Paying For College

Paying For College Brad Barnett, MS, AFC Accredited Financial Counselor Senior Associate Director James Madison University Office of Financial Aid & Scholarships

Consult with Appropriate Stakeholders Talk to Those Involved in This Decision • If parents are assisting students with paying for college it is important students take the time to sit and discuss details with them • Financial aid is a long-term process • How much debt are students willing to accumulate • How much debt can parents afford

Learn More About Schools • Understand the costs of schools • Examine the types of schools • Learn about individual deadlines of schools • Try not to let cost be a large deterrent • MANY colleges are willing to work with students

Options • Personal savings • Investments (e.g., 529 plans, ESA’s, Mutual Funds, etc.) • Payment plans • Part-time employment • Grants (federal and state) • Scholarships (institutional and private) • Federal Loans (student and parent) • Private Loans (student and parent)

Payment Plan Example • Average cost of full-time in-state tuition/fees and room/board at Virginia 4 year public colleges in 2010-11 is about $17,000 • Payment Plans (generally 10 month option) • $17,000 / 10 months = $1,700 / 4 weeks = $425 per week • $8,500 / 5 months = $1,700 / 4 weeks = $425 per week • Are there items you can reduce in your budget or debt you can eliminate before college to help “cash flow” some of this? • Car payments • Improve food budgets • Credit card or other consumer debt • Other sacrifices to make for next 4 years to avoid long term college loan debt (Opportunity Cost of debt) • Community college to 4 year option

Loan Repayment Example • Dependent student beginning in 2011-12 and eligible for maximum Direct Loans for 4 years (assume student accepts the loans): • 1st year - $5,500 - no more than $3,500 subsidized (6.8%)* • 2nd year - $6,500 - no more than $4,500 subsidized (6.8%)* • 3rd year - $7,500 - no more than $5,500 subsidized (6.8%)* • 4th year - $7,500 - no more than $5,500 subsidized (6.8%)* • Total debt - $27,000 (aggregate maximum $31,000, no more than $23,000 subsidized) • Standard Repayment Plan is 10 year • $310/month in loan payments • $37,286 repaid over the 10 year period • $10,286 paid in interest • This does not include any capitalized interest, which will increase the cost *Note: Unless Congress takes additional action, all subsidized and unsubsidized loans beginning in 2012-13 will carry a 6.8% interest rate. In 2011-12 subsidized loans are at 3.4%.

FAFSA • Free Application for Federal Student Aid • Required to apply for federal financial aid • May be required to apply for state or institutional financial aid • Required, at times, by private entities to determine a student’s “need” level

Cost of Attendance • Tuition & fees • Room & board • Books, supplies, transportation, & miscellaneous personal expenses, including documented costs for personal computer • Loan fees • Study abroad costs • Dependent care expenses • Disability-related expenses • Cooperative education program costs

EFC = Expected Family Contribution • The federal government determines a family’s ability to pay for post-secondary expenses (including living expenses) • The figure schools use to determine a student’s eligibility for need-based aid

Definition of Need Cost of attendance (COA) – Expected family contribution (EFC) = Financial need

Tools • www.FAFSA4caster.ed.gov • Early estimator of EFC • Does not factor state or institutional aid • Net Price Calculators • More colleges are bringing these up • By October 2011 all schools will be required to have these • Provides an estimate of costs at a particular school for an individual student

Professional Judgment • Unexpected issues not reflected on the FAFSA • Tuition expenses at an elementary or secondary school • Medical or dental expenses not covered by insurance • Unusually high child care costs • Job loss or unemployment • Parents enrolled at least half-time in a degree or certificate program • Roth IRA rollovers • Dependency overrides • Contact the financial aid administrator to discuss if these items can be considered in a Professional Judgment review • Issues such as credit card expenses, car payments, standard living expenses, and other “normal” daily items cannot be considered under Professional Judgment for federal and state aid purposes

Financial Aid Sources Four primary sources of financial aid are: • Federal • State • Institutional • Private

Major Federal Programs • Pell Grant • Supplemental Educational Opportunity Grant (SEOG) • Teach Grant • Federal Work Study (FWS) • Perkins Loan • Direct Loans (subsidized/unsubsidized) • Parent PLUS Loans

Federal Perkins Loan • Eligible students • Undergraduate and graduate students • Priority to students who show “exceptional need,” as defined by school • Loan amount varies • Maximum annual loan • $5,500 - undergraduate students • $8,000 - graduate & professional students

Federal Perkins Loan • Interest rate: 5% • 9-month grace period • Repayment period may be up to10 years • Deferment & cancellation provisions available

