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How the Financial Aid Process Works

How the Financial Aid Process Works. Ruth Pusich Director of Financial Aid Elmhurst College. Topics. Federal Methodology CSS Profile Types, Categories and Sources of Financial Aid Educational Loans Understanding the Financial Aid Award/Package Net Price Calculators. Federal Methodology.

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How the Financial Aid Process Works

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  1. How the Financial AidProcess Works Ruth Pusich Director of Financial Aid Elmhurst College

  2. Topics • Federal Methodology • CSS Profile • Types, Categories and Sources of Financial Aid • Educational Loans • Understanding the Financial Aid Award/Package • Net Price Calculators

  3. Federal Methodology • The Federal Need Analysis Methodology is used by the federal and state governments, as well as colleges, to award federal and state financial aid. It is regulated by the U.S. Congress and is administered by the U.S. Department of Education. The FM takes into consideration income, assets, expenses, family size, and other factors to help evaluate a family's financial strength. The information used for FM analysis is collected on the Free Application for Federal Student Aid (FAFSA). • The FM determines a student's expected family contribution (EFC) for an award year for the student financial aid programs authorized under title IV of the Higher Education Act of 1965. • An EFC is the amount that a student and his or her family may reasonably be expected to contribute toward the student's postsecondary educational costs for purposes of determining financial aid eligibility. Financial Aid is money that is gifted, earned or borrowed to pay for educational expenses

  4. Federal Methodology • Free Application for Federal Student Aid (FAFSA) • Calculates the EFC • Foundation for special circumstances and professional judgments • Self-report web-based application • Requires a PIN to sign application • Gathers data from student and parents • Demographics of student and parent(s) • Family size • Enrolled college students • Income /Assets • May need to use 2011 income tax information if 2012 taxes are not completed • Information is forwarded to reported state of residence • State of Illinois and many Schools have deadlines • Schools may require FAFSA for scholarships • Annual application

  5. Website: www.fafsa.gov • Available on January 1, 2013 for 2013-2014 • FAFSA on the Web Worksheet: • “Pre-application” worksheet • Questions follow order of FAFSA • Website: www.pin.ed.gov • Sign FAFSA electronically • Not required, but speeds processing • Used by students and parents throughout aid process, including subsequent school years

  6. FAFSA • Student is the “OWNER” of the FAFSA • Each college student in a family would need separate FAFSA • Eligibility: • US Citizen or eligible non citizen • Enrolled in an accredited institution, working towards a degree, earning credit, and making good academic progress • Who is a dependent student? • 13 questions to determine dependency status • If a student is dependent based on the questions, the income of the parent(s) MUST be included on the FAFSA • Size of family and number in college • Can send to 10 schools • Calculation will give the EFC • Used by all schools to determine “need”

  7. FAFSA • Who is the parent? • Traditional family – both biological parents • Separated or Divorced parents • Use the income information from the parent that the student lives with most of the time (51% of the time) • If this parent is married – income of stepparent would also be included • If other biological parent is providing child support, it would be reported as “untaxed” income

  8. What You Need • Student’s Information • Legal name • Birthdate • Social Security Number • High School name • If the student is male, are they registered for Selective Service? • Income Information • 2012 taxes if filed; and/or • W2s if student worked in 2012 but did not file taxes • Asset Information • Cash, savings, savings bonds, UTMAs, UGMAs, stocks, bonds • Investments • PIN Number for signature

  9. What You Need • Parent(s) Information • At least one parent • Legal name • Birthdate • Social Security Number • Income Information • 2012 taxes if filed; and/or • W2s (income from work) • Asset Information • Cash, savings, savings bonds, 529 plans, stocks, bonds • Investments • PIN Number for signature

  10. What You Need What are Assets? • Include: • Real Estate other than your personal home • Cash, savings • Stocks, bonds, investments • 529 plans • Do Not Include: • Value of home • Value of Retirement accounts • Value of Life Insurance policies • Value of family business with less than 100 FT employees

  11. IRS Data Retrieval NOT REQUIRED RECOMMENDED FOR ACCURACY • May submit real-time request to IRS for tax data • IRS authenticates taxpayer’s identity (PIN) • If match found, IRS sends real-time results to applicant in new window • Applicant chooses whether or not to transfer data to FAFSA

  12. Federal Methodology • Income Protection • Students - $6,000 threshold • 50% of income over $6000 factored into EFC • Parents • Employee expenses • State and other tax allowances • Social Security tax calculation • Asset protection • Students • 20% of every dollar in cash, savings, investments, etc. • Parents • Exclusion - based on age (45/$41,300 or 55/$53,400) • 7% of discretionary net worth

