© NASFAA 2006*Adapted from NASFAA materials

Financing Education Financing Education Beyond Beyond

High SchoolHigh School

2007-2008

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What is Financial Aid?

• Scholarships

• Grants

• Loans

• Employment opportunities

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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)

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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

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Definition of Need

Cost of attendance (COA)

– Expected family contribution (EFC)

= Need

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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

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Need Varies Based on Cost

X

Y

Z

Cost of Expected Family NeedAttendance Contribution (Variable) (Variable) (Constant)

1

2

3

EFC EFC

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• 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

Principles of Need Analysis

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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 2006-07 = $4,050

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Academic Competitiveness Grant (ACG)

• First and second year undergraduate students • Federal Pell Grant recipient• U.S. citizen• Full time• Completed rigorous secondary school program• Award amounts:

– $750 first year students– $1300 second year students

• Portable

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ACG – Rigorous Program Criteria

• 4 years of English

• 3 years of math (Algebra I and above)

• 3 years of science (Biology, Chemistry, Physics)

• 3 years of social studies

• 1 year of a language other than English

(sign language counts)

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National Science and Mathematics Access to Retain Talent (SMART) Grant

• Third and fourth year undergraduate students• Federal Pell Grant recipient• U.S. citizen• Full time• Eligible major• 3.0 GPA• Award amount:

– $4,000 for third and fourth year of study

• Portable

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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

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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

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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

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Federal Perkins Loans

• Interest rate: 5%

• 9-month grace period

• Repayment period may be up to 10 years

• Deferment and cancellation provisions available

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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

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Stafford Loans

• Subsidized: Must demonstrate “need”

• Unsubsidized: Not based on “need”

• Base annual loan limits (combined subsidized and unsubsidized):

– $3,500 for 1st year undergraduates

– $4,500 for 2nd year undergraduates

– $5,500 for each remaining undergraduate year

– $8,500 for each year of graduate/professional study

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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

– $12,000 per year for graduate/professional study

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Stafford Loans

• Fixed interest rate of 6.8%

• Loan fees based on principal amount of each loan:

– FFEL: Up to 2% origination fee and 1% insurance premium

– Direct Loan: Up to 3% loan fee

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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

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PLUS

• Parent loan program for parents of dependent undergraduate students

• Annual loan limit: COA minus other aid

• Fixed interest rate

– FFEL: 8.5%

– Direct Loan: 7.9%

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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

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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 being convicted of a drug-related offense

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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)

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Role of the Financial Aid Office

• Determines aid eligibility using federal 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

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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

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FAFSA

• 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

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Paper FAFSA

• 10 page booklet containing:– Instructions– 102 questions

organized into 7 steps– Worksheets to list

certain types of income

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FAFSA on the Web

The 2007-2008 application and correction forms will be available on the FAFSA on the Web site January 1, 2007.

www.fafsa.ed.gov

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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

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PIN Registration

• Web site: www.pin.ed.gov

• Can get PIN before January 1, 2007

• Not required, but speeds processing

• May be used by students and parents throughout aid process, including subsequent school years

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FAFSA on the Web Worksheet

2007-08 FAFSA on the Web Worksheet—8-page booklet containing:

• Instructions• 72 questions in 8

sections• Worksheets A, B, and C

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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!

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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

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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 Acknowledgement if filed electronically via FAFSA on the Web and student’s e-mail address was not provided

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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

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CAUTION!

• Avoid being charged a fee to file the Free Application for Federal Student Aid– Completion and processing of the FAFSA are

FREE– 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

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Professional Judgment

Professional judgment authorizes case-by-case adjustments at the school that the student is attending.

• Dependency Status Review• Special Circumstances

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Dependency Status Review- Independent Student Definition

• At least 24 years old by December 31 of award year covered by the FAFSA;

• Graduate or professional student;

• Married;

• Has children or dependents (other than a spouse) for whom the student provides more than half support;

• Orphan or ward/dependent of the court;

• Veteran of U.S. Armed Forces; or

• Determined to be “independent” by financial aid administrator based on unusual circumstances

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Dependency Status Review – Factors to Consider

• Nature of relationship with parents

• Documentation of abuse or abandonment

• Student self-supporting

• Parents unwilling to complete the FAFSA

• Support received from others

• Third-party testimony

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Professional Judgment Case Study

• Dependency Status ReviewOur first example concerns Martin Burger. Martin is a 17-year old high

school student; who will be a freshman during the 2007-08 school year. When he was 8, he went to live with his grandfather and grandmother because his parents divorced and were unable to care for him. His grandparents did not legally adopt Martin. He was never declared a ward of the court. And he never had a legal guardian appointed for him. Martin’s parents both live in other states, and he communicates with them only sporadically. Although they do occasionally send him gifts or money, they do not contribute regularly to his support. His mother is single and has a low-paying job; she also has a daughter who lives with her. Although she would be willing to sign his FAFSA, she cannot afford to support him financially. Martin’s father is remarried and has a job that pays well, but he has three other children living with him and he claims that he cannot help Martin. In fact, he has not provided any support since the divorce. He refuses to fill out any forms or sign any papers.

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Is Martin Independent or Dependent?

If Martin is dependent, on whom is he dependent?

Whose income and asset information would you have him report on his FAFSA? And why?

