How Do I Solve the Financial Aid Puzzle?

[Note to Jason: Use the headings labeled “Puzzle Piece” to put inside puzzle pieces such as they are now. Tips go somewhere near the text where they are located in this draft copy.]

Tip: You do not know how much college will cost until you go through the financial aid process. Most families do not pay the catalog or ‘sticker price.’

Tip: The first step in planning for college is deciding what programs and colleges can help you build the kind of life that you want for yourself. The money part comes later.

Puzzle Piece If you are an adult going back to school -

Financial aid is about the family's ability to pay. If you are a dependent student, family usually means your parents. If you are an independent student, family usually means you and your spouse. You are defined as an independent student if you are:

·        At least 24 as of Jan. 1 of award year (or)

·        Veteran of U.S. Armed Forces (or)

·        Legally married (or)

·        An orphan or ward of the court (or)

·        Responsible for legal dependents, other than spouse (or)

·        Independent by professional judgment of financial aid officer

Puzzle Piece The Basic Principles That Govern Financial Aid Decisions

What are the "rules" that decide who gets what in the way of financial support for college?

·        Parents and students are primarily responsible for postsecondary education costs.

·        All FA resources supplement the family/student resources

·        Family contribution is based on its current ability to pay those college costs.

·        Current ability to pay is based on past (assets), present (discretionary income) and future (loans) resources.

·        The financial aid office of the college you attend will consider unusual family circumstances, such as changes in martial status, income/job status, etc.

College Cost (Budget)

Colleges have a budget that they use to determine what it will cost for a student to attend their institution. We offer an example below that comes from two colleges. The budget at the colleges you are exploring may be very different, so look at the college's catalog or ask the college's financial aid office. Please remember that you do not know how much college will cost until you go through the financial aid process.

How much is the family expected to contribute?

If you look at the list of factors you can see that there is quite a bit that goes into determining what sort of aid you are eligible to receive. Note that the process determines what you could pay, not what you are willing to pay! While you might not agree with the outcome, you can take heart that other families go through the very same process.

·        Federal aid eligibility is determined through a federal formula

·        Some schools also use an institutional formula to determine the family’s ability to pay college costs

·        Formulas determine what the family (student & parents or adult student) can reasonably contribute toward the cost of education

·        The results are called the Expected Family Contributions or EFC’s (Federal & Institutional)

Puzzle Piece How is Expected Family Contribution (EFC) Determined?

The process of determining eligibility for financial aid recognizes that a family must meet minimum standards in order to continue to live while the student is in college.

·        The federal formula reflects a family's need for a minimum income.

·        Parents are not expected to use all of their savings for their children's education.

·        Money is set aside for normal working expenses such as transportation.

·        The federal formula does not include equity in primary residence or value of retirement funds.

·        The age of older parent is considered: As you age, you need your savings for retirement

Implications for Student’s Contribution

If you are a dependent or independent student, you are investing in the opportunity to increase future earnings, and you will use a greater proportion of your assets than your parents.  You will, after all, ultimately benefit from your investment. Your current earnings are considered as a primary resource for paying for your education. The federal formula also assumes that your savings (trust funds, etc.) should go for your education.

Components of the federal Expected Family Contribution (EFC)

All of the assets that you and your family can generate according to the federal formula become your expected family contribution, or EFC. Determining the EFC is only a milestone on the road to determining that actual amount you will pay for your education, but it is the major milestone. Once your EFC has been determined, the financial aid offices of the colleges that you are considering take over.

Institutional EFC

Institutional EFC generally supplements the information provided by the federal formula and is used primarily by colleges with large amounts of their own money they distribute to their students.  The institutional EFC:

·        Ensures low-income student access

·        Reduces middle-income family EFC’s

·        Reflects family’s current economic circumstances

·        Reduces perceived savings penalty by providing an "Annual Education Savings Allowance" and a "Cumulative Education Savings Allowance"

You may begin to see that once we consider financial aid, a college with a high ‘sticker price’ may cost the same as, or even less than, a college with a low ‘sticker price.’  Do not breath a sigh of relief just yet, but you should remember the message we have been repeating: You do not know how much college will cost until you have completed the financial aid process

Tip: Colleges meets financial eligibility according to the resources that they have to give you. The amount of money you are eligible for and the amount of money that the college provides are not the same. Typically, colleges do not provide all of the aid that you are eligible to receive.

