Financial Aid: 101

1. Financial Aid: 101 Paying for Postsecondary Education John M. Szentesy, M.Ed. Associate Director of Financial Planning-Mansfield University

2. Agenda • Session I • Types and Sources of Financial Aid • Application Process • Eligibility • Session II • Federal, State and College Financial Aid Programs • Session III • Next Steps—Determining Affordability • Resources

3. Financial Aid: 101 Session: I Types and Sources Application Process Eligibility

4. What is Financial Aid? Financial aid consists of funds provided to students and families to help pay for postsecondary education expenses

5. Types of Financial Aid • Gift Aid – Free money • Grants and Scholarships • Self-Help • Loans and work programs • Merit-based aid based on academic ability, special talent or achievement, program of study, family or ethnic background • Need-based grants, loans and employment based on income, assets, other factors

6. Where does the money come from? • Federal Government • State Government • Colleges and Universities • Private Scholarship Sources: • HS Counselors • Clubs & Organizations • Employers • Internet scholarship Searches

7. Basic Principles • Joint responsibility of the student and parent(s) to pay, to the extent possible, unless the student is independent per federal determination • Need-based financial aid is determined by a federal calculation based on the FAFSA • Not all families qualify for need-based financial aid. • There is no guarantee you will get any need-based financial aid to pay for higher education

8. Application Process • Free Application for Federal Student Aid (FAFSA) is a federal form used to determine student eligibility for the following: • Federal programs, such as Pell Grants, work programs, and student loans • State programs, such as Pennsylvania State Grant, state work programs, and other special programs • Campus based aid such as need based grants and scholarships

9. When to apply • The FAFSA may be filed beginning on January 1st of the upcoming award year • Must be completed each year • For the 2014-15 award year this would be January 1st, 2014

10. Ways to apply • Complete the FAFSA as soon as possible after January 1st of the year for which the student is seeking financial aid • On-line at www.fafsa.gov • Safe, secure, skip logic, built in edits • Complete the FAFSA on the Web worksheet • Print the confirmation page when complete

11. www.fafsa.gov

12. Apply for PA Grant from FAFSA confirmation page

13. Signing the FAFSA on-line • Student and parent sign electronically with a Personal Identification Number (PIN) • Apply for the PIN at www.pin.ed.gov • Don’t lose it, write it down • Can use for future FAFSA filing, corrections, parents can use for other children’s FAFSA • Use to sign federal loan applications

14. IRS Data Retrieval Tool • Real time request to the IRS for tax data • IRS will authenticate tax payer’s identity • Match found, results to applicant in a new window • Applicant chooses whether or not to transfer data to the FAFSA • Available early February 2014 • FAFSA correction to select IRS Data Retrieval Tool

15. Whose information goes on the FAFSA? • Divorced or separated parents (the parent that provides more that 50% of support) • Step-parents – YES • Adoptive parents – YES • Foster parents – NO • Legal Guardians – NO • Anyone else the student is living with – NO

16. Who is Independent? • 24 years of age or older • Veteran (includes active duty personnel) • Working on a graduate degree • Emancipated minor in legal guardianship • Orphan, in foster care, or ward of the court at anytime when the student was age 13 or older • Have legal dependents other than a spouse • Student deemed homeless by proper authority

17. Other Financial Aid Forms • Know what financial aid forms each school requires • FAFSA required by all schools, PHEAA, and some scholarship organizations • State Grant Form (SGF) required for 1st year students (maybe required for subsequent years) • CSS (College Scholarship Service) profile required by schools and scholarship organizations (Privates) • www.collegeboard.com • Institutional Financial Aid Forms

18. KNOW YOUR DEADLINES! • School Deadlines ??? • Date and necessary forms • PA State Grant Deadline • May 1st, 2014-first time and renewal applicants • Federal Deadline • June 30th, 2014 - end of award year for 2014-15

19. How is financial aid determine? Expected Family Contribution (EFC) • Parent’s income & assets • Excludes primary home value • Student’s income & assets • Size of the family • Age of older parent • Number of children in college

20. How is financial aid determine? Cost of Attendance (COA) • Determined by the school • Tuition and fees • Room and board • Books and supplies (allowance) • Personal expenses & transportation (allowance)

21. How is financial aid determined? Cost of Attendance – Expected Family Contribution = NEED • Cost of Attendance (COA) is determined by the school • FAFSA process calculates the Expected Family Contribution (EFC) • The school attempts to fulfill NEED with financial aid programs • Gift aid or free money first • Self-help: loans and work programs

22. Eligibility Examples Low Medium High COA $17,000 $27,000 $47,000 EFC $15,000$15,000$15,000 Need $2,000 $12,000 $32,000 Financial Aid Office notifies student by an Award Letter, which indicates the types and amounts of aid provided to the student.

23. Reviewing Financial Aid Award Letters After reviewing the award letters, students should be sure to know and understand the following: • How much of their financial aid is gift aid and how much is not? • Which awards are based on need and which on merit? • Are there any conditions on the gift aid; in particular, is there a GPA requirement? • Will their awards change from year to year? • Will institutional awards increase as tuition increases?

