FINANCIAL AID 101. WHAT IS FINANCIAL AID? Scholarships Scholarships Grants Grants Loans Loans Work...

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FINANCIAL AID 101

WHAT IS FINANCIAL AID?

• Scholarships• Grants• Loans• Work Programs• “Other people’s money used to pay for your college costs”

THEORY OF FINACIAL AID

• Provide access and choice to post-secondary education

• Student and parent have the primary responsibility to pay for college

• Financial aid helps make up the difference between the cost of college and what the family can “afford to pay”

SOURCES OF FINANCIAL AID

• Federal government

• State government

• College/University/Tech School

• Private sources

HOW TO ACCESS FINANCIAL AID

• Complete the FAFSA (Free Application for Federal Student Aid)www.fafsa.ed.gov

• Apply for scholarships and grants

• Review borrowing options

FINANCIAL AID CRITERIA• US citizen or eligible non-citizen• Admitted to the school as a degree-seeking student• Have a high school diploma or equivalent• Be enrolled at the school at least half time• Make academic progress (Satisfactory Academic Progress)• Cannot be in default on a prior federal loan or owe a refund on a grant• If male, must be registered with the Selective Service

HOW FINANCIAL AID IS AWARDED

• Federal and State money – demonstrated financial need as determined by the FAFSA form• Institutional money – financial need and merit (academic,

athletic, performing and visual arts, etc)• Private money – merit, financial need, other criteria based on

the private source

DEMONSTRATED FINANCIAL NEED

• Defined as what a family can reasonably be expected to pay for one year of college

• Parent component + student component = EFC (Estimated Family Contribution)

• EFC: The measurement of financial strength of the family

WHAT IS INCLUDED IN AN EFC CALCULATION?

PARENT INFO• Parent income• Parent assets

STUDENT INFO• Student income• Student assets

FAMILY INFO• Number in household

supported by parents• Number in household

who will be in college

CALCULATING EFC

PARENT:[Taxable income + untaxed income] – [allowances for federal, state, local, and FICA taxes] – working parent allowance and allowance for household size. Then added to net of [cash, checking, and savings accounts + net real estate and investments + investment farm] X a factor based on a sliding scale of net figure ÷ number in college

CALCULATING EFC

STUDENT:[Taxable income + untaxed income] – [allowances for federal, state, local, and FICA taxes] – income protection allowance of $6400 – 50% of what is left + to 20% of reportable assets including cash, checking, savings, investments and real estate, and farm

CALCULATING EFC

• Parent contribution + student contribution = EFC• Formula does not count the value of house, IRA or retirement

accounts, the farm if you live there, credit card or consumer debt, medical expenses, mortgage, etc• Parent data – parent with whom the student resides and

provides more than 50% of the student’s support and that parent’s current spouse

COST OF ATTENDANCE

• Billable costs• Tuition and fees• Room and board if living on campus

• Allowance for housing if living at home or off-campus housing (apartment)• Allowance for books, transportation, spending money,

educational expenses

PUTTING IT TOGETHER

Cost of attendanceMinus

What family can afford to pay (EFC)Equals

Demonstrated financial need

EXAMPLE

Family of 4, with 1 in collegeTaxable income of $89,270IRA contribution of $3,500$5,000 in the bankStudent has no income or assetsEFC will be 13,519

EXAMPLEPRIVATE SCHOOL STATE SCHOOL COMMUNITY

COLLEGETuition and fees $24,500 $8,500 $4,200

Room and board $12,000 (dorm) $10,500 (dorm) $1,800 (home)

Miscellaneous $5,500 $5,500 $3,000

Total estimated costs

$42,000 $24,500 $9,000

Less EFC $13,519 $13,519 $13,519

Financial need $28,481 $10,981 $0

EXAMPLEPRIVATE SCHOOL STATE SCHOOL COMMUNITY

COLLEGETuition and fees $24,500 $8,500 $4,200

Room and board $12,000 $10,500

Total billable cost $36,500 $19,000 $4,200

Less EFC $13,519 $13,519 $13,519

Financial need $22,981 $5,481 $0

EXAMPLE

• Private institution – financial need of $28,481• Should have eligibility for state grant, institutional grants and

scholarships, student loans, and work study

• State institution – financial need of $10,981• Should have eligibility for student loans and work study

