College Financing

Editor's Notes

• #2: Introduce yourself and share your financial aid background Let families know you’ll be speaking on college financial aid Explain to families the benefit of attending this seminar (learning the necessary facts of the financial aid process and free resources to help them throughout the process) Provide the timeframe: presentation will be approximately 1 hour followed by a Q&A Let families know if you’ll be taking questions throughout or just at the end Let families know that this is a presentation timely for seniors in high school and their families, but juniors and sophomores can benefit from learning what’s ahead Remind families to complete the evaluation following the presentation Tell families that the slides to this presentation can be found online on mefa.org/Events Point out the handout that families should have received when they arrived, which is filled with helpful information on financial aid
• #4: Financial aid is simply money to help students pay for college THREE main types of financial aid Grants and scholarships are allocations of free money, also known as gift aid, which do not need to be repaid Work-study does not come off the student’s bill and is a set amount of funding saved for a student to earn while on campus working in a part-time job Work-study earnings are paid in paycheck form Federal student loans are considered financial aid because of their special repayment terms. As well, they are the only option for a college student to borrow a loan without a co-signer at a low, fixed interest rate. Student loans must be repaid You do not have to accept loans or work-study
• #5: Financial aid may also be awarded based on factors other than financial eligibility Only some colleges award merit aid, also called merit scholarships Awarding practices vary significantly from college to college Discuss some of the ways students may need to apply for merit aid: a separate application, essay, nomination, etc. Discuss how students may lose academic merit awards if they don’t meet GPA requirements Most merit-based aid comes from the institution. One example from MA: John & Abigail Adams Scholarship: Non need-based Based on high 10th grade MCAS score No application: winners are notified in fall of senior year Covers tuition (NOT fees) at MA public colleges & universities UMass System has combined tuition and fees so their students will receive a tuition credit for the same amount that would be allocated for tuition. Example- The tuition credit at UMass Amherst would be $1,714. For a full listing of the Adams Scholarship amount at each school, visit http://www.mass.edu/osfa/programs/adamstable.asp. Must be MA resident and U.S. citizen or eligible non-citizen Must submit the FAFSA (even though it’s not need-based) Students must maintain a 3.0 GPA for renewability Don’t mention this at private high schools, as private high schools are not required to take the MCAS
• #6: Most financial aid is awarded mostly based on the family’s ability to pay for college, not grades, standardized test scores, or other factors Most federal and MA financial aid is awarded based on financial eligibility Colleges also offer institutional funds based on financial eligibility Satisfactory academic progress – this is a term that families will hear often in college – students must be making a certain GPA and taking a certain number of credits to keep their financial aid
• #7: Financial aid comes from four primary sources. Each source has different requirements for eligibility. Federal: Most federal grants are allocated for lower income families; Work-Study is reserved for students with financial need; Every student eligible to apply for federal financial aid can receive federal student loans; tax incentives are credits on federal tax returns State: Most state grants are allocated for lower income families; MA also offers scholarships and tuition waivers for students who meet certain criteria; Visit osfa.mass.edu for more details on MA state aid College/University: some colleges or universities do have their own student loan programs Actively explore each of these sources Start looking online for outside/private scholarships now – mefa.org has an entire page devoted to private scholarships with links to different search engines. Check with your guidance counselor for local/high school scholarships. Also check with the student’s parents’ employers and any membership groups or affiliations of which parents are members. NEVER pay for a scholarship search or application – those are scams. And students can start looking for scholarships EARLY (as young as Elementary School!) There is a page on mefa.org with general information about private scholarships You may want to ask the school counselor before the seminar beings if he/she wants to speak about local outside scholarships and how the information is available through the guidance office
• #8: There is a lot of financial aid available: $183.9 billion for undergrads in 2014-15 34% of this total is federal loans Less than 1% is work-study 67% of this total comes from the federal government: grants, loans, work-study, and tax credits Tax credit info is located in IRS Publication 970 5% comes from the states
• #9: Getting organized with the process is so important – write down for every college the forms needed and the deadlines, which are different from admissions deadlines
• #10: FAFSA: Discuss the benefits of completing the FAFSA online: skip logic, saved info year-to-year, etc. Stress to families that the website for the FAFSA is FAFSA.gov The application has a new open date: October 1st Stress that meeting the deadline is VERY IMPORTANT- Some schools may run out of money after their priority deadline. If you are filling out the FAFSA early for EA or ED deadlines, you can always do a FAFSA correction later on to add more schools that were not initially on the students list. Student needs an FSA ID to login, and parent & student need an FSA ID to sign electronically (otherwise will need to print the signature page and mail it – this is necessary for parents without a SSN, as parents without a SSN cannot secure an FSA ID). Getting an FSA ID takes a few minutes, so encourage families to get it NOW before the FAFSA even opens so it’s all ready Let parents know that if they already have a FAFSA ID they used for their own FAFSA or another child, they should use that FAFSA ID as it does not expire. Keep the FSA ID and password in a safe place so it is easy to retrieve. It can be cumbersome to reset or request a new FSA ID. MEFA has a great blog and slide share for families about the FAFSA ID, encourage families to take a look! Introduce IRS Data Retrieval Tool, which will populate the FAFSA with 2015 If there are big discrepancies between the 2015 and 2016 data, i.e. income is much lower in 2016 vs. 2015, families should talk to their college to consider a change in their circumstance. Tax return information from the IRS. It cannot be used by parents married filing separately, change in marital status during the tax year, amended tax return, or foreign/Puerto Rican return Must complete the FAFSA each year Mention FAFSA Day as resource for free help completing the application Federal and MA state financial aid eligibility will be based exclusively on the EFC from the FAFSA. The FAFSA must be completed for MA state aid by May 1.
