financial aid reform: beyond prior-prior
TRANSCRIPT
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Financial Aid Reform
FINANCIAL AID REFORM:BEYOND PRIOR-PRIOR
Brent BennerDirector of Enrollment Management
The University of Tampa
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Financial Aid Reform
Dr. John Baworowsky Vice-President of Enrollment Management &
Student [email protected]
Frank Palmasani College Counselor
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The Goals
This proposal will focus on reform at three levels:
• Federal• University• High School
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The Problems•Late notification to students/parents by Universities•Application redundancy•High Federal Government loan rates•Congressional indecision with appropriations/interest amounts•Net Price Calculator variability•Lack of “financial fit” in college counseling
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Trends to Ponder
• Declining home equity
• Ballooning PLUS loans/general loan
aversion
• Aging parents of traditional students
• Colleges viewed as a commodity
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Cloudy Consumer Clarity
• All hopes and good intentions go into making a list of potential colleges.
• Students apply to colleges without knowing their final cost until just weeks before a tuition deposit is due.
• Family college savings is limited due to poor incentives and unclear understanding of costs.
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Hurry up and wait
• Families are encouraged to apply for admission early.
• Some financial aid deadlines are as early as Feb 1st.
• Verifications, tax transcripts, etc. make awards tentative for months.
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A Wasteful Process
• Due to ISAR data not being available until January, schools offer merit scholarships at the point of acceptance.
• These early merit offers are less effective each year as they have become commonplace.
• After the merit offer, the family still cannot determine affordability.
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FEDERAL REFORM
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Federal Reform
• One-time FAFSA filing
• Congress determines Pell eligibility
once every four years
• Develop a comprehensive & robust
federal college savings plan
• 2% interest rate for college loans
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A Prescription for Change
Take Prior-Prior logic one step further: Complete FAFSA only one time.
Median US Household Income2007-2008 - $54,6362008-2009 - $53,4652009-2010 - $52,5132010-2011 - $51,4962011-2012 - $51,059
* Source: U.S. Department of Commerce, (2013). Historical Income Tables: Households. United States Census Bureau.
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A Prescription for Change
• Feds set up Pell eligibility in the summer for 4 year increments.
• Colleges present their financial aid awards at the time of acceptance.
• Seeing student need earlier means colleges can be more strategic at meeting need.
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A Prescription for Change
• Develop a more robust federal college savings plan.
• Set a national goal / societal expectation for families to save a certain percentage of the cost of college.
• Lower federal loan interest rates: Offer Perkins & Stafford (sub & unsub) at 2% interest rates.
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Federal “Bailout” Rates
BANK AMT INT.RATEBank of NY Mellon $3.0B 3.18%Amer. Express $3.4B 2.19%BB&T $3.1B 2.96%Capital One $3.6B 3.18%Goldman Sachs $10B 3.18%Hartford Fin. $3.4B 3.18%JP Morgan Chase $25B 3.18%Morgan Stanley $10B 3.18%
* Projects.propublica.org, (2015). Bailout List: Banks, Auto Companies, and More
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A Prescription for Change
AMT INT RATEGeneral Motors $50B 1.37%
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A Prescription for Change
Perkins & Stafford 2%
• Invest in the United States’ greatest asset
• Graduates would have more money to spend/invest in the US economy
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A Prescription for Change
Earnings from fixed effective interest rates on new Direct loans
Programs No. of New Loans Avg Loan size($)
Effective InterestRates(%)
Cap on interest rates
Avg.Earnings at interest rates($)Rates(%)
Total Annual Earnings 2014-2015( $)
Avg Interest repaid over 10 yrs (2014-2024) to govt.
10 years Interest earned on total volume of loans
Stafford Subsidized 8,100,000 3,250
4.66%8.25% $151.45 $1,226,745,000 $1,874.96 $15,187,193,675
Stafford Unsubsidized (UnderGrad) 8,100,000 3,510
4.66%
8.25% 163.57 1,324,884,600 $2,024.96 $16,402,169,169
Stafford Unsubsidized (Grad) 1,900,000 14,314
6.21%9.50% 888.90 1,688,908,860 $11,832.59 $22,481,926,082
Parent PLUS 800,000 13,087 7.21% 10.50% 943.57 754,858,160 $13,166.85 $10,533,483,044
Grad PLUS 500,000 16,427 7.21% 10.50% 1,184.39 592,193,350 $16,527.23 $8,263,616,851
Total 19400000 $5,587,589,970 $72,868,388,821
* Source: Based on data collected from U.S. Department of Education website
Federal Student Loan statistics 2014-2015 (Direct Loan program)
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A Prescription for Change
Annual Earnings from avg loan size (2% interest
rates)Total Annual Profit from total loan size
Interestrepaid over 10 yrs to Federal
gov.
Interest earned over 10 years for
total volume of loans
$65.00 $526,500,000 $711.73 $5,765,028,106
$70.20 $568,620,000 $768.67 $6,226,230,355
$286.28 $543,932,000 $3,134.69 $5,955,903,643
$261.74 $209,392,000 $2,865.98 $2,292,783,980
$328.54 $164,270,000 $3,597.42 $1,798,710,669
$2,012,714,000 $22,038,656,752
Earnings at fixed 2% interest rate
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A Prescription for Change
Perkins & Stafford 2%
• Invest in the United States’ greatest asset
• Graduates would have more money to spend/invest in the US economy
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A Prescription for Change
Eliminate the generic, free NPC in favor of a more enhanced NPC with one of the vendors.
