Financial Aid 101

1. Financial Aid 101 What You Need to Know About the College Financial Aid Process Presented by Lisa Branson & Jack Zegeer Northern Virginia Community College

2. Topics • Why is college important? • What is Financial Aid? What is Financial Need? • Need Components • Types of Aid • Applying for Aid • Dependency Status and Parents • Change in Circumstances • Tax Credits – Making College Affordable One Debt Ceiling Debate At A Time • What Should You Do Next?

3. Why is College Important?

4. Why is College Important? • Compared to an individual High School Diploma • An associates degree recipient earns 20% more in each paycheck, and has a 40% greater chance of being employed • A bachelors degree recipient earns 70% more in each paycheck, and has a 90% greater chance of being employed • A masters degree recipient earns 105% more in each paycheck…

5. What is Financial Aid? • Financial aid consists of funds provided to students and their families to help pay for postsecondary education. • Financial aid helps to bridge the gap between the Cost of Attendance and the Expected Family Contribution.

6. What is Cost of Attendance (COA)? Varies based on the school

7. What is Expected Family Contribution (EFC)? • Amount a family can reasonably be expected to contribute • Two Components • Parent Contribution + Student Contribution • Calculated using data from the FAFSA • Does not change based on the school

8. Financial Need Calculation

9. Financial Need Cont.

10. Where Does Aid Come From? • Federal government • State government • College/University • Private sources

11. Types of Financial Aid • Grants • Work-study • Loans • Scholarships

12. Grants • Money that does not have to be paid back, some may require an “agreement to serve” after graduation • Typically based on financial need • Federal Grants • Federal Pell Grant, Federal Supplemental Education Opportunity Grant (FSEOG), Teacher Education Assistance for College and Higher Education Grant (TEACH) • State Grants • Virginia Guaranteed Assistance Program, Commonwealth Award, Virginia Tuition Assistance Grant

13. Work-Study • Allows student to earn money to help pay for college costs • On and off-campus jobs available • Paid by: • Paycheck • Credit to student account • Non-monetary compensation Example: Room and Board (resident assistants) • Not all colleges participate

14. Loans • Money that is borrowed to finance educational costs, which must be repaid • Borrower - Student and/or Parent • Repayment • Student - After graduating or dropping below half-time enrollment • Parent - Typically 60 days after the first disbursement or can request deferment while student is enrolled at least half-time (interest accrues while deferred) • Repayment terms and options vary for students and parents

15. Loans Common Federal Loan Programs • Federal Perkins Loan – fixed 5% interest rate • Federal Direct Student Loan • Subsidized – fixed 4.66% interest rate, interest does not accrue while in school, based on need • Unsubsidized – fixed 4.66% interest rate, interest accrues while in school, but does not require in-school repayment on interest, not based on need • Federal Parent PLUS Loan – fixed 7.21% interest rate, one parent borrower, good credit history

16. Loan Debt • On average, college borrowers graduating from public institutions with a Bachelor’s Degrees had ~$24,000 in federal student loan debt. • On average, college borrowers graduating from private, non-profit institutions with a Bachelor’s Degrees had ~$29,500 in federal student loan debt. • 67% of college students graduate with debt!

17. Loan Debt cont. • What does $27,000 look like in repayment? • At 6.0% (likely future rates), this equates to a $300 monthly payment for 10 years • You will pay $8,500 in interest, for a total payment of $35,500 • Income based-repayment plans will lower your monthly payment, but can drastically increase your overall interest paid.

18. Loan Debt cont. • While, these numbers may be striking, the fact still remains that a college education provides an incredible return on money invested. • Average lifetime earnings for a bachelor’s recipient are $800,000 to $1,000,000 greater than a high school diploma recipient • Approach borrowing and paying for college realistically!

19. Scholarships • Money that does not have to be paid back • Usually based on merit, skill, a unique characteristic, and/or need • Think of scholarships as a competition – Sell Yourself • Sources • Civic organizations, churches, employers, schools • Free online web searches • https://bigfuture.collegeboard.org/scholarship-search • CAUTION – Beware of scams • http://www.finaid.org/scholarships/protecting.phtml

20. Question Intermission

21. FAFSA Process Complete the Free Application for Federal Student Aid (FAFSA) each year. • Available January 1 of each year at www.fafsa.gov • Check with colleges for any priority deadlines • File electronically for faster processing and online tracking • Collects demographic and financial information • If “Will File”, you can provide estimated tax information, but will need to update once taxes have been filed • Information collected is used to determine EFC • Apply for PIN (Personal Identification Number) • Student and parent sign with their own PIN

22. PIN Process • PIN PROCESS is being changed as of April 2015 • New username and password to be used for all FAFSA applications after April 2015 • Student and parent each apply for a personal identification number (PIN) at www.pin.ed.gov • Can be requested at any time, even real-time as the student completes the online FAFSA • Must have PIN to electronically sign the FAFSA • PIN can be used to sign loan master promissory note (MPN)

23. General Student Criteria • U.S. citizen or eligible non-citizen (next slide) • Registered with Selective Service (males) • Valid Social Security Number (SSN) • High school diploma, GED, or homeschooling credential • Enrolled or accepted in an eligible degree or certificate program • Criminal convictions (including drug convictions) may limit eligibility, depends on the conviction type

24. Dependency Status FAFSA will ask a series of questions to determine if the student is dependent or independent, including: • 24 years or older • Married • Master’s or doctorate degree program • Military service – Active or Veteran • Children and/or dependents, provide half of support • Foster care, deceased parents, dependent or ward of court, emancipated minor or legal guardianship, homeless * If all “No” answers, student is dependent. * If “Yes” to any question, student is independent.

