Navigating College Financial Aid

Program Analysis

Dr. Herm Davis

301-548-9423

hdcfaces@comcast.net www.drhermdavis.com

COLLEGE SELECTION PROCESS

1) Quality of Education2) Happiness3) Security and Health4) Affordability

4-year College Graduation Comparison Chart

www.collegeresults.org (1 of 2)

College or University2012

4-Year Grad Rate

% Pell Recipients Among Freshman

Estimated median

SAT/ACT State

Size (Undergrad

FTE)

Duke University 87.3% 14.3% 1440 NC 6,665

Wake Forest University 82.8% 14.2% 1325 NC 4,738

Georgetown University 89.4% 15.9% 1395 DC 7,385

Loyola University Maryland 79.2% 14% 1190 MD 3,832

Johns Hopkins University 86.4% 12.8% 1400 MD 5,820

University of North Carolina at Chapel Hill 76.2% 19.7% 1305 NC 17,768

Vanderbilt University 86.6% 14.4% 1445 TN 6,770

Carnegie Mellon University 71% 13% 1400 PA 5,830

4-year College Graduation Comparison Chart (2 of 2)

College or University 4-Year Grad Rate

% Pell Recipients Among

Freshman

Estimated median

SAT/ACT State

Size (Undergrad

FTE)

University of Maryland-College Park 63.2% 14.7% 1290 MD 25,407

Pennsylvania State University-Main Campus 65.4% 15.3% 1195 PA 38,136

Ohio State University, Main 52.6% 21.4% 1265 OH 40,461

Salisbury University 48.4% 18.5% 1145 MD 7,500

North Carolina State University at Raleigh 39.3% 22.4% 1185 NC 23,105

Towson University 39% 21.7% 1080 MD 17,988

Hood College 49.3% 34.1% 1085 MD 1,394

East Carolina University 32.8% 33.4% 1035 NC 19,600

University of South Carolina-Columbia 53% 19.9% 1185 SC 21,319

How to start the Financial Aid Process – KNOW your 4 worst enemies!

Enemy #1 – Cost of Attendance

Enemy #2 – Missed deadlines

Two main reasons:

“Student must be admitted before filing for aid” – WRONG! “Parents must have their Federal income taxes submitted” – WRONG!Enemy #3 – Self discrimination

Two main reasons:

“We make too much to file for aid” – WRONG! “We can’t afford a private college” – WRONG!

Enemy #4 – Your College Student • Student needs to check college’s financial aid website• Parents need to obtain their student’s ID and password

University of Pennsylvania – Average Freshman Awards by Family

Income

Aided Freshmen by Family Income Class of 2018 (entering September 2014)

I ncome Median Total

Awards Percent of Applicants

Offered Aid

$0 - 39,999 $63,040 99%

$40,000 - 69,999 $59,888 99%

$70,000 - 99,999 $53,230 97%

$100,000-129,999 $45,255 99%

$130,000-159,999 $35,400 88%

$160,000-189,999 $29,240 93%

$190,000-219,999 $25,380 67%

$220,000 and up* $21,355 18%

* Most who qualify have more than one child in college. Many factors other than income are considered. Therefore, individual awards vary based on individual circumstances. Families with non-typical financial situations (such as business owners, parents who are self-employed, owners of real estate other than their primary home, and divorced parents) are more likely to receive non-typical awards.

FAFSA Forms Analysis

► Free Application for Federal Student Aid (FAFSA)

► CSS Profile

► Institutional Aid Application (IAA)

► Verification Work Sheet (VWS)

Free Application for Federal Student Aid (FAFSA)

► www.fafsa.gov► Cost: Free► Submit for each student per year

immediately after Jan. 1st.► PIN Required to sign electronically► www.pin.ed.gov

► fafsa4caster.ed.gov

FORMS PROCESSINGStep 1: Apply for a PIN

► When? ASAP (before submitting the FAFSA) 

► How? Sign on to “PIN.ED.GOV”  ► Why? The PIN is an electronic signature for the FAFSA and is required by

both the student and one parent . Both PINs will need to sign the FAFSA before it can be submitted to the processor.