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Benefits
• Seeing student need earlier means colleges can be more strategic at meeting need.
• Colleges can predict their aid budgets earlier and more accurately.
• One time FAFSA filing will eliminate waste and inefficiency for the US Gov’t, colleges, and parents/students.
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Benefits
• A robust college savings plan initiative can encourage families to save more money starting at an earlier date.
• Reducing interest rates will relieve student debt burden and provide greater economic stimulation.
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UNIVERSITY REFORM
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University Reform
• National application & notification
deadline
• Clarification of financial aid packages
• Implementation of university-specific
tools in order to reduce student debt
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•Provide a national standardized October 15th “First Wave” deadline for college application completion for high school seniors.•Universities will offer notifications by December 15th.
•Financial aid packages released with the acceptance (December 15th).
Application Deadline Reform
Part 1
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• Provide a standardized January 15th “Second Wave” national deadline.
• Offer notifications by February 15th. • Release financial aid packages by March
15th.
Application Deadline Reform
Part 2
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•Provide rolling admissions for all students applying after January 15th .
Application Deadline Reform
Part 3
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•National deadline will provide a wider window for students to compare and plan for financing, as well as “fit” decision making. Student will drive process by meeting deadlines.
Benefits
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These deadlines and one-time early FAFSA filing will allow universities to deliver financial aid packages earlier & parents time to assess all offers.
(current research indicates average is March 21st notification).
Benefits
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COLLEGE AVERAGE AWARD LTRNE Metro Private 3/27 – 4/15State Univ. (IL) 3/14State Univ. (NC) 3/14State Univ. (CT) 1st – 3rd wk MarchNC Private Mar. – AprilState Univ. (CA) 3/15
Award Letter Timelines
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COLLEGE AVERAGE AWARD LTRPA Metro Private 3/15 – 3/31State Univ. (VA) 3/15IL Metro Private 3/15State Univ. (AZ) 3/15 – 3/31Univ. (MN) 3rd wk Mar. to 5/1
Award Letter Timelines
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Financial Aid Package Clarification
Build on shopping sheet concept (is already happening!)
1. Inform families that “payment for 2015-16 is $XX,XXX per year”
2. Place total cost front and center (vs. direct cost)
3. Spell out options to pay net costs
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After Financial Aid Packaging
Family consultations at Admitted Student Receptions (IL, CA, TX, MO, NY, NJ, PA, OH, CO, MD, CT, MA, NH, FL, PR, VI)
Run reports to determine low EFC/high Parent Plus Loan Deposited Students Counsel students regarding realistic payments/alternatives (e.g., Transfer, etc.)
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After Financial Aid Packaging
Spell out actual estimated post-graduation paymentsCounsel on realistic student work both on- and off-campus
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College Loan Counseling ($ALT)
Provide students with guidance on money and student loan management
Advantages of using $ALTIndividual Situation AssessmentTrack and plan student loansLifetime membershipAdvice on loan repayment options
Credit advice Help finding internships, scholarships, and jobs
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HIGH SCHOOL COUNSELING REFORM
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High School Reform
• Focus on financial fit in addition to
academic and “feel” fit
• Modernize financial fit language
• Change & standardize the type of
colleges assessed
• Utilize net price calculators
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Language
Cost of Attendance – Expected Family Contribution = Need• This concept is incredibly misleading• Assumes the financial aid system of the past• Coincides with a faulty timeline
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Traditional Search
leads to similarly priced schools
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Traditional Timeline
• Work with students to find preferences in junior year, beginning of senior year
• Students apply to colleges prior to December 1 of senior year
• Parents with students file for financial aid after January 1 of senior year
• Families learn cost of these colleges in late March or April
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New Language
Sticker price (Cost of Attendance) – Free money (grants and scholarships) = out of pocket cost (net price)
Meet net price with: direct student loan, campus employment, parent cash flow, student and parent savings, tax credit eligibility, parent borrowing
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New Search and New Timeline
(requires parents and students)
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Utilize net price calculators
• Blow up the government NPC
• EFC, composite test score, GPA
• Take advantage of Prior-Prior (10/1) for enhanced accuracy
• Net prices can be easily compared and matched with family affordability
(Creighton University & The University of Tampa)
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Delineate understanding of
college categories• Flagship State Schools (in and out of
one’s state)• Non-flagship State Schools
(in and out of one’s state)• Highly Selective Privates• Mid-size Privates• Traditional Privates• Backups (commuting, community
college)
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Methods of search & results
• Traditional method (EFC 11500, ACT 23, GPA 3.2) = net price variety 25k to 32k
• Using new search method (same family) = net price variety 9k to 32k
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QUESTIONS?
Dr. John Baworowsky [email protected]
Brent Benner [email protected]
Frank Palmasani [email protected]
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QUESTIONS?
Brent Benner [email protected]
Director of Enrollment ManagementThe University of Tampa