Puzzle Piece How Do I Access All the Different Sources of Financial Aid?

Applying for Financial Aid is fairly straightforward. The primary application you will need is the Free Application for Federal Student Aid or the FAFSA. These applications are available in schools, colleges, public libraries, and other locations, including on-line (see below). We list the basic sources for you here.

·        Federal Programs: FAFSA (Free Application for Federal Student Aid)

·        Additional Programs at Select Colleges: CSS/Financial Aid PROFILE

·        Scholarships - uses searches such as www.Finaid.com, or your local high school guidance office. Your state department of education may also have a list of scholarships that you can apply for.

·        You may also be eligible for scholarship aid through your employer or a family members employer, from your state's vocational rehabilitation program, or from military programs.

Tip: Be certain to explore programs such as ROTC, the Reserves, National and Air Guard, and the regular military. While you will incur certain obligations, the education benefits are considerable.

FAFSA: Free Application for FAFSA: Free Application for Federal Student Aid - 2002 – 2003

The FAFSA or Free Application for Federal Student Aid is the most important document you will complete if you intend to get help paying for college. We strongly suggest that you start early and that you do a little at a time, rather than tackle the entire document at once. You will need the tax forms for the year 2001 or your completed tax forms for 2000 in order to make a good estimate.

·        No fee involved

·        Determines eligibility for all federal programs and some state's grant programs - federal EFC

·        Electronic filing options available - FAFSA Express- 1-800-4-FEDAID (1-800-433-3243) or FAFSA on Web at www.fafsa.ed.gov

·        Submit as soon after January 1, 2001 as possible

·        Estimate information if you need to

·        Mail to a federal processor

Tip: You can fill out this form without assistance, but it may leave you a bit overwhelmed. There is free is help available from the federal government on their hot line (1-800-433-3243).

PROFILE

The PROFILE is offered by the College Scholarship Service as an additional form that assists 500+ private colleges in distribution of their own non-federal funds. The PROFILE is used to determine Institutional EFC at the colleges that use the PROFILE. It estimates family’s ability to pay college costs.

·        Costs: There is a registration fee and fee to send the report to colleges

·        Phone Registration: 1-800-778-6888

·        Electronic Registration & Application option: http://www.collegeboard.com

·        Should register 4-5 weeks before earliest college financial aid deadlines

Not all colleges use the PROFILE! Please check with your college to be certain that you need the PROFILE, otherwise you may waste time and money that could be used on your college essay or on you scholarship search

Why Apply for Financial Aid Even If I Know I am not eligible?

First of all, you do not know if you are eligible for financial aid unless you apply. Still, let's assume that you know that there is now way you will get a penny in aid. Should you still apply? Yes.

·        It's cheap insurance: If something happens to one or both parents then aid office has all the information they need to bring together the needed resources at a challenging time for the family.

·        Unsubsidized student loans may be a better deal than dipping into your child's trust fund.

·        Some merit scholarships use the FAFSA as part of their application.

·        By applying for aid now, even if it is determined that you are not eligible, you are assured of receiving a lot of useful information about current and future payment options

Puzzle Piece Sources Of Financial Aid

The primary source of financial aid is the federal government. When you make out the Free Application for Federal Student Aid (FAFSA) you are accessing Pell Grants, Perkins Loans, Stafford Loans, PLUS loans (Parent Loans for Undergraduate Students), and many college based and private loan and scholarship programs. You may also be accessing many state programs. College programs may have a special application or use the CSS/Financial Aid PROFILE. (Your college can tell you if you need the PROFILE).