• #11: What’s on the FAFSA: Citizenship status – student must be a U.S. citizen or eligible non-citizen to receive financial aid (parent citizenship status is irrelevant). Eligible non-citizens: U.S. nationals & permanent residents, those with an Arrival-Departure Record (I-94), students with a T-visa or who have a parent with a T-visa, “battered immigrant-qualified aliens,” and citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau Will do 1 form and send it to up to 10 schools at a time – you list your schools. Don’t need to speak to this but just in case anyone asks: Colleges will no longer be able to see the other colleges that students listed on the FAFSA. Students and parents answer questions and provide data Information from both parents will be required on the FAFSA, regardless of parents’ gender or marital status, if 1. Both parents are legal parents, defined as biological or adoptive parents; and 2. The student’s legal parents live together. This change requires same-sex parents who live together and parents who have never been married who live together to now BOTH report information on the FAFSA. A same-sex step-parent ALSO must report information on the FAFSA if that step-parent lives with the custodial parent. Talk about estimating income to meet deadlines As of the 2017-18 FAFSA (the one that current high school seniors will complete), income from two years prior (2015) will be requested on the FAFSA, instead of income from one prior year. The FAFSA will also open October 1, 2016. Go to mefa.org for a PDF of the paper FAFSA to view all questions FAFSA4caster is a preview Don’t need to speak to this but just in case you receive a question about it: Contributions toward college costs from anyone that is NOT the parent (such as grandparents, aunts, uncles, etc.) counts as student untaxed income in the year it’s used to pay for college. So if a grandparent helps pay the tuition bill in fall 2016, then the student would need to report that contribution in her 2016 untaxed income, which would appear on the 2018-19 FAFSA.
• #12: CSS PROFILE Only some colleges and universities require this (mostly private) The PROFILE provides colleges more information to award institutional funds There is a fee for the PROFILE: $25 for first, $16 for every additional school If student is applying Early Decision/Early Action, the PROFILE may be required earlier than FAFSA, as early as Oct. Best to fill out both forms so the financial aid award is accurate and not an estimate. PROFILE also has FAFSA worksheet families can use, however IRS data retrieval tool is the easiest way to fill out the FAFSA. Noncustodial PROFILE: Let families know that schools don’t share the Noncustodial PROFILE with the custodial parent – it’s a separate application and process. If the Noncust PROFILE is required by a school, the financial aid application is INCOMPLETE if the requirement is not fulfilled. Schools have an entire process by which a family can appeal the Noncustodial PROFILE requirement. A noncustodial parent’s unwillingness or refusal to complete the application will not exclude the student from the requirement to submit the Noncustodial PROFILE. MEFA provided a webinar for families on the CSS/Financial Aid PROFILE in early October. The recording is on mefa.org. It does not matter if you fill out the FAFSA or the PROFILE first. Easiest to fill the both out one after the other while the information is fresh and all the documents have been gathered. Families can also be reminded that the Social Security Number, while still an optional field on the Common App and the PROFILE, is often used by schools as the identifier when compiling all student data and applications, and it is helpful for families to therefore report the student’s SSN on all applications when requested. Also, some colleges and universities may have additional application requirements, such as the Business/Farm Supplement as a component of the PROFILE. Remind families to check application requirements carefully and to return all school requests for additional information or a callback. College/University Financial Aid Application Institutions can ask anything Not all colleges require this - check with the college for details As part of the original financial aid application (and not simply for Verification), some schools may require families to provide the corresponding tax return when submitting the financial aid application(s). If the appropriate year tax return (from the previous calendar year) is not yet available, some schools may accept the tax return from the year prior for the initial financial aid application process.