• Community college – no financial need• No need, still have eligibility for student loans

COMMON QUESTION

“I make X so I don’t qualify for aid. Why should I bother doing the FAFSA form?”• Family situations change – job loss, unexpected medical

expenses, death/disability of parent, change in marital status• Every student is eligible for a Federal Direct Stafford Loan• Some schools require the FAFSA to be filed to review for

institutional aid

NEED-BASED GRANTS

FEDERAL PELL GRANT• Students with highest

need• Based on EFC• Accepted, degree

seeking

FEDERAL SEOG GRANT• PELL grant recipients

have first preference• Students with high

financial need• Accepted, degree

seeking, half-time

PHEAA STATE GRANT• PA residents attending

a PA institution• 8 semesters• Amount varies with

type/cost of institution• Full time or at least half

STUDENT LOANSFederal Direct Stafford Loan• Loan in student name• Enrolled at least half time• Current interest rate 4.29%• In-school deferment• 6 month grace period• 10 year loan repayment• Cancellation/hardship/forbearance provisions

STUDENT LOANS• First year students (0-29.5 cumulative credits) - $5500 per

year (up to $3500 subsidized if financially needy)

• Second year students (30-59.5 cumulative credits) - $6500 per year (up to $4500 subsidized if financially needy)

• Third, fourth, fifth year students (>60 cumulative credits) - $7500 per year (up to $5500 subsidized if financially needy)

EMPLOYMENT

• Work on or off campus• Up to 20 hours per week• Minimum wage or higher• On-campus: offices, labs, gym, food service• Off-campus: public, non-profit sites (Red Cross, Olivets,

United Way, etc)

OTHER OPTIONS

• Institutional need-based loans

• Institutional co-op or special work program

• Internships

OTHER LOANSParent PLUS (Parent Loan for Undergraduate Students) Loan• Parent borrower – parent or stepparent • Current interest rate 6.84%• Cannot assign responsibility to student• Repayment begins after loan disburses• Loan repayment options• Principal and interest• Interest only until graduation (or less than half time)• Defer until graduation (or less than half time)

OTHER LOANSPrivate alternative loan• Check with college for recommendations• Variable interest rate (8-13%)• Student borrower• Will most likely need a co-signer• Credit criteria varies among lenders• Variable repayment opportunities

SEARCHING FOR SCHOLARSHIPS

• High school guidance office – best resource!• Parent employer• Student employer• Church• Local civic groups and community foundations• Union memberships

SEARCHING FOR SCHOLARSHIPS

On the internet, use the following websites:

•www.collegeboard.org•www.fastweb.com•www.educationplanner.org

SCHOLARSHIP HINTS

• Well-rounded, involved student (clubs, activities, volunteering, sports, dance, theatre, etc)• Good personal essay• Apply on time• DO NOT PAY for a scholarship application• Be wary of scams

QUESTIONS?

APPLYING FOR AID

• Applying for FSA (Federal Student Aid) ID• Completing FAFSA• Making corrections• Comparing packages• Appealing aid packages• What happens next• Resources

FSA ID

• Used to sign the FAFSA and other federal financial documents online• Replaces the SSN and PIN• Each student needs an FSA ID• At least one parent in household needs FSA ID

FSA ID

• fsaid.ed.gov • Student name, address, date of birth, social security number,

valid email address• 5 challenge questions• 2 predetermined questions• 2 created questions• 1 significant date

FSA ID

• Case sensitive, spelling important• Use permanent email address – student and parent cannot be

the same• Will send a code to your email needed to confirm identity• Write everything down! Or print everything out!

COMPLETING THE FAFSA

• www.fafsa.ed.gov

• Documents need to complete• 2015 federal income taxes• 2015 W-2s• Most recent bank statements• 2014 federal income tax return and W-2s

• Can use estimated 2015 tax return• Estimate income from work based on last pay stubs for 2015• Estimate income from other sources (interest, dividends, capital gains,

lottery winnings, etc) from 2014 tax return• Must correct FAFSA when 2015 federal income tax return is completed

COMPLETING THE FAFSA• Student logs in with FSA ID• Section 1 – Student demographic data• Confirm name, middle initial, date of birth, social security number• Selective service for males• Grade level: First year, never attended• Degree: First bachelors • Citizenship status • Enrollment plans: Full time