24. Financial Aid: 101 Session II: Federal, State, and Campus based Financial Aid Programs

25. Federal Programs • Pell Grant (maximum award $5,645) must be high need • Campus based aid—determined by FAO • FSEOG max $4,000 • Perkins Loan max $5,500 • Federal Work-study variable by school • For most programs, student must be enrolled half-time • Goes to financially needy students first

26. Federal Programs—service based www.studentaid.ed.gov • TEACH Grant (must meet teaching commitment) • Iraq and Afghanistan Service Grant • Aid for Military Families www.americorps.gov

27. PA State Grant • Full-time in PA max $4,348 • Part-time in PA max $2,174 • Out of State up to $600 • CT, DE, MA, ME, OH, RI, VT, WV, and DC • All other States up to $400 • NY, NJ, and MD - $0 • Amount determined in part by COA • Must be at least half-time to be eligible

28. Other State Programs www.pheaa.org • State work-study-job related to major • Educational Assistance Grant (EAP) National Guard • Chafee Education and Training Grant – administered by the Department of Welfare • Blind and Deaf Beneficiary Grant • Postsecondary Educational Gratuity Program (PEGP) • Partnerships for Higher Education (PATH) • PA Targeted Initiative Program (PA TIP Program)

29. Federal Direct Loans • Effective July 1, 2010, all federal loans are made directly through the U.S. Department of Education • Web-based application • www.studentloans.gov • Federal Pin is used for authentication

30. Federal Direct Student Loans • Subsided Student Loan-no interest while in school • 3.86% fixed interest rate • 1% origination fee deducted from disbursements • 6 Month grace period • Unsubsidized Student Loan-interest accrues while in school and during grace • 3.86% fixed interest rate • 1% origination fee deducted from disbursements • 6 Month grace period

31. Federal Direct Student Loans

32. Additional Federal Direct Student Loan Eligibility

33. Loan Balance $23,000 Interest rate 3.4% Loan Term 10 years Monthly Payment $228.65 Number of payments 120 Total Payments $27,437.73 Total Interest $4,437.73 It is estimated that you will need an annual salary of at least $27,438.00 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. This corresponds to a debt-to-income ratio of 0.8. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $18,292.00, but you may experience some financial difficulty. This corresponds to a debt-to-income ratio of 1.3. Source: www.finaid.org Repayment Example

34. Federal Direct PLUS Loan • For parents of dependent students • Credit Check is required, yet no debt-to-income • No borrowing limit • Annual loan maximum is the COA – other financial aid • 4% Origination fee will be deducted from the disbursement • Principal amount can be deferred while student is in school (interest will accrue) • 10 year repayment period • 6.41% Fixed Interest Rate • $10,000 Loan amount = ~$118.00 monthly payment

35. Private/Alternative Education Loans • Student borrows in their name • Co-signers usually required. Some loans offer a co-signer release option • Based on credit scoring & debt-to-income • Repayment may be deferred while in-school • Fees, interest rates, loan amounts, and repayment provisions vary by lender and are generally more costly than federal loans • Compare loans before making choices and read the fine print!

36. Borrowing for Higher Education • Always consider Federal loans first. They have the best interest rates and repayment provisions • Borrow in the following order: • Federal Perkins Loan • Federal Direct Student Loan • Federal Direct PLUS Loan • Private/Alternative Loan

37. Financial Aid: 101 Session: III Next Steps Resources

38. Determining Affordability • Approach this as though you are not buying a school, you are buying an Education • Look at the sticker price. Tuition costs range from $2,500 to $40,000 plus Room & Board • Understand that in Higher Education there is no direct correlation between cost and quality • Be open minded and diverse in college searches • Think in terms of yesterday’s money, today’s money, and tomorrow’s money • Determine how much you can afford to borrow • Set some parameters right up front

39. What you can be doing now! • Gather personal financial records for parents & student • Determine your financial resources to pay for college • File your tax return early and utilize the IRS Data Retrieval Tool • Request your pin for parent and student • www.pin.ed.gov • Required to apply for Federal Student Aid

40. What you can be doing now! • Perform Scholarship Searches • www.fastweb.com • www.finaid.org • Estimate your federal aid eligibility • www.fafsa4caster.ed.gov • PA residents review the State Grant Website • www.pheaa.org

41. What you can be doing now! • Review the Federal Loan Programs • www.studentloans.gov • Review Private/Alternative Loan Programs • www.elmselect.com • Utilize college planning websites • www.studentaid.ed.gov • www.collegeboard.org

42. Tips • Know and understand key dates • Ask questions • Review all loan terms and conditions • Avoid using retirement funds • Avoid high interest rate products like credit cards • Provide a valid email address • Keep all copies of your paperwork • Make a sound investment—choose a college you can afford

43. Other Resources • Federal Student Aid Information Center • 800-443-3243 • PHEAA: 800-692-7392 • Youcandealwithit.com • Myfedloan.org • Educationplanner.org

44. QUESTIONS