·        Federal: Grants, work-study & loans

·        State: Grants & Loans

·        College: Scholarships, fellowships & loans

·        Private: Grants, scholarships & loans

·        VA/Military: Entitlement Assistance

·        Job Training/Voc Rehab: Entitlement Assistance

·        Employer: Tuition reimbursement

·        Family: Assets (savings, trusts, etc.), Disposable Income (as available) & Loans (from private resources)

Tip: Check with your college to be sure that you need to use the PROFILE. There is a fee attached for using it.

Puzzle Piece The Typical Aid Package

Gifts and Self-Help

Financial aid can be divided into two categories: gift aid and self-help aid.  The two categories contain several different sources of aid.

Gift Aid

·        Pell Grants (if you are income eligible)

·        State Grants (if you are income eligible)

·        College Federal Aid (if you are income eligible) Supplemental Grants

·        College Funds and scholarships (varies with each college)

·        Tuition discounts

Self Help Aid

·        Work-Study

·        Perkins Loan

·        Stafford Loans (from lenders)

·        Loans to parents form the college

·        Federal Parents Loans for Undergraduate Students (PLUS)

Almost all aid packages contain loans. Stafford loans and PLUS (Parent Loans for Undergraduate Students) loans are available to all students, regardless of need. The way you pay for these loans, however, varies. To contact our preferred provider of Stafford and PLUS loans go to www.mesfoundation.com or call 1-(800) 922-6352.

Since over 60% of all aid is in the form of loans, learn all you can.   We recommend that you start with www.mesfoundation.com to start your research.

How Financial Need Might be Met by a Financial Aid Package

As you look at this aid package, please remember: You do not know how much college will cost until you have gone through the financial aid process. Your aid package will probably not look like this one. Your aid package may tell you, however, that the college that looked beyond your means according to the "sticker" or catalog price is very affordable. Note that the loans for each school are different. The private college combined the Stafford loan with their own loan program. The combinations are almost infinite, but you clearly want to look at the loan portion of your award. Some colleges do not even list loans as part of their awards, but you should assume you would probably have to borrow money for college.

Tip: Focus on which college will help you the most with your career.

Puzzle Piece Reminders:

Take a look at this list of reminders. This list will save you money, so you may want to print it out and hang in up where you can see it from time to time.

·        Observe all deadlines

·        Shop for interest rates for loans

·        Consider colleges that are right for your son/daughter, based on his/her interests and aspirations, as well as cost & affordability

·        Compare potential student debt to his/her life-long earnings

·        File for financial aid and all observe deadlines

·        Save a copy of everything that you mail. You may need that copy if items get lost, you may have to verify the financial information, and the copy helps enormously when it comes time to re-apply for aid in the future.

·        Look for scholarships, but do not spend energy and money in the false hope that scholarships will ease the tuition burden

·        If you have questions call the financial aid office at the college you plan to attend. They want the process to work for you!

·        Communicate with the financial aid office

·        Keep a journal or record of contacts to the financial aid office. Jot down the date, who you talked to, and what was said. If possible, try to work with the same aid administrator every time you contact the office.

*Your FAFSA acknowledgement card is attached to your FAFSA.  Follow the directions for submitting the card with your FAFSA.

** Read you FAFSA directions to determine when your Student Aid Report is due

Puzzle Piece Applying for Loans

Almost all aid packages include loans and almost all students require some form of loan assistance. The most common loan is the Federal Stafford Loan. Before you apply for any loan, shop around. The difference between Stafford Loan providers can mean thousands of dollars by the time you have paid off your loan. There are several categories of Stafford Programs.

·        Programs that charge the full rate allowed. Do not borrow from these programs as they are simply too expensive.

·        Pre-discount programs. These programs offer discounts up front regardless of your re-payment history after graduation. They are more expensive than "reward" style programs.

·        "Reward" style programs. These programs offer considerable savings. Not all are alike and the benefits they offer vary, so shop around. We suggest you call their customer services line and (1) see how you are treated, and (2) make certain they can explain the program to your satisfaction.

