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Introduction to Financial Aid: An Overview for High School Parents

Introduction to Financial Aid: An Overview for High School Parents. presented by: (Your Name) (Your Title) (Your Institution). Tonight’s Topics. Types and sources of aid How financial need is determined When and how to apply Completing the FAFSA What to expect from each type of college

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Introduction to Financial Aid: An Overview for High School Parents

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  1. Introduction to Financial Aid: An Overview forHigh School Parents presented by: (Your Name) (Your Title) (Your Institution)

  2. Tonight’s Topics • Types and sources of aid • How financial need is determined • When and how to apply • Completing the FAFSA • What to expect from each type of college • How to recognize and avoid scams • Other college financing options

  3. Need versus Merit Aid • Aid based on financial need • most government grants • subsidized student loans • Federal Work-Study • Aid based on merit • academic and athletic scholarships • some government grants • Some scholarships require merit and need

  4. Sources of Financial Aid • Federal Government • $51 billion (68%) • Colleges and Schools • $15 billion (20%) • State Government • $ 4 billion (6%) • Private Organizations • $ 4 billion (6%) $74 billion

  5. Types of Financial Aid • Gift Aid • not paid back • grants and scholarships • Loans • paid back with interest • student and/or parent may borrow • Work-Study • earned as wages • part-time jobs on or off campus

  6. Helpful Hints When Applying for Financial Aid • Review the college catalogue -procedures, deadlines, special circumstances • Correctly complete and submit the right forms • Know the deadline dates and meet them • Know your file will not be processed until you are ACCEPTED for admission • Respond promptly to requests and notices • Keep copies of all forms sent and received • Apply EACH year for as long as you need aid

  7. Financial Aid Process • You fill out FORMS !!!!! -EACH college may have their own -FAFSA -CSS Profile (high cost colleges) • There are Eligibility Formulas -Federal Methodology -NJ Eligibility Index (TAG) • You provide information to EACH college - tax returns • Receive a letter (award) from college

  8. Financial Aid Process • You fill out FORMS !!!!! • EACH college may have their own (know school’s deadline!) • FAFSA (Get a PIN and Apply On-Line) • CSS Profile (high cost colleges – Apply On-Line) • There are Eligibility Formulas • Federal Methodology/NJ Tuition Aid Grant Formula • Institutional Methodology • You provide information to EACH college • tax returns • Check web sites/college catalogs for school specific information • Receive a letter (award) from college • usually contains 3 types of financial aid

  9. Financial Aid Process • You fill out FORMS !!!!! • EACH college may have their own (know school’s deadline!) • FAFSA (Get a PIN and Apply On-Line) • CSS Profile (high cost colleges – Apply On-Line) • There are Eligibility Formulas • Federal Methodology/NJ Tuition Aid Grant Formula • Institutional Methodology • You provide information to EACH college • tax returns • Check web sites/college catalogs for school specific information • Receive a letter (award) from college • usually contains 3 types of financial aid

  10. CSS /PROFILE • Collects additional data colleges need • Target limited non-federal funds • Financial need vs. federal eligibility • Supports Institutional Methodology (IM) as well as Federal Methodology (FM) • Supports early estimates/early admission

  11. 2003-2004 Profile Registration • College Board Online - www.collegeboard.org • Apply electronically or Register for paper application • Toll free telephone registration - (800) 778-6888 • Applications received within 7 to 10 work days • Receive a “customized” application • Student Fees • -$7 phone registration, $5 for Internet -$17 reporting fee per school PROFILE fee waivers • Cards distributed in September • Covers fees for one or two Code Numbers • Can be used with PROFILE Online

  12. What Is the FAFSA?Free Application for Federal Student Aid • A multi-purpose application form • One form to apply for all colleges • One form to apply for all aid programs • federal grants, loans and work-study • New Jersey grants • most college aid • One form each year for each student

  13. FAFSA on the Web:www.fafsa.ed.gov • Complete and send FAFSA on the internet • Saves 7-14 days compared to paper FAFSA • Access from anywhere • No software to install • Automatically edits data as you enter it • Skip logic: asks only what you must answer

  14. What’s a PIN?www.pin.ed.gov • Personal Identification Number • Students and parents can get PINs • Electronic signature for FAFSA on the Web • PIN delivered by mail in 7-10 days • Can also be used for: • Renewal on the Web • Corrections on the Web • National Student Loan Database