• Section 2 – School choice• List up to 10 schools• List first choice PA school first• Rest of the schools in no particular order• Housing choices

• On-campus: college owned housing• Off-campus: non-college owned housing; apartment, condo, town-house,

rental, etc• With parent: at home and commuting

• Section 3 – Dependency status• Need parent data• Parent = custodial parent – the parent with whom the student resides

and provides more than 50% of the student’s support• Parent includes biological, step, and adoptive parent

• Grandparent/aunt/uncle/sister/brother is not parent

• To be independent, the student must:• Be 24 years old• Be married or separated• Be enrolled in a masters or doctoral program• Be active military, national guard/reserves enlistee called to federal

active duty (not for training)• Have a child they support more than 50%• Have a dependent other than a spouse or child

• To be independent, the student must (cont.):• At any time since age 13, been an orphan or ward of the court, or in

foster care• Is an emancipated minor• Is in a legal guardianship as determined by the court• Was on or after July 15, 2015 determined to be homeless by the high

school or school district homeless liaison; or determined to be homeless by the director of an emergency shelter

• Student needs to answer yes to any one of those questions to be independent

• Parent refusing to fill out the FAFSA or refusing to help financially does not make the student independent

• Section 4 – Parent data• Last name, first initial, date of birth, and social security number for

each parent• Parent marital status and date of status• Parent state of residency• Type of tax return filed• Option to transmit tax data directly from IRS if tax return completed

(DRT-data retrieval tool)

• If not using the DRT, refer to tax documents

• Parent 1 & 2 wages (Box 1 of W-2s)• Adjusted gross income (Last line on page 1 of 1040 long form)• Taxes paid (around line 56)• Untaxed income (Box 12d of W-2s)

• Untaxed income• Contributions to an IRA, retirement program• Untaxed withdrawals from pension fund• Workers compensation• Black Lung or Railroad retirement benefits• Disability pay

• Do not report payments received for foster care, student financial aid, earned income credit, social security benefits, SSI, welfare benefits, or combat pay

• Parent assets• Cash/checking/savings from current bank statements• Investments/stocks/bonds from current statements

• Do not include IRA or retirement programs• Real Estate investment property; investment farm

• Do not include family residence

• Section 5 – Student financial data• Same demographic identifying information as for parents• Tax filing status• Type of tax return• Adjusted gross income• Wages from work• Federal taxes paid (if tax filer)

• Student assets• Cash/checking/savings• Stocks/bonds/investments• Investment real estate• 529 plans are reported by the OWNER of the plan, not the beneficiary

• Section 6 – Signing the FAFSA• Student may be required to enter FSA ID and password again• Parent needs to enter FSA ID and password• Click SUBMIT

• Section 7 – Confirmation page• PRINT• Will show EFC• Will give estimate of PELL Grant and Stafford Loan eligibility

MAKING CORRECTIONS

• Can update with tax information when tax return complete (DRT link)• Cannot change asset information• Changes may result in verification of data • College would request documentation to confirm FAFSA data

COMPARING PACKAGES

Compare and contrast packages• Billable costs (tuition and fees, room and board if on-campus)• Determine actual out-of-pocket costs• Grants vs. loans and type of loan products offered

APPEALING FINANCIAL AID PACKAGES

• Special circumstances – loss of job, death or disability of parent, decreased earnings• Requesting independency because of special situation

involving parents• Other special issues

WHAT HAPPENS NEXT?

• Contact college if you have question or concerns• Make decisions based on fit, not money• Involve student in financial discussions• Plan ahead, do not wait until bill is due or move-in day to ask

for more money

RESOURCES

• High school guidance office• Staff at college• Federal websites that end in ed.gov

OTHER TIPS

• Consider loan options at your bank or credit union, home equity, or line of credit• Student’s college education, grades, financial aid, bill, etc• FERPA is now in place

• Dropping and failing courses can affect aid eligibility for current and future semesters• Let students take ownership of their education

QUESTIONS?Antoinette “Nettie” Matz, M.Ed.PSU Berks Admissions and Financial Aid Counseloracc16@psu.edu, 610.396.6070

Dr. Judith Rile, Ed.D.Financial Aid Coordinatorjar38@psu.edu, 610.396.6070