Direct Loans • Federal Direct Student Loan (Direct Loan) Program with funds provided directly by federal government via participating schools • Subsidized fixed 3.4% interest rate for 2011-12 loans • Unsubsidized fixed 6.8% interest rate • 9-month grace period • Repayment period is 10 years (more in some cases)

Direct Loans • Subsidized: Must demonstrate “need” • Unsubsidized: Need is not considered • Base annual loan limits (combined subsidized & unsubsidized): • $5,500 for 1st year undergraduates ($3,500 max sub) • $6,500 for 2nd year undergraduates ($4,500 max sub) • $7,500 for each remaining undergraduate year ($5,500 max sub) • $8,500 for each year of graduate/professional study

Direct Loans Additional unsubsidized loan eligibility for independent undergraduate, graduate, & dependent students whose parents are unable to borrow Parent PLUS: • $4,000 per year for first & second years of undergraduate study • $5,000 per year for remaining years of undergraduate study • $12,000 per year for graduate & professional students

Parent PLUS • Parent loan program for parents of dependent undergraduate students • Annual loan limit: COA minus other aid • Fixed interest rate 7.9%

Parent PLUS • Repayment begins after loan is fully disbursed; or • Parents can request postponement of payment until 6 months after a student ceases to be enrolled at least half-time; interest may be capitalized

Major State Programs • Commonwealth Award • Virginia Guaranteed Assistance Program • Tuition Assistance Grant Program (private only) • College Scholarship Assistance Program • Two Year College Transfer Grant

Public College & Universities • Programs • VGAP • Commonwealth Award • CSAP • Transfer Grant (Community College to 4 Year) • Amounts vary at each institution based on funding • Generally have FAFSA Priority Filing dates

Private Colleges & Universities • Program - Tuition Assistance Grant Program • Award amounts are based on the number of eligible students and the amount of funds appropriated by the General Assembly • Maximum 2010-11 Annual Award to be determined: • The undergraduate award is usually around $3,000 • The graduate award is usually less than $2,000 • Application deadline is July 31st! Talk to a private college or university for more details.

Community College to Four Year College • Two Year College Transfer Grant • Be a first-time entering freshman no earlier than summer 2007 • Be a full-time undergraduate in-state student meeting selective service requirements • Have received an Associate’s degree at a Virginia two-year public institution with a cumulative GPA of 3.0 on a scale of 4.0 for the Associate’s degree • Enroll into a Virginia four-year public or Virginia four-year private nonprofit college or university by the fall following completion of Associate’s degree • Have financial need: defined as a federally calculated EFC of 8,000, or less • Maximum annual standard award is $1,000 ($500 per term), with an additional $1,000 ($500 per term) for students enrolled into a degree program in: engineering, mathematics, nursing, teaching, or science • Limited to three years or 70 credit hours • Maintain college GPA of 3.0 on a 4.0 scale and continue to demonstrate financial need (maximum EFC of 8,000)

Other State Aid • Higher Education Teacher Assistance Program • Foster Care Grant (VCCS only) • Virginia War Orphan Education Program • Virginia Dept. of Rehabilitative Services • Virginia Part-time Tuition Assistance Program • And many more

Institutional Aid Types of Institutional Aid • Need-based or merit-based grants • Scholarships • Loans: Student and Parent loans • Work-study Application Process: • The Financial Aid Office at each institution can explain what type of aid is available and the application procedures

Financial aid from private resources can be the most elusive of all aid programs Available From: Local businesses Civic groups Churches Private benefactors National organizations Employment Where to Look: High school counselors Write, call, or visit businesses, civic groups, churches, etc. Public libraries Internet Private Aid Sources

Avoid Being Scammed To check legitimacy of scholarship search services or individuals, for information about financial aid scams, & tips to avoid being scammed visit these Web sites: • Better Business Bureau: http://www.bbb.com • U.S. Department of Education: http://studentaid.ed.gov/students/publications/lsa/index.html

Preliminary Tentative Estimated Official Final (not an accurate description) Non-preliminary Actual Two Types of Financial Aid Award Notices Timely responses are critical!

Finally • Read each document • Keep copies of EVERYTHING • Be aware of deadlines • File taxes early • Watch out for verification • Respond to all correspondence • START LOOKING NOW!

Questions Brad Barnett, MS, AFC Senior Associate Director James Madison University Office of Financial Aid & Scholarships MSC 3519 Harrisonburg, Virginia 22807 (540) 568-2894 barnetbd@jmu.edu www.jmu.edu/finaid

Paying For College