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Celebrating 30 years of Excellence Planning, Saving & Paying for College

Financial Aid Trends and Regulatory Updates

NPEA Conference April 2014

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•  Massachusetts Educational Financing Authority •  Not-for-profit state authority that works to

make higher education more accessible and affordable •  Created in 1982 by the State Legislature •  Helping families:

o Plan: Extensive community outreach o  Save: U.Fund® and U.Plan® college savings plans o Pay: Affordable fixed interest rate college loans for

over 30 years

Facts About MEFA

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•  Private non-profit organization based in Boston, MA

•  Public purpose mission = empower students to successfully manage and repay their college loan debt

•  Provides student loan education and advocacy

•  Develops financial competencies through innovative web-based tools and trusted, neutral advice

•  All free of charge to students and alumni

Facts About ASA

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•  President is concerned about accountability and student debt

•  Federal Government is concerned about transparency

•  Families are concerned about costs

•  Institutions are concerned about helping students enroll and complete and funding levels

Current Climate

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•  Paying for Performance –  College rating system determining aid funding –  Aid to students based on student performance

•  Promoting Innovation and Competition –  Encourage online courses & innovative learning

•  Ensuring that Student Debt Remains Affordable –  Cap repayment at 10% of monthly income –  Outreach

A Better Bargain for the Middle Class: Making College More Affordable

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•  Grants vs. Loans •  Federal Methodology

– FAFSA

•  Independent Student/Dependency Overrides •  Citizen/Eligible-Non Citizen

•  Verification – IRS Data Retrieval

How Does The Government Define Affordability?

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Overview of Financial Aid Undergraduate Student Aid 2011-12 ($185.1 Billion)

Source: The College Board, Trends in Student Aid 2012

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•  Student is the borrower – no credit check

•  Annual limits: $5,500 for freshman year

•  Fixed interest rate changes annually: 3.86% for 2013-14

•  Two types:

–  Subsidized – Interest accrues after graduation

–  Unsubsidized – Interest accrues immediately

•  1.072% fee deducted from loan amount

•  Promissory Note & Entrance Counseling: StudentLoans.gov

•  No payments while in school

•  Several repayment options: StudentAid.gov

Federal Direct Student Loans

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•  Free Application for Federal Student Aid (FAFSA)

–  Required by all colleges for federal and MA state aid –  Open January 1st: FAFSA.gov –  Must sign with a PIN: PIN.ed.gov –  IRS Data Retrieval Tool – available February 1st –  Requires data from all parents who live together, married or not

The FAFSA

Must be completed every year!

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•  Auto Zero EFC income cutoff remains $24,000 or less

•  Skip logic

•  Defining Parents: –  All parents who live together, married or not –  Same-sex parents –  No noncustodial parents

•  The PIN –  Requires a SSN – parents without should sign the signature page

•  IRS Data Retrieval – available