financial aid: what you need to know south high school december 13, 2011 sandy sundstrom st. olaf...

Financial Aid: What You Need to Know

South High SchoolDecember 13, 2011

Sandy Sundstrom

St. Olaf College

Agenda College Costs Types of Financial Aid Types of Aid Applications Family Contribution Ability to Pay Special Circumstances Loan Debt Financial Aid Award Letter Appeals

College Tuition Costs(2010-2011 annual tuition and fees for MN colleges)

Private colleges: $30,411 Private career schools: $13,184 University of Minnesota: $12,288 Minnesota state universities: $6,895 MN community & technical colleges: $4,919

Source – MN Office of Higher Education

Cost of Attendance

The cost of attending college includes more than just tuition and fees. Also included are:

Room and BoardBooks and SuppliesTransportationPersonal Expenses

How Will We Pay For It?

Past Earnings – Savings

Current Earnings

Future Earnings – borrowing

Financial Aid

Ability to Pay To the extend they are able, parents have

the primary responsibility to pay for their dependent children’s education.

Students also have a responsibility to contribute to their educational costs.

A family’s ability to pay for educational costs must be evaluated in an equitable and consistent manner.

Types of Financial Aid

Gift Aid:

Grants

Scholarships

Self-Help Aid:

Loans

Student Employment/Work Study

Where does financial aid come from?

Federal Government State Government Colleges and Universities Private and public sources

Sources of Financial Aid

SOURCE: The College Board, Trends in Student Aid 2010, Figure 2A.

Merit vs. Need-Based

Merit Often from the institution but can be from

foundations, scholarship organizations, etc. Have specific eligibility criteria

Need-based Calculated from financial aid application – evaluates

family’s ability to pay for costs Sources can be federal, state, institutional Goal is to distribute limited resources in an equitable

way Provide a balance of gift aid and self-help aid

Institutional Aid varies by Institution

Spectrum – some institutions (very selective) offer no merit and & lots of need-based aid, others (less selective) offer lots of merit aid but very little need-based aid.

Institutions vary in ability to meet demonstrated need.

Apply for Financial Aid

Federal Aid – Free Application For Federal Student Aid (FAFSA). Required by all schools; available at www.fafsa.gov

Complete school financial aid application (if required)

High-cost private schools may require the PROFILE application. Required by some schools; available at www.collegeboard.com

Apply for scholarships both within and outside of the college/university

Meeting Deadlines is EssentialKnow each college’s priority deadlines Read and retain all the communications you receive.

Read each school’s website or contact each school’s Financial Aid Office Merit scholarship deadlines Admission deadlines Financial Aid deadlines Deadlines for supplemental

documents – tax returns, W2s, etc.

• Completing and processing the FAFSA is free!

• Never pay a fee to file the FAFSA.

• Complete the FAFSA after January 1 of your senior year

• Contact your school’s financial aid office - if you need help.

FAFSA on the Webwww.fafsa.gov

Put your name and SSN on FAFSA exactly how it appears on your social security card

Refer to completed federal income tax return and consult instructions for proper line references

If entry is zero or none, enter 0--don’t leave blank

Enter school code(s)

Student and one parent must both sign dependent student’s FAFSA

Be careful…

2011

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

Graduate or professional student Married

Has legal dependents other than a spouse who receive more than one half of their support from the student Is an orphan, in foster care, or ward of the court

On active duty or veteran of the U.S. Armed Forces

Emancipated minor or in legal guardianship as determined by a court

Has been determined to be homeless by an authorized official

What makes a student “independent”?

Expected Family Contribution (EFC)

The EFC is calculated from the information you provide on the FAFSA according to a formula established by law.

You can get an estimate of your EFC using the FAFSA 4-caster tool at: www.fafsa.gov

FAFSA data that has the most impact on EFC calculation

Dependent Student• Parents’ income

and assets• Household size• Number of

dependents attending college

• Student’s income and assets

Independent Student• Student’s (and

spouse’s) income and assets

• Household size• Number in household

attending college

To Save or Not to Save In the Federal Formula:

For parents – value of retirement accounts and primary residence are not includedOther assets are protected in part (or full) by Education Savings and Asset Protection Allowance.About 5.6% of parent net worth exceeding the allowance is included in EFC.

Savings Examples (Federal Formula)

Example: Married parents, older spouse is 48, the allowance is $46,200. They have $100,000 in savings and investments. $100,000 – 46,200 = $53,800 X 5.6% = $3,012 is included in the EFC as parent contribution from assets.

Example: Students have no Education and Savings Asset Protection Allowance. Assessment rate is 20%. If Student has $100,000 in savings, $20,000 is included in EFC as student contribution from assets.