  13. Verification • Verification • 35% of students are selected for verification by the processor • Schools are required to collect the data • Number in family • Number of family members in college • Student and parent 2012 IRS tax transcript or data retrieval or non-filer statement • SNAP Benefits • Child Support Paid • Proof of High School Completion • Proof of Identity

  14. Verification • Some schools “verify” every student every year • Some schools ask for data based on the answers to the questions on the FAFSA • Schools cannot disburse federal funds if they do not receive required paperwork • Must provide the requested information only to the school that the student attends

  15. Institutional Methodology CSS/Financial Aid Profile Though the federal government may be the largest single source of financial assistance for families, a significant amount of aid comes from the colleges themselves. The IM is used by many colleges and private scholarship programs to determine students' eligibility for their own private funds. These institutions or programs may require students to complete the CSS/Financial Aid PROFILE® in addition to the FAFSA. • Financial Aid application service of the College Board • Over 400 colleges and scholarship programs use data • $9 application fee • $16 for each college or scholarship program • Includes more detailed financial information • Institutional methodology is used to determine awards • Can begin to complete after October 1

  16. Assembling Financial Aid • Variables: • Cost of Attendance (COA) • FAFSA results (EFC) • Need (COA – EFC = Need) • Academic credentials • Eligibility for specific aid programs

  17. Cost of Attendance Varies between schools: • Direct Costs • Tuition/fees • Room • Board • Indirect Cost • Books • Travel expenses • Miscellaneous Personal expenses

  18. Financial Need and EFC

  19. Types of Financial Aid • Gift – money you do not pay back • Scholarships • Grants • Self-Help • Student Employment • Must work to benefit from the award • Student Loans • Must pay back after education is completed

  20. Categories of Financial Aid • Need Based (considers income of family) • Grants • Federal work study • Perkins and subsidized loans • Non-Need Based (does not consider income or assets) • Merit/talent based scholarships • Unsubsidized and Parent loans

  21. Sources of Financial Aid

  22. Education Loans • Perkins – 5% • No interest accrues while student is in school • Federal Direct Loans – 6.8% • Subsidized • No interest accrues while student is in school • Unsubsidized • Interest accrues while student is in school • Can pay interest as it accrues or let it capitalize and pay later • What a student can borrow each year • $5,500 – Freshmen ($3,500 sub/$2,000 Unsub) • $6,500 – Sophomores ($4,500 sub/$2,000 Unsub) • $7,500 – Juniors & Seniors ($5,500 sub/$2,000 Unsub) Loans go into repayment 6-9 months after graduation

  23. Education Loans • Parent PLUS Loans – 7.9% • Designed to go into repayment 60 days after second disbursement (March) • Can be deferred until 6 months after student has completed education • Alternative/Private Loans • Provided by private banks or lenders • Cannot be consolidated with other federal student loans • Interest rates vary per lender and credit scores

  24. Award Letter/Package • Formal presentation of types and amount of financial aid a student is eligible to receive at a specific school • Result of either a scholarship award or the submission of the FAFSA • May be delivered via email or in paper form – or both • Will provide Cost of Attendance and uncovered expenses

  25. Award Letter/Package • Will include all forms of financial aid (most schools) • Will also include very important consumer information • May include a “Shopping Sheet” • May have deadlines to respond • Award letters do not constitute a commitment to attend an institution unless you have made a binding commitment with a school • Early Decision

  26. Award Letter/Package • May need to provide verification information to the school • Some schools require all paperwork prior to the award • Other schools will send the award package and request information • Read everything to understand the restrictions of various awards • Enrollment status • Renewability • Grade maintenance

  27. Award Letter/Package • Each school will have directions on methods of responding to letter or package • Accept scholarships and/or grants • May need to return a signed paper copy of letter • May be directed to a secure website for acceptance • Loans may or may not be included in award package depending upon type of school • May need to decline student loans (passive) • Accept student loans (active) • Master Promissory Note • Entrance Counseling

  28. Award Letter/Package • Compare Award Packages with schools on your hot list • Add up Direct Costs (charges billed by the school) • Tuition/fees • Room/board • Add up “Gift” aid only (do not include FWS or loans) • Scholarships • Grants • Real Cost of a school: Direct Costs - Gift Aid Bottom Line

  29. Net Price Calculator • Federally mandated law as of October 29, 2011 • All undergraduate schools must have a calculator easily accessible on their website • Designed for the first-time new freshman student • Calculators will vary by school • Amount of information received will vary by school • Will ask for income and asset information – basic • For estimated EFC use FAFSA4caster on www.FAFSA.gov

  30. CONCLUSION • Read everything you receive • Do not make any assumptions • Ask questions when in doubt ? Be very cautious about paying money to an individual to file the FAFSA or search for scholarships

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