► Who? Each student in the family applying for financial aid and one parent.

► How often? One time, it will be active for the period of time the student is in college.

 ► Comment(s): - If there are two students attending college, each will need

their own PIN. However, the parent’s PIN can be used for both students.

- When applying for a PIN, you will be able to assign your own number.  - The same PIN number can be chosen for all family applicants.

FORMS PROCESSINGStep 2: FILING THE FAFSA

► When? After January 1st, 2015. ► How? Sign on to - “FAFSA.GOV” and the electronic application will be

available. There is no paper FAFSA.

► Who? Each student in the family attending college

► Whose information will be used? ► - The Student will have to list his/her wages, savings and other assets.► - The Parent(s) will have to list their wages, savings and other assets.

CSS Profile►https://profileonline.collegeboard.com

►Cost is $25 for the initial application fee and and one college and $16 to add each institution

►CSS Non-Custodial Parent Profile cost is also $25 for the initial application fee and $16 to add each institution

►CSS IDOC (Institutional Documentation Service)

► Comment(s):

► 1. If the parent is single, then the parent where the student resides more than 50% of the time will be the parent who will need to complete the FAFSA.

► 2. If the parent, where the student is residing, should remarry, then the new step- parent’s wages and assets will need to be included on the FAFSA.

► 3. Excluded Assets a. equity in the home b. retirement accounts (annuities, 401k, C.D. etc.)

c. business values unless the business employs over 100 employees.

FORMS PROCESSINGStep 3: FAFSA DISCUSSION and TIME TABLE

► January 1 and after a.The FAFSA should be submitted by February 15th to meet all deadlines and no

later than March 1st. The FAFSA is used by all state scholarship programs and their deadline for filing is normally March 1st.

b.You don’t have your taxes done yet? No problem, just use estimated income for 2013 using your last year’s 1040 or your pay check receipts as a guide.

► March 1st and after

Updating the FAFSA, now that you have your taxes completed, open up the FAFSA and make your adjustments from your submitted taxes.► April 1st and after

Verification process- If the student’s FAFSA has been flagged for verification, it will require the parent’s to update their FAFSA using the:

a. IRS DATA RETRIEVAL TOOL, instructions will be on the FAFSA. (or)b. By calling the IRS (1-800-829-1040) and using the IRS INCOME TAX

TRANSCRIPT.

ONLINE FAFSA Flow

Student Student Aid Report

S A R

FAFSA entered by Student/Parent

Central Processor

StudentCorrections

SchoolAward “Package”

Process

School ISIRIndividual Student Information Report1. 4. 7.__ 2. 5. 8.__3. __ 6. 9.__10.__

SchoolAward Letter Sent

to Student

Maryland State Scholarship

Include a Maryland College on the FAFSA

FAFSA- Student Resources

FAFSA- Parent(s) Resources

FAFSA PreparationQuestion? Student Parent

What is the value of your cash, checking, savings account?

$ 10,000 $ 20,000

What is the Value of investment accounts excluding all retirement accounts?

$ 6,000 $ 50,000

What is the value of your business account (excluding a family farm or family business with <100 FT employees)?

