Financing Education Beyond High School

1. Financing Education Beyond High School 2008-09

2. Financing Your Education • What is financial aid? • Where does it come from? • What aid is available? • Who is eligible? • How do I apply?

3. Agenda • Definition of financial aid • Definition of financial need and how it is determined • Descriptions of major federal financial aid programs • How to apply for financial aid, including the Free Application for Federal Student Aid (FAFSA), and how to avoid errors • Descriptions of other government resources • Where to look for information about private sources of aid, including how to avoid being scammed

4. What is Financial Aid? • Scholarships • Grants • Loans • Employment Opportunities

5. Types of Aid • Gift aid: Grants and scholarships (need-based or merit-based) • Self-help aid: Loans and employment (need-based or non-need-based)

6. Goals of Financial Aid • Primary goal is to assist students in paying for college and is achieved by: • Evaluating family’s ability to pay educational costs • Distributing limited resources in an equitable manner • Providing balance of gift aid and self-help aid

7. Definition of Need COA(cost of attendance) EFC (expected family contribution) Need minus equals

8. Cost of Attendance • Tuition and fees • Room and board • Books, supplies, transportation, and miscellaneous personal expenses, including documented costs for a personal computer • Loan fees • Study abroad costs • Dependent care expenses • Disability-related expenses • Cooperative education program costs

9. Need Varies Based on Cost

10. Example of Need COAEFCNeed LocalCollege $8,000 $2,000 $6,000 BigUniversity $15,000 $2,000 $13,000 Harvard $50,000 $2,000 $48,000 You will receive a financial aid packet from every school in which you request results of your FAFSA to be sent

11. Principles of Need Analysis • To extent they are able, parents have primary responsibility to pay for dependent child’s education • Students also have responsibility to contribute to educational costs • Families should be evaluated in their present financial condition • Family’s estimated ability to pay educational costs must be evaluated in equitable and consistent manner, recognizing that special circumstances may affect family’s ability to pay

12. Federal & Institutional Methodology Federal Methodology is the formula created by Congress to determine the EFC. Institutional Methodology is the formula used by institutions to determine eligibility and need.

13. Do you REALLY Want to Know? • How do the computations take place? Let’s vote!

14. EFC for Dependent Student Step 1: Determine available parental income Total income (taxed and untaxed) – Excludable income (e.g., child support paid) – Taxes paid (i.e., federal, state, local, Social Security) – Income protection allowance for basic living expenses (e.g., food, shelter, etc.) – Employment allowance (if eligible) = Available income (may be negative)

15. EFC for Dependent Student Step 2: Determine available parental assets Value of cash, savings, and checking accounts + Adjusted business/farm net worth (total value minus debt against business/farm) + Investment/real estate net worth (excluding home) – Education savings and asset protection allowance (determined by age of older parent) x Asset conversion rate (12%) = Parental contribution from assets

16. EFC for Dependent Student Step 3: Determine portion of available parental income and assets available for education Available income + Contribution from assets = Adjusted available income (AAI) x Assessment rate (varies) = Total parental contribution ÷ Number attending college (excluding parents) = Parental contribution for student

17. EFC for Dependent Student Step 4: Determine student contribution Total income (i.e., taxed and untaxed) – Excludable income – Taxes paid (i.e., federal, state, local, and Social Security) – Income protection allowance – Parental adjusted available income if < $0 = Student’s available income

18. EFC for Dependent Student Step 4: Determine student contribution Student’s available income x 50% assessment rate = Income contribution from student + 35% of the student’s net asset worth = Student contribution

19. EFC for Dependent Student Parental contribution from income and assets (as adjusted, if more than one household member in college) + Student contribution from available income and assets =EFC

20. The Gap Need- Financial Aid Package Unmet Need 1 2 Need 3 EFC 1 Aid Package 2 3 Unmet Need EFC

21. Federal Pell Grants • Awarded to eligible undergraduates pursuing first baccalaureate degree and certain students enrolled in post-baccalaureate teacher certification or licensing programs • Portable • Actual award amount based on COA, EFC, and enrollment status • Maximum award for 2005-06 was $4,050

22. Federal Supplemental Educational Opportunity Grants (FSEOG) • Eligible students: • Undergraduates pursuing first baccalaureate or professional degree • Awarded first to students with “exceptional financial need” (i.e., students with lowest EFCs at that school) • Priority to Federal Pell Grant recipients • Annual award amounts: • $100 minimum • $4,000 maximum

23. Federal Work-Study (FWS) Earnings • Eligible students: Undergraduate, graduate, and professional students • Employment may be on or off campus • Eligible employers: • Schools • Federal, state, or local public agencies • Certain private nonprofit and for-profit organizations • Schools must use portion of FWS funds for community service employment activities

24. Federal Perkins Loans • Eligible students: • Undergraduate, graduate, and professional students • Priority to students who show “exceptional need,” as defined by school • Loan amount varies • Maximum annual loan amounts: • $4,000—undergraduate students • $6,000—graduate and professional students

25. Federal Perkins Loans • Interest rate: 5% • 9-month grace period • Repayment period may be up to10 years • Deferment and cancellation provisions available

26. Stafford Loans • Student loans available under: • Federal Family Education Loan (FFEL) Program with funds provided by lenders (e.g., banks and credit unions) • Federal Direct Student Loan (Direct Loan) Program with funds provided directly by federal government via participating schools • School determines loan eligibility and delivers loan proceeds to students