  15. Application Processing Flowchart college # 1 college # 2 CENTRAL FAFSA STUDENT PROCESSING college SYSTEM # 3 college SEN SAR # 4 NJEI: EFC: college # 5 college Data # 6 NJ Office of base Student Assistance Match

  16. Divorced/Separated Issues • FAFSA is to be completed by parent student is living with • If parent has remarried, step parent information must be included on FAFSA • Some higher cost schools will ask for a Divorced/Separated Supplement to be completed on other parent to determine eligibility for college programs

  17. Unemployment or change in employment Separation or divorce Death of parent Disability of student or parent Windfall (inheritance, overtime, etc.) Loss of benefits Elementary/secondary school expenses Unreimbursed medical or dental expenses Special Circumstances? Call the Financial Aid Office

  18. Financial Need Cost of Attendance - Expected Family Contribution (EFC) = Financial Need

  19. Cost of Attendance • Tuition and fees • Books and supplies • Room and board • Transportation • Personal expenses Cost varies most by: - Type of college (private, state or county) - Academic program

  20. Then the family contribution is determined and subtracted from cost • using government “Federal Methodology” • considering: income, non-home assets, family size, age of parents, number of parents working, number in college...

  21. . . . the family • It is expected that parents will help finance their child’s college education • Students are also expected to do their part through savings, part-time earnings and student loans

  22. Expected Family Contribution • Formula established by the U. S. Congress • Uses information reported on your FAFSA • Index for Federal Pell Grant eligibility May be adjusted by your college due to: - Verification/correction of your FAFSA data - Special circumstances that limit ability to pay

  23. Middle Income Student Family Size 5 Number in college 1 Parent AGI $72,000 Parent’s Assets $15,000 Student’s AGI $6,763 Student’s Assets $3,000 Expected Family Contribution: $13,254

  24. Needs Vary By Schools Attended Community State Private College University University Budget $ 7,459 $ 15,400 $ 25,240 EFC 13,254 13,254 13,254 Need 02,146 11,986 Financial 2,625 2,146 (Sub.) 4,750 (grant) Aid Unsub. 479 (Unsub.) 2,625 (sub) PossibleStafford Stafford Stafford

  25. There are many forms of grants: • Federal Pell Grant • Federal Supplemental Educ. Opport. Grant • N. J. Tuition Aid Grant • College Grants • None have to be repaid

  26. Other Sources of Aid • Colleges • athletic and academic scholarships • endowed funds and alumni groups • Private sources • employers and labor unions • religious or community organizations, clubs, and civic groups • high schools • Veterans Administration (apply to VA)

  27. There are numerous loan programs • Federal Perkins Loans - 5% • Stafford Loans - 8.25% cap subsidized and unsubsidized currently 3.46% • NJ CLASS Loans - 4.75% • PLUS Loans (parents) 4.86%

  28. Even if you are not able to show a need, you will be able to have an unsubsidized Stafford Loan

  29. There are two kinds of Federal Loans • Borrowed through private lender (bank, savings & loan, credit union) • Borrowed directly from government through school (Direct Loans) • School will decide which will be made available to you

  30. Loan Debt and Loan Limits • $ 15,375 Average Loan Debt of Undergraduates • $ 17,250 Average Loan Debt of Graduates • Stafford Loan Limits- Undergraduates - Freshman - $ 2,625 - Sophomore - $ 3,500 - Junior - $ 5,500 - Senior - $ 5,500

  31. NJCLASS • Lender is NJ Higher Ed Student Assistance Authority • Can borrow for Out of State College • Undergraduate or graduate students, parents, legal guardian, spouse or relative may borrow • Borrowers must be creditworthy or provide a cosigner • Loan may be up to the cost of attendance minus other aid • No restriction on income • Interest rate is fixed and depends upon payment option • Pay principal and interest monthly • Defer principal and pay interest quarterly • Defer principal and interest (interest capitalized at a higher rate) • 15 year repayment period, minimum is $50 per month

  32. So You Have To Borrow Money • Federal Stafford Loan (student) • Subsidized/Unsubsidized • Flexible Payment Plans • -available from college • spread tuition over several months • NJCLASS or PLUS Loan (parent) • Home Equity -borrow up to 80% of Equity -long repayment period -tax deductible • Life Insurance Policies/Pension Plans

  33. Role of the Financial Aid Office • Determine financial need of all applicants • Verify applicant data when required • Develop policies and procedures to distribute aid • “Package” aid from all available sources and send award letters. • Answer your questions.