• #13: Explain what happens with the applications once they are submitted Your information is sent off electronically and processed by a central processing center and data is sent to selected colleges as well as the Massachusetts Office of Student Financial Assistance You will receive a SAR (Student Aid Report) and, if you also file PROFILE, a CSS PROFILE Acknowledgement Report For PROFILE corrections, contact your colleges directly SAR comes in different forms: email if student provided a valid email address, mail if not Be sure to review all of your answers and make sure they are accurate If you estimated your income, update your FAFSA when taxes are complete Utilize IRS Data Retrieval Tool to make corrections if possible Explain Verification process. U.S. Department of Education requires that schools verify data on certain FAFSAs. Explain what documents might be required Tell families to READ THEIR EMAILS from the financial aid office, to comply with requests, and to stay organized Remind parents that colleges communicate with the students directly, and mostly electronically (so students should keep on top of email – some families set up a separate email address for all college communication that both students and parents can access) Families will be required to submit IRS transcript if selected for federal Verification and tax information on FAFSA was not gathered using IRS Data Retrieval Tool – or if IRS Data was subsequently changed Can let folks know to contact the financial aid office if something changes (a job loss) or if there are special circumstances (student wants to petition to be independent, etc.)
• #15: The Cost of Attendance is comprised of both the billed and unbilled costs. Cost of Attendance is used in the formula to determine financial aid and it includes tuition, fees, room & board, travel expenses, books, supplies, and personal expenses
• #16: The EFC reflects the family’s ability to absorb educational expenses (a family’s financial strength), but makes no particular assumptions about how the family will finance that contribution The EFC is calculated using a standard formula for all families for the federal EFC Some colleges (those that require another financial aid application – usually the CSS PROFILE) also use an institutional EFC formula for the distribution of their own college funds The EFC is only for one year of college, and is re-calculated every year The family has the primary responsibility to pay for the student’s education Families have choices about how to do that Families often pay more for college than the EFC The EFC formula protects a portion of income and assets Parent and student information is treated differently in the formula The formula does not take into account personal debt (credit card debt, car loan, personal debt) Some colleges use two EFC formulas (FM – federal, IM – institutional) if they collect two financial aid applications EFC calculators can be found on the College Board Big Future site (provides both FM and IM EFCs) and on FAFSA.gov (the FAFSA4caster, which provides the FM EFC). Juniors: getting an estimate of your family’s EFC is something you can do now. The formula is complicated – we can’t tell families what certain income and asset cutoffs will make them ineligible for financial aid
• #17: The information you get from the calculator is only as accurate as the information you put in Different schools have different questions on their calculators The NPCs do include the full cost of college, so commuters will see housing costs within the NPC output MEFA has helpful tips on how to use NPCs at mefa.org/using-net-price-calculators
• #18: All colleges use this preliminary calculation to determine eligibility for financial aid EFC stays the same regardless of institution Explain that COA varies The amount the family can contribute is taken into consideration before determining a financial aid award
• #19: There is a generous parent asset protection allowance factored into the EFC formula. Feel free to replace these slides with the low income slides that MEFA provided separately. While assets (current value of savings, checking accounts, investments, and reportable businesses and farms) are considered in the financial aid formula, assets have minimal impact to the EFC, as it is primarily an income-driven formula Having saved for college or having other assets that you can use to help pay for college is a good thing; it gives families options for paying the balance due Families in the audience who have saved for college should feel good about it! All 529 plans are considered assets in the parents’ name and are treated in the same manner as every other parent asset. Parents have to list the 529 assets for ALL children, because the beneficiary (the child) can be changed, so one child could hypothetically end up using all 529 plans In this example: An additional 75K in savings only increases the EFC by $3,038 An additional 150K in savings only increases the EFC by $7,268 Remember this is parental assets (up to 5.6%) while student assets would be assessed at a higher rate (20%) Numbers were calculated using the U.S. Department of Education’s 2017-18 Federal Methodology
• #20: The EFC formula can be heavily income-driven Income (all income, from taxable and non-taxable earnings and other sources) is assessed at a higher rate in the financial aid formula than assets EFC can change from year to year when income increases due to a raise, etc. In this example: An additional 25K in income increases the EFC by $8,573 An additional 75K in income (from $75,000) increases the EFC by $24,409 Colleges don’t tell families how to meet their EFC. For example, with family B, the college wouldn’t require the family to use any of their reported assets for education expenses. This is an option the family may choose Reminder, the EFC is determining how much the family can absorb in educational expenses over time. In many cases, families using multiple resources, which we will discuss later Families should not use these charts to calculate their own EFC; instead they should utilize EFC calculators Numbers were calculated using the U.S. Department of Education’s 2017-18 Federal Methodology