How are Aid Awards Determined:

Cost of Attendance (COA) - Expected Family Contribution (EFC) = Eligibility for need-based financial aid

Special Circumstances When the numbers don’t tell the whole story or

situation has changed (or is expected to change)

Family situation Fluctuating/One-time income Change in employment Medical/dental expenses Marital status

Must be able to provide documentation Copies of bills, canceled checks, termination letters,

etc.

2011

GrantsFederal Pell Grant: need-based; annual award range for a full-time

student is $976 - $5,550

Federal SEOG Grant: limited funding; priority given to students with

exceptional need; annual award range is $100 - $4,000

Minnesota State Grant: MN resident enrolled at eligible MN school; for students from low and moderate

income families; annual award range is $100 - $9,444

Institutional Grant: college or university funds awarded to students

with financial need

Student Employment/Work-Study

Part-time student employment

Earnings paid to student Work-Study earnings not included when determining EFC on next year’s FAFSA

Types of Loans  Interest Rate Repayment Additional Info

Federal Perkins Loan 5% Fixed9 months after school

Federal Stafford Direct Loan

Subsidized 3.4% Fixed Unsubsidized 6.8% Fixed

6 months after school

Subsidized: no interest charged while in school Unsubsidized: interest accrues while in school

Federal Parent PLUS Loan 7.9% Fixed

May be deferred until 6 months after school

Interest accrues while student is in school

Minnesota SELF Loan Variable rate 12 months after school

Must pay quarterly interest while in schoolRequires a co-signer

Alternative/ Private Loans Variable rate

Variable repayment terms

Interest accrues while student is in school

How Much Is Too Much? For the Class of 2010, in Minnesota, the average indebtedness for 4-

year college students was $29,058. 71% of graduates borrowed. (Source: The Project on Student Loan Debt, http://projectonstudentdebt.org)

Translates into a monthly payment of approximately $344/month for 10 years. (Source: http://www.finaid.org/calculators)

Graduated and income contingent payment plans available to reduce monthly payments.

One rule of thumb: Student’s total borrowing shouldn’t exceed what he/she expects to make the first year out of school.

$27,000 is the maximum a student can borrow through the Direct Stafford loan program (most utilized program).

This is a family discussion and decision – how much should/can the student borrow, and how much should/can parents borrow?

Other Resources

Reciprocity ProgramsWisconsin, North and South Dakota, ManitobaMidwest Student Exchange Program (MSEP):

Kansas, Michigan, Missouri, Nebraska

Federal Tax Benefits for Higher EducationTuition and Fees Tax Deduction American Opportunity Tax CreditStudent Loan Interest Deduction

Lifetime Learning Tax Credit

Review Aid Awards CarefullyCompare:

Costs of Attendance (COA)

Total amount of aid

Types of aid offered

Amount of gift aid (grant/scholarship)

Amount of loan (interest rate, repayment terms, etc.)

Ask Questions:

Is the grant and/or scholarship renewable?

What are the terms for renewing? (GPA, number of credits, course of study, etc.)

Is the amount of work-study realistic?

Will aid change from year to year?

Will aid increase if COA increases?

Net Price CalculatorNet Price Calculator: Provides estimated net price information to prospective students and their families based on the student’s individual circumstances.

Tool to help families estimate their out of pocket expenses.

Required by federal regulation.

Must be posted on a school’s website by October 29, 2011

Net Price Calculator – Pros & Cons

Pros You can get an estimate of

how much it will cost to attend an institution much earlier in the process.

When developing the college list you can compare estimates between schools.

Cons Since institutions differ, formats

for the NPC will differ...not always apples to apples.

Fewer or more data elements may be required.

Merit-based aid may or may not be included.

Only represents first-year award.

Special circumstances not

considered.

Appeal the award if there is a valid reason

Possibly valid reasons: You have a unique family situation that isn’t

evident from the FAFSA data. Your family’s situation has changed

since you completed the financial aid application

Probably not valid reasons: Another school gave me a better award. I heard/read I should “negotiate.” My parents are unwilling to provide their

information/or unwilling to contribute.

2011

Where can I get more information?

U.S. Department of Education: www.ed.gov and

www.college.gov

Minnesota Office of Higher Education: www.ohe.state.mn.us

Internet System for Education & Employment Knowledge: www.iseek.org

FinAid! - The Financial Aid Information Page: www.finaid.org

Minnesota Association of Financial Aid Administrators: www.mafaa.org

The College Board: www.collegeboard.org

To Sum Up . . .

Apply for aid if you are concerned about covering costs

Paying for college is a team effort Research institutional aid options Meet deadlines Understand the types of aid offered Determine the “bottom line” Borrow wisely Inform the financial aid office if your situation

changes

Questions . . .