  34. Financial Aid by Type of College • Private Colleges -most expensive, smaller, more financial aid • Public Colleges -larger, more variety, subsidized by state • Community Colleges -subsidized by state and county • Career and Technical Schools -short term, higher cost, privately owned

  35. Elite Private Colleges • Annual cost average: $30,000 • Admit only 10-30% of applicants • All or most aid is based on need • Endowment funded institutional awards • Collect more financial data (CSS Profile) • Use own need analysis for institutional aid • Generally will not negotiate offers

  36. Other Private Colleges • Annual cost average: $24,000 • Admit all or nearly all applicants • Aid based on need and/or merit • May use merit aid to “attract” top students • Tuition funded institutional awards • Most use FAFSA need analysis for all aid • May negotiate certain offers

  37. Public 4-Year Colleges • Annual cost average: $12,000 (residents) • Admit from 40-100% of applicants • Aid based on need and/or merit • May use merit aid to “attract” top students • Mixed funding sources, mostly government • Use FAFSA need analysis for all aid • Generally will not negotiate offers

  38. Community Colleges • Annual cost average: $2,600 • Admit all applicants • Nearly all aid based on need • Nearly all aid government funded • Use FAFSA need analysis for all aid • Will not negotiate offers

  39. How to Compare College Financial Aid Offers • Start with tuition, fees, room and board • Subtract grant and scholarship offers only • The difference is your “net cost” • Always compare net cost • Never include loans and work-study offers • Make sure scholarships are renewable

  40. College Scholarship Fraud • Scams net $5 million annually • 350,000 students/parents affected • Selling what you can get for free • Never pay to find a scholarship! • Never pay a scholarship provider to apply!

  41. Scholarship Scam Warning Signs • “A list of scholarships is guaranteed” • “I just need your credit card number” • “Please enclose a $5 processing fee” • “You’ve been selected” by a group you never heard of • “You’re a finalist” in a contest you never entered

  42. Free Scholarship Info • Library publications • High school guidance offices • www.finaid.org - Scholarship Searches • Fastweb scholarship search on the internet www.fastweb.com • completely free • over 600,000 scholarships • can print application requests

  43. FTC Consumer Alert:the FREE Financial Aid Seminar • Direct mail marketing to parents • Very active in New Jersey • Scare tactics • Exaggerated claims • Phony guarantees • High-pressure sales pitches

  44. Avoid saving money in student’s name Spend down student’s assets first Pay off consumer debt & accelerate purchases Prepay your mortgage Minimize capital gains Maximize retirement fund contributions Grandparents should pay bills, not give cash Avoid trust funds for student “Secret Strategies” We Won’t Tell You About

  45. Why “Secret Strategies” often Fail to Produce More Aid • Focus on assets, not income • Retirement fund balances already exempt • Home equity already exempt (FAFSA) • Asset Protection Allowance (parents) • Type of college selected • Possible adverse tax consequences

  46. Cut costs by curbing expenses • Take advantage of campus activities • Exercise credit card restraint • Seek out used textbooks • Minimize excess travel • Keep phone calls minimal • Carpool, take the bus, purchase airline tickets early when going home • Wear basic-style clothing-- won’t go out of fashion

  47. Be a student worker • Earn and save as much money as possible from a summer job • Try to find a part time job while in school-- on campus or off • Student workers typically do better in their studies

  48. Education Tax Incentives:The Taxpayer Relief Act of 1997 • The Hope Scholarship tax credit • Lifetime Learning tax credit • Education IRAs • IRA withdrawals for higher education • Student loan interest deduction • Qualified State Tuition Programs (NJBEST) • Tax-free employer-provided assistance

  49. Good Stuff on the Internet • The Financial Aid Information Page www.finaid.org • The College Board www.collegeboard.com • Education tax incentives (IRS) www.ed.gov/inits/hope/tax_qa • NJ Higher Education Student Assistance Authority www.hesaa.org

  50. If you have any questions, we’ll be on hand afterwards to help you

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