• #21: The bar graph illustrates the three line formula (COA – EFC = Eligibility) that we looked at earlier. Financial aid eligibility varies from school to school Use this chart to show why a student should never rule out a college because of its cost. The student is eligible for a large financial aid package from college A At the same time, you don’t know what that financial aid package will include until the student is accepted to the school and receives the financial aid award letter. For this reason, the student should consider applying to a balanced list of colleges financially At College D, the student has 0 eligibility for financial aid, however it might be an affordable option for the family. College D might be a local community college. Remember that community colleges can be a great, affordable option for a student’s first two years of school In a perfect world (theoretically), the college will be able to meet the student’s full eligibility and the EFC will remain the same, however many colleges cannot meet full eligibility due to available funding Students still in the process of determining their final list of colleges and students in younger grades should look for colleges’ net price calculators to aid in the discussion around affordability
• #22: Colleges use the EFC to determine eligibility for financial aid, then try to meet the eligibility (or fill the barrel) with financial aid from all resources Most colleges are not going to be able to fill the barrel The EFC always goes into the barrel first Unmet need is more common than not Explain what happens to EFC when there is unmet need. In this example, if the student decides to attend this institution, the family will need to contribute the EFC plus unmet need ($5000 + $3000 = $8000) for the student to attend Use this as an example to demonstrate how the EFC is often the MINIMUM contribution for a family, not necessarily a MAXIMUM Explain the difference between direct and indirect costs in the COA and that even though the college won’t bill the student for indirect costs, the family still needs to determine how they will be met Explain ways that students can reduce indirect costs, such as used books and cheaper travel Explain how outside scholarships may affect the financial aid The $5,500 student loan might actually be $5,500 of Direct Loans, which will include at least $2,000 in Unsubsidized Loans. Unsubsidized Loans don’t technically fill in financial need, though when students don’t have their entire financial need met with other aid, the Unsubsidized Loan does help to fill that need
• #23: Unmet need can vary greatly from college to college even when the COA is constant Explain the differences and possible reasons for the variance College A, B and C could also represent 3 different students at the same institution (students with the same eligibility at the same school may still receive different financial aid based on the different strengths of the admissions applications or enrollment goals of the school, or maybe one student missed the college’s financial aid application deadline) When comparing financial aid award letters, families should consider the total number of years the student plans to be enrolled Encourage families to visit mefa.org after receiving award letters to take advantage of the online, interactive My College Cost Calculator to compare financial aid awards Remind families that deadlines are so important – the student may receive less aid because the financial aid application was late
• #24: When comparing award letters, you can’t just look at the bottom line. You need to compare what’s making up each financial aid award Here are three examples of awards from colleges with the same Cost of Attendance Might want to start out by asking the audience what’s different about these award letters (Parent Loan) You can see that even though three hypothetical colleges have the same total financial aid, the funds making up that award vary greatly Explain the differences and possible reasons for the variance Talk about the different kinds of loans a family might see on an award letter College C might have not offered any grants or scholarships because the student submitted the financial aid applications late What should a family do if offered a parent loan?
• #26: Families decide the best plan to meet the balance due at the college based on their own personal finances. The options fall under three major categories: past, present, and future income. Families don’t need to choose just one option (past, present, or future income) to pay the balance due, and combination plans can save money in the long run. Encourage families to visits mefa.org to access a Loan Payment Calculator, which allows families to understand the full cost of borrowing a loan Reiterate that this is only for one year Past Income: savings or other investments such as college saving plans Present Income: Explain payment plan, e.g., owe $1,000? pay $100 per month for 10 months. Better than ANY loan Future Income: borrowing loans. This will be in addition to student loans that are offered in the financial aid award. If families are considering financing any portion of the student’s education, they should take advantage of federal student loans first Families need to be thinking about a long-term plan when deciding what options to use. This includes the total number of years the student plans to be enrolled as well as multiple children who plan to attend college Colleges who use institutional methodology often expect the student to contribute from savings and/or summer work. Students are able to contribute to the payment plan along with the parents. For families who are not receiving aid, you can still use these same steps. You will not be able to subtract aid, but if you have outside scholarships be sure to subtract them from direct costs. Outside Scholarships can also be used as present income to help pay direct and indirect costs.