25. Who is the ‘Parent’? • Biological parents’ information or adoptive parents should be provided on the FAFSA • Grandparents, legal guardians, foster parents, older brothers or sisters, and uncles or aunts are not considered parents on the FAFSA unless they have legally adopted you • Possible dependency override in certain circumstances – rare, but speak with your financial aid administrator

26. Which parent? In cases of divorce or separation: • Who did the student live with the most during the past 12 months? • If neither or both, who provided the most financial support? • Example: Who paid for health or car insurance?

27. Household Size • Student • Parents • Dependents • Others who live with you and you are providing more than half of their support and will continue to provide from July 1 – June 30

28. Errors can be costly! • Read instructions and complete carefully! Incorrect or missing information may delay the process and result in loss of financial aid • Most Common Errors • Incorrect Social Security Numbers • Divorced/remarried parental information • Income earned/paid and untaxed income • Household size and number of household members in college • Real estate and investment net worth

29. IRS Data Retrieval Tool (DRT) • Applicants have the option to transfer IRS tax data into their FAFSA using the DRT • DRT allows the applicant to file more quickly and accurately • File taxes electronically and early, then file your FAFSA using the IRS DRT after 10-14 days • Not eligible for IRS DRT? • Complete based on 2014 tax return and order an IRS transcript of any 2014 tax returns filed at http://www.irs.gov/Individuals/Get-Transcript

30. Verification • At least one in three applications will be selected by a school, greater probability for new students • Did not use the IRS DRT and are selected for verification? You must submit an IRS Transcript • Contact your financial aid office about any other documentation needed for the verification process • Financial aid cannot be released to a student’s account until this step is completed

31. Role of the College Financial Aid Office • Assists students and their families in understanding and utilizing financial aid resources • Determines federal and state aid eligibility • Verifies FAFSA information • Reviews special circumstances • Packages financial aid depending on fund availability • Sends award notification (electronic or paper) with award amounts, disbursement methods, timeframes, and any terms and conditions of each award

32. Change in Circumstances • Loss of income or benefit • Death of a parent • Parent divorced or separated after FAFSA is filed • Unusually high medical expenses paid but not reimbursed by insurance You may be eligible for adjustment based on professional judgment - speak with your financial aid administrator

33. Education Tax Credits • 1098-T – Tax Form • www.irs.gov/pub/irs-pdf/p970.pdf • American Opportunity Credit • $2,500 credit per student, $1,000 is refundable, 4 years of eligibility • Lifetime Learning Tax Credit • $2,000 per tax return, no portion refundable, unlimited number of years

34. Education Tax Credits cont. • Tuition and Fees Tax Deduction • Deduct taxable income by up to $4,000 • Not a credit! • Deduction expired for 2013 – Up in the air for renewal for 2014 • Student Loan Interest Deduction • Not a credit! • Deduct yearly accrued interest from taxable income

35. What’s Next? • After FAFSA processing, student will receive a Student Aid Report (SAR) via link in email if student provided valid email address or paper by mail if no valid email address provided • Review SAR comments and check for accuracy • Remember to update any estimated information • Make sure you meet all admissions and financial aid deadlines. Check each school’s website for details • Submit any requested documents • Search and apply for other sources of aid, such as private scholarships and grants

36. Summary • Start the process early • Know any and all deadlines • Know what information and forms you need • Provide accurate information • Make and save copies of everything • Follow up: typical processing times are 4-6 weeks • Check your email regularly • If you have a question – ASK!

37. Super Saturday Events • You can receive in-person help in completing the FAFSA at a “ 2015 Super FAFSA Week” event • Financial aid professionals will help you complete the FAFSA online • Find an event near you • February 1-8, 2014 • Details at www.vasfaa.org/super • NOVA Financial Aid will hold multiple FAFSA filing events at Loudoun County High Schools from Mid-January - March

38. Other Resources • www.vawizard.org – College-Cost Calculator, FAFSA estimator, Career Finder • www.studentaid.gov – Detailed information on specific aid programs and aid eligibility. www.studentloans.gov – Information on federal loans, repayment plans, and repayment calculators • www.finaid.org – Financial aid information and helpful tips in navigating the application

39. Questions? Thank you for attending! Ask Away!

40. jzegeer@nvcc.edu - Email