Does the fact that his mother lives some distance away and has only limited contact with Martin make it unreasonable to consider him dependent on her, even though she is willing to provide financial information and sign his applications?

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Professional Judgment Case Study

• Dependency Status ReviewBecky Springs is an 18 year old high school student, who will be a freshman during the 2007-08 school year. When she was 14, she went to live with her grandmother because her mother, a single mother of 3, was sent to prison to serve a 5 year sentence. Her father has never been a part of the family and his address is unknown. Becky’s grandmother is willing to complete the FAFSA with her social security income.

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Is Becky Independent or Dependent?

• If Becky is dependent, on whom is she dependent?

• Whose income and asset information would you have her report on his FAFSA? And why?

• If Becky is independent, will she be independent for her entire educational career?

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Special Circumstances

Special circumstances are conditions that differentiate an individual student from a whole class of students

FAA may not assume the circumstance exists for any group of students even if the group displays similar attributes

It is a violation of the law to generalize conditions or situations for a population of students and make across the board adjustments

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Examples of Special Circumstances

Loss of employment of family memberUnusual family medical or dental expenses not covered by insuranceExtraordinary dependent care expensesDivorce of parent or independent studentDeath of parent or independent student’s spouseCare of parents

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Professional Judgment Case Study

Special CircumstanceHarper Ferry is 18 years old and will be a freshman in college in 2007-08. In 2006, her father received a $10,000 bonus for being his company’s top salesperson. In addition, Harper’s mother appeared as a contestant on a TV quiz show and won $5,000, which the family reported on their 2006 tax return. Harper’s father does not expect to receive a bonus in 2007. In fact, his company is downsizing and he could be laid off. Also, the family used Harper’s mother’s winnings to pay off the balance of a car loan. Her parents’ income in 2006 was $60,000. They estimate their 2007 income will be around $48,000.

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Is There a Special Circumstance?

Does Harper’s situation warrant special consideration?

Would you adjust Harper’s EFC?

What documentation would you require from Harper’s family?

Would the fact that the family used the winnings to pay off a car loan affect or change your decision?

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Professional Judgment Case Study

Special CircumstanceCharles Townsend is in his second year at Shepherd University for the 2007-08 school year. His FAFSA was completed with his mother and father’s 2006 federal tax return and his Expected Family Contribution is 7800. Charles’ father was unexpectedly laid off on July 27th after working for the same company for 25 years. He is currently receiving $600 a month unemployment and Mrs. Townsend has taken a part-time job earning $800 a month to help make ends meet. His parents’ income in 2006 was $75,000. They estimate their 2007 income will be around $29,000.

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Is There a Special Circumstance?

Does Charles’ situation warrant special consideration?

What documentation would you require from Charles’ family?

Would you adjust Charles’ EFC? If so, what approach would you use to make the adjustment?

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Making Corrections

• If necessary, corrections to FAFSA data may be made by: – Using FAFSA on the Web (www.fafsa.ed.gov)

if student has a PIN;– Updating paper SAR (SAR Information

Acknowledgement cannot be used to make corrections); or

– Submitting documentation to school’s financial aid office

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Where Do I Go From Here?

• Obtain and review admissions and financial aid Web sites and materials for each school to which you are applying

• Meet all application deadlines– Complete FAFSA and other application

materials, such as College Scholarship Service’s PROFILE application, if required by school or state agency

– Submit all requested follow-up documents• Investigate other sources of aid

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Robert C. ByrdHonors Scholarship Program

• Federally-funded, merit-based aid program administered by states

• Recognizes and promotes student excellence and achievement

• States establish application requirements and selection criteria, and select recipients

• Recipients may receive up to $1,500 a year for up to 4 years of undergraduate study

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Other Government Resources

• Corporation for National and Community Service (AmeriCorps) – www.americorps.gov

• Veteran’s benefits – www.gibill.va.gov

• ROTC scholarships or stipends

• Bureau of Indian Affairs (BIA) Grants

• State Divisions of Vocational Rehabilitation

• U.S. Department of Health and Human Services (HHS) Bureau of Health Professions – www.bhpr.hrsa.gov/dsa

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Other Sources of Funds

• State grants, scholarships, loans, and work programs

• School need-based and non-need-based programs (e.g., academic, athletic, and other talent-based scholarships and grants)

• Private business scholarships (e.g., Wal-Mart, Gates Foundation, etc.)

• Civic organization scholarships (e.g., PTA, Elks Club, etc.)

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Avoid Being Scammed

To check legitimacy of scholarship search services or individuals, for information about financial aid scams, and tips to avoid being scammed visit these Web sites:

• U.S. Department of Education: www.studentaid.ed.gov/students/publications/lsa/index.html

• Federal Trade Commission: www.ftc.gov/bcp/conline/publs/alerts/ouchart.htm

• Better Business Bureau: www.bbb.com

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Private Scholarship Search

Free Internet scholarship search engines:• FinAid on the Web: www.finaid.org• College Board: www.collegeboard.com• FastWeb: www.fastweb.monster.com• Scholarship Resource Network Express:

www.srnexpress.com• GoCollege: The Collegiate Websource:

www.gocollege.com

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Private Scholarship Search

• Local library resources

• Local businesses and civic organizations

• Parents’ employers

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Good Luck!