• #27: MESSAGE: Federal loan options should ALWAYS be considered before private options Direct Loans are student loans Subsidized loans count within the total financial aid that is filling in the financial need, so they can’t cover the EFC Go over loan details and limits: Student Direct Loan: $5500 FR, $6500 SO, $7500 JR & SR – these all include a $2000 Unsub DL Loan each year Tell families that even students with NO financial need can receive a $5,500 Unsubsidized Direct Loan Start the kitchen table conversations now as a family about affordable monthly payments and debt that students will be able to afford based on future earnings. $300 is the approximate monthly payment for a student who borrows $27,000, which is roughly the amount of 4 years of maximum Direct Loans (not counting the accrued interest that would also be added in for unsubsidized loans). Student will need to sign a master promissory note and complete entrance counseling on StudentLoans.gov Direct Loan – all U.S. citizens/permanent residents are eligible Students whose parents are denied for the PLUS loan are automatically eligible for a $4K (FR & SO) or $5K (JR & SR) Unsub Direct Loan – these amounts are in addition to the limits above Many repayment options are available for borrowers, including one that can be tailored to the student’s budget. Forgiveness provisions exist for certain professions. See StudentLoans.gov for details. All Direct Loans don’t have to be repaid until after the student leaves school. What is reasonable student loan debt? On average, student borrowers who graduated in 2015 will owe $35,051, according Mark Kantrowitz, a student financial aid policy expert and publisher of Edvisors.com. Additional Loan Options: Perkins: Not available at all schools, $5500 max/yr NIL: A MA state loan for low-income students; not available at all schools Parents who want loans will have to apply for them separately and will need to be credit-worthy (a PLUS loan is a federal parent loan but still requires a credit-worthy borrower and an application) Students who want an additional loan will need to apply through a private source and will need a credit-worthy co-borrower Many private loans offer multiple repayment options allowing families to start make payments while the student is in school or to defer payments until after the student graduates
• #29: FAFSA Day is part of the National College Goal Sunday Program and is a statewide volunteer program that provides free information and assistance to students and families who are applying for financial aid for postsecondary education Many dates and locations in November, December and January in addition to the primary dates listed. See http://www.fafsaday.org/index.php before each seminar to know where the closest locations are to the high school. Families can receive free assistance completing the FAFSA There will be different dates, times, and locations available. Events will likely run from October to February. For additional information and to register, please visit FAFSADay.org Families signed up for MEFA emails will receive reminders about FAFSA Day FAFSA Day Massachusetts brings together financial aid professionals from colleges and universities along with other volunteers to help college-bound students and their families complete the FAFSA. Up Next is Better Make Room’s mobile messaging tool recently announced by the First Lady that gives high school and college students, parents, and counselors across the country free personalized support on all things college – college search and the application, federal student aid, even student loan repayment – all through texting. All students, parents, and counselors can sign up by texting “COLLEGE” to 44044. Educational Opportunity Centers offer free assistance with financial aid IRS offers centers with volunteers that prepare taxes for free for qualifying individuals (income-based). Families can look on IRS.gov under “Hot Topics” or go here directly: irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers
• #30: All webinars are recorded and posted on mefa.org so families can view them anytime.
• #31: Paying the College Bill seminars are designed to help families during a critical decision-making period – after receiving award letters and before making a final decision about which college to attend. They offer a financial aid refresher and further details Regional seminars will be held throughout the state Held in late March & April – after most families have received financial aid award letters Offers financial aid refresher, details about understanding award letters, and explains financing options and payment plans Families who sign up for MEFA emails will receive location information and reminders about these seminars PCB seminars are especially helpful for families who didn’t receive financial aid and will be funding the entire bill themselves
• #32: Families should research financial aid deadlines and requirements now to begin the financial aid process. Families (both student and parent) should get an FSA ID now. Families should talk together about college costs and how the family together will plan to pay for college Remind families to use Net Price Calculators on college websites Tell families to sign up for MEFA emails on the evaluation form or on mefa.org Also on this slide, you can point to the timeline in the handout, which will guide parents on the next steps within this process.
• #33: Ask for any questions Please ask families to complete the seminar evaluation and sign up for MEFA emails Let them know where to place completed evaluations and collect them before leaving Presenters: please fill in your full name for families to use for the evaluations