27. Stafford Loans • Subsidized: Must demonstrate “need” • Unsubsidized: Not based on “need” • Base annual loan limits (combined subsidized and unsubsidized): • $2,625 for 1st year undergraduates • $3,500 for 2nd year undergraduates • $5,500 for each remaining undergraduate year • $8,500 for each year of graduate/professional study

28. Stafford Loans • Additional unsubsidized loan eligibility for independent undergraduate, graduate, and dependent students whose parents are unable to borrow PLUS: • $4,000 per year for 1st and 2nd year undergraduates • $5,000 per year for remaining years of undergraduate study • $10,000 per year for graduate/professional study

29. Stafford Loans • Variable interest rate, capped at 8.25% • Interest rate for 7/1/05 – 6/30/06 is: • 4.70% in-school, grace, and deferment periods • 5.30% repayment and forbearance periods • Loan fees based on principal amount of each loan: • FFEL: Up to 3% origination fee and 1% insurance premium • Direct Loan: Up to 4% loan fee

30. Stafford Loans • Repayment begins after 6-month grace period • Maximum repayment period between 10 and 30 years depending on repayment plan chosen • Deferment and cancellation provisions available

31. PLUS • Parent loan program for parents of dependent undergraduate students • Annual loan limit: COA minus other aid • Variable interest rate • May not exceed 9% • Interest rate for 7/1/05 – 6/30/06 is 6.10%

32. PLUS • Loan fees based on principal amount of each loan: • FFEL: Up to 3% origination fee and 1% insurance premium • Direct Loan: Fixed 4% loan fee • Repayment begins 60 days after loan is fully disbursed

33. PLUS Denial If you apply for a PLUS loan and are DENIED Send a copy of the denial letter to the Financial Aid Office and your student will be eligible for additional Stafford Unsubsidized Loan. Also, contact the lenders, appeal the denial, there may be other options to access PLUS loans.

34. Summary Time • Federal Aid programs • Free money? • Borrowed Money? • EFC? • Gap? • Other stuff?

35. General Student Eligibility 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

36. General Student Eligibility Criteria • Must have valid Social Security Number (SSN) • May not be in default on a federal student loan • Must not owe an overpayment of federal grant or loan funds • Must be making satisfactory academic progress (as defined by school)

37. Role of the Financial Aid Office • Determines aid eligibility using federal formula, and school formula • Packages aid depending on availability of funds • Sends award notification including: • Award amount for each program for which student is eligible • Disbursement methods and time frames • Terms and conditions of each award

38. Application Process • Submit FAFSA prior to school’s deadline • Most aid awarded on “first-come, first-served” basis • To ensure maximum consideration for federal, state, and institutional aid, check information from each school to determine: • Required application materials • Application deadlines

39. Deadlines • FAFSA Deadline • Application for federal aid • State of Maine Deadline • Application for state money • Scholarship Program Deadline • Some scholarship programs want your information • Institutional Deadline • Application for school aid programs; including state and federal money

40. College Scholarship Service • Many member colleges, universities, graduate and professional schools, and scholarship programs use the information collected on PROFILE to help them award nonfederal student aid funds.

41. FAFSA (as a bit of review) • Collects family’s personal and financial information used to calculate student’s EFC • Available in English and Spanish • May file FAFSA in one of two ways: • Electronically via FAFSA on the Web • Paper FAFSA (not encouraged!)

42. FAFSA on the Web • Web site: www.fafsa.ed.gov • 2006-07 FAFSA on the Web available on or after January 1, 2006 • Pre-Application Worksheet: • Available prior to January 1st • Questions follow order of FAFSA on the Web

43. FAFSA on the Web • Good reasons to file electronically: • Built-in edits to help prevent costly errors • Skip-logic allows student and/or parent to skip unnecessary questions • 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 renewal application process

44. PIN Registration • Web site: www.pin.ed.gov • Can get PIN before January 1, 2006 • Not required, but speeds processing • May be used by students and parents throughout aid process, including subsequent school years

45. Paper FAFSA 2006-07 FAFSA—8-page booklet containing: • Instructions • 103 questions in 7 steps • Worksheets A, B, and C • Pre-addressed envelope to mail completed form and return-receipt postcard

46. CAUTION! • Avoid being charged a fee to file the Free Application for Federal Student Aid • Completion and processing of the FAFSA are FREE (don’t ever pay!!) • If filing via FAFSA on the Web, be sure to go directly to www.fafsa.ed.gov • Contact financial aid office for help completing the FAFSA

47. ERRORS can be COSTLY! Errors on the FAFSA or supplemental forms may DELAY application processing and result in the LOSS of financial aid funds. Read the instructions and complete all forms carefully! Download the FAFSA worksheet from the website, complete it as soon as you can, then use it to complete the online FAFSA.

48. Frequent FAFSA Errors • Parent and student Social Security Numbers • Divorced/remarried parental information • Income earned by parents/stepparents • Untaxed income • U.S. income taxes paid • Household size • Number of household members in college • Real estate and investment net worth

49. FAFSA Processing Results • Central Processing System (CPS) notifies student of FAFSA processing results by: • Paper Student Aid Report (SAR) if paper FAFSA was filed and student’s e-mail address was not provided • SAR Information Acknowledgement if filed electronically via FAFSA on the Web and student’s e-mail address was not provided

50. FAFSA Processing Results • CPS notifies student of FAFSA processing results by: • E-mail notification containing a direct link to student’s on-line SAR if student’s e-mail was provided on paper or electronic FAFSA • Student with PIN can view SAR on-line at www.fafsa.ed.gov