 25% of $26,181unmet need)

EFC=$14,000
Loan= $6546+
Total=$20,546 Actual out of pocket costs

University of Massachusetts Amherst
COA=$19,246
EFC= $14,000
Need=$5246 UMASS Amherst meets 82% of need of which 40% is gift aid
Gift = $1720 ($5246 x 40%) Money you do not have to pay back
Loan=$3526 unmet need

EFC=$14,000
Loan=$3526
Total=$17,526 Actual out of pocket costs

*THE DIFFERENCE=$3020 more to attend Holy Cross at $43,181 vs. UMASS at $19, 246

Appealing a Financial Aid Award
Appealing
• The first award may or may not be
the last offer
• Follow each school’s appeal
procedure
• Base appeal on situations related
to “mis-awards” or “special
circumstances
Special Circumstances
• Loss of employment or dramatic
reduction in parent’s or student’s
income/assets
• Reduction in child support or
social security benefits
• Financial responsibility for elderly
parents
• Unusual medical/dental expenses
not covered by insurance


Still Confused ?


So Where Do You Go For Help
• Well you could seek out assistance from your local
college financial aid office but that is like going to
the IRS for help to reduce your income taxes
• Or you could ask your high school guidance
counselor for their help but with a workload of
hundreds of students do you really think they have
the time or even the expertise to deal with your
specific situation
• Maybe even spend hours on end scouring the
internet doing research and looking for answers
• Better yet contact us………..


What you can expect to gain from a
confidential personal evaluation
• EFC Analysis
• Current & Best case scenarios
• Federal & Institutional methodologies
• Find out now exactly how much financial aid your student will be
eligible for
• Evaluation of assets
• Impact of those assets on financial aid eligibility
• College profile report
• Learn your asset protection allowance
• Identify which assets /income are affecting your EFC
• Discuss strategic solutions to maximize the amount of financial aid
which you can receive
• Create an action plan for paying college costs
• Discuss our fee structure which includes all of the above


Contact Us
1-800-698-1994
Financial Aid Strategy (FAS)
255 Park Avenue Suite 1104
Worcester Ma. 01609


THANK YOU
We hope this
presentation has
been helpful and that
you now have a better
grasp of the college
financial aid process.


What Parents need to know about College Financial Aid

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