Tip: Money is very easy to borrow. Only borrow what you absolutely need. Also consider the salary typically earned by people starting out in your chosen career. Will it provide the money you will need to pay back your student loans? Some majors, like teaching certain subjects in certain parts of the country, may offer loan forgiveness programs. Check with your state's department of education.

Puzzle Piece Your Friend the Financial Aid Administrator

As you wend your way through the financial aid process, you will be forming a partnership with your financial aid office. They are the ones that make it all work and the vast majority of aid officers want you to succeed. There are some things that you can do to make certain this new partnership works to your (and the college's) best advantage:

·        Get to know the aid office on your first visit.

·        Give them good, complete information on all the forms you fill out and supplement anything else you think they need to know with a letter.

·        If your information changes, tell them as soon as possible.

·        Know the names of people, and if possible, get to know an aid officer that you can make your point of contact.

·        Include your social security number with any written contact with them.

·        Do not play games or try to hide information. If they find out, and they do tend to find out, it can hurt your chances of getting more aid and may actually put you in legal trouble.

·        If you are a parent sending a dependent to college, make certain that your dependent student understands what has been filed. If the aid office has a question, they will contact the student. It is best for all concerned if the student and parents share all the financial information from the very start of the aid process.

Tip: You are going to college to build a better quality of life for yourself. If you attend a college that may save you money, but will not accomplish that end, you are not saving a penny.

Can I Negotiate my financial aid package?

If the aid package from your first choice college will not work, tell the college. We have had clients who have returned to the aid office and said, "Your college is our first choice.  College xyz found this for us. Can you look again to see if you can provide any more assistance?" This honest approach worked. Once again, the aid officer wants to make it work with the resources that they have available.

 As the aid season progresses toward late spring and students that applied for aid decline their packages, additional aid may become available.  If you have new information it may help the aid officer offer a better package, be certain to tell them. You are forming what will probably be a four-year partnership. You may not have to accept their first offer, but do not assume threats or arrogance will sweeten the deal. At the same time, persistence in the pursuit of a justifiable aid request can pay off.

Puzzle Piece Overview of the Search for Scholarships

Plugging in "Scholarship" in any search engine will reveal several free sources. The number of scholarships, and the publicity that accompanies them, helps create the expectation that there is a lot of free money out there just for the taking. Only 2% of aid beyond the family's resources is made up of scholarships. This does not mean, however, that you give up before we get started. It does mean you have some work ahead of you.

We know students that have financed their college education on small scholarships, some only $100. While it took some work tracking them down, they got enough of these smaller awards to cover their expenses. Scholarship winners follow a few basic rules:

·        Follow the directions carefully

·        Be certain that you meet the criteria outlined in the scholarship

·        Write a good essay on the topic the scholarship asks for

Tip: Word processing makes the chore of writing essays and completing scholarship applications much easier than paper and pen. Be careful, however, that you do not send the wrong material to a scholarship committee

Where to Find Scholarships

The Internet has emerged as a key source of scholarship information. There are other resources you will want to add to your search strategy. If you are a high school student, check the guidance office. If you are an adult, check your local adult education office.
Employers may also offer awards. If you are working, check with your employer for tuition assistance or scholarship awards. If you are a dependent student, ask your parent or legal guardian to check the personnel office for the availability of awards.

We know one individual who spent Christmas break in the library trying to find money for second semester. He found a state based scholarship that had gone unnoticed and applied. He got the money for second semester.

You can also use on-line scholarships searches such as the one found at www.mesfoundation.com.

It is probably a scholarship search scam if:

There are some scams still some out there, so be careful. If you have any doubts about the viability of a scholarship and you are in high school, see your guidance counselor or adult education counselor. The web site www.Finaid.com 's tracks scholarship scams and offers one good place to turn. We list below the "alarms" that we watch for.

·        There is an application fee

·        They guarantee winnings

·        Everyone is eligible

·        It is an unsolicited opportunity

·        There are typing and spelling errors

·        There is a P.O. box for a return address

·        You must respond quickly

·        They make unusual requests for personal information

·        They ask for money

Puzzle Piece Help charts:

These worksheets are intended to help you gather information to help you plan for your college expenses.