$ $

20% Age APA

Asset Protection Allowance

Example: If the age of the older parent is 50 and 2 parents are in the household: The asset protection allowance is $31,800

Age of older parent as of

12/31/14

Allowance if there are 2

parents

Allowance if there is only one

parent

40 $25,100 $6,800

44 $27,500 $7,400

48 $30,300 $8,100

50 $31,800 $8,500

52 $33,500 $8,900

54 $35,400 $9,300

56 $37,300 $10,000

60 $41,700 $10,800

64 $46,700 $11,900

65 and over $48,100 $12,300

EFC FORMULAEFC = Expected Family

Contribution

(ESC-I) Expected Student Contribution from Income

+ (ESC-A) Expected Student Contribution from Assets

+ (EPC-I) Expected Parent Contribution from Income

+ (EPC-A) Expected Parent Contribution from Assets

= (EFC) [Expected Family Contribution]

FAFSA / CSS ProfilePreparation and AnalysisFAFSA

Step-by-step Preparation

Federal Methodology

CSS Profile Step-by-step Preparation

Institutional Methodology

CSS Profile Step-by-step Preparation

Consensus Methodology

Item Analysis Item Analysis Item Analysis

Student’s Income Student’s Income Student’s Income

Student’s Assets Student’s Assets Student’s Assets

Parent’s Income

-NO Untaxed Social Security

Parent’s Income Business/Farm IncomeUntaxed Social Security Income

Parent’s Income Business/Farm IncomeUntaxed Social Security Income

Parent’s Assets

-Business and Farm Assets-NO Home Equity

-NO Retirement Plans

Parent’s Assets Including: - Home Equity -Retirement Plans -Business and Farm Assets

Parent’s Assets Including: 1.2 x AGI x 5 % -Retirement Plans -Business and Farm Assets

Number in College Number in College Number in College

Special Circumstances Non-Custodial Profile Non-Custodial Profile

Award CalculationLC MC 1 MC 2 HC

COA $16,000 $25,000 $50,000 $60,000

-EFC

$14,000 $14,000 $14,000 $14,000

= NEED $2,000 $11,000 $26,000 $42,000

Concensus MethodologyHOME EQUITY VERSUS PERCENTAGE OF AGI Home equity is only a concern for students planning to attend a college using the CSS Profile. When the home equity value is calculated by the CSS Profile processor it is calculated at 5%. Assuming the parent’s income (AGI) is $90,000 and equity in the home is $500,000 would result in the following:  IE: Equity of $500,000 X 5% = $25,000  However, many of these high costs private colleges have replaced the home equity assessments to a percentage of the parent’s adjusted gross income (AGI). This percentage may vary from school to school from 1.2 to 3 times the AGI.  IE: AGI of $90,000 X 1.2 = $108,000  In this example, the school would reduce the equity of $500,000 to $180,000 and apply the 5 % calculation.. IE: $108,000 X 5% = $ 5,600 Treatment of the AGI in this manner has reduced the EFC by $ 19,000.

RESOURCE ANALYSISSelf Help Programs (Awarded before gift aid)

Work-study or student employment programs: federal and college.

Loans: Direct Loans, PLUS Loans and Private Loans – borrowed money that you must pay back, usually with interest.

Gift Aid Programs – “Free Money”

Grants – Need BasedMoney you don’t have to repay, typically based on financial

need.

Scholarships – Merit and May be Need BasedInstitutional, State and PrivateFree money awarded usually based on your area of study or

merit.

Federal Loans: The smart way to borrow

►Federal Direct Loans Subsidized Direct Loans

►Based solely on financial need►Federal government pays the interest while

you are in school

Unsubsidized Direct Loans►All eligible students can receive them,

regardless of income or assets►You’re responsible for paying the interest while

in school.

Federal Direct Loan Limits

Year Dependent Undergraduates

Subsidized + Unsubsidized = Total

Independent Undergraduates

Graduate and Professional Students

First Year $3,500 + $2,000 = $5,500 $9,500 $20,500 –Only Unsubsidized Loans

______________

Interest Rates – SEE Next Slide

Second Year $4,500 + $2,000 = $6,500 $10,500

Third Year $5,500 + $2,000 = $7,500 $12,500

Fourth Year $5,500 + $2,000 = $7,500 $12,500

Total amount you can borrow

$27,000 $45,000

Federal Direct Loan Interest Rates

Loan Type Current Interest Rates ( NOT Fixed rates)

Undergraduate Direct Subsidized and Unsubsidized Loans

From 3.9 %Currently

4.66%

Not to exceed 8.25%

Graduate Direct Unsubsidized Loan

From 5.4%Currently

6.21%

Not to exceed 10.5%

Direct PLUS Loan(Parent Loan for Undergraduate Students)

From 6.4%Currently

7.21%

Not To exceed 10.5%

Federal Pell Grant = $5,730

Federal Direct PLUS Loans

►Enable parents or stepparents (whose information is reported on the FAFSA) to borrow up to the cost of attendance.

Minus any other aid the student may receive

Legal guardians cannot borrow PLUS loans .

Components for Discussion

1 – Overview

2 – Forms Analysis

3 – Process Analysis

4 – FAFSA / CSS Profile Preparation & Analysis

5 – Resource Analysis

6 – Award Analysis

The Award Process

► Colleges assign each student a password and user name after the admissions applications are received. The user name and password is assigned to allow students to monitor their admissions application, financial aid status, academic record and billing statements.

► The financial aid offices uses this process to communicate with the students regarding their financial application status.

(The Award Process Continued)

► After each college receives the aid application/documents it will post receipt of the document on the student’s financial aid page.

1. The posting will tell the student the status of the document received regarding its fulfillment.

2. If the college requires additional information, it will post the listing on the student’s aid page.

(PROBLEM: Student fails to monitor his/her financial aid page in order to take further action and thus complete the aid application process.)

(The Award Process Continued)

► After the student meets all requirements for awarding, the aid office will post the award on the student’s account.

1. The awards will be posted for the student to accept or decline.

2. If accepted, the student will be instructed regarding any additional action to be taken.

(Note: A student should check his/her college email account as well as their personal email account and regular U.S.P.S)

(Problem: Student fails to monitor his/her financial aid page to either accept or decline awards. In addition, even after accepting, many times the student fails to complete the award process by not fulfilling the loan application process.)

FAFSA Forms Analysis

► Free Application for Federal Student Aid (FAFSA)

► CSS Profile

► Institutional Aid Application (IAA)

► Verification Work Sheet (VWS)

Institutional Supplemental Forms

►Institutional Aid Application (IAA) “Institutional Funding Form” Financial Aid Form found on college

financial aid website

►Verification Work Sheet (VWS)-IRS Data Retrieval Tool (DRT) FAFSA

Update -VWS Form + w-2’s +IRS Tax TranscriptIRS ph: 1-800-908-9946

Process Analysis

►Online processing►How colleges receive

data►How to correct data►EFC Formula►Awarding of Aid Formula

FAFSA Preparation

-Who fills out the FAFSA?Parent(s) of the student, where the student has resided more than 50% of time of the calendar year.- Who’s information do you use?Parent(s) who are married or remarried OR Single, Divorced, Separated or Widowed?

FAFSA Preparation ►Student Financial Information “As of today, what is your (student’s) total current balance of cash, savings and checking account(s)?”

“As of today, what is the net worth of your (student’s) investments, including real estate…”

FAFSA Preparation► Parent(s) Financial Information“As of today, what is the parent’s total current balance of cash, savings and checking account(s)?”

“As of today, what is the net worth of the parent’s investments, including real estate? (Don’t include the home in which your parents live. Net worth means current value minus debt.)”

“As of today what is the net worth of your parent’s current business and/or Investment farms? (Don’t include a family farm or family business with <100 FT employees)”

(Resource Analysis Continued)

► Academic Common Market “College 411” Guide

http://www.mhec.state.md.us

► Innovative Opportunities “Best College Deals” -www.petersons.com

► College Graduation Rates by years of study www.collegeresults.org   ► Net Price Calculator http://netpricecalculator.collegeboard.org/

Navigating College Financial Aid

Program Analysis

Dr. Herm Davis

301-548-9423

hdcfaces@comcast.net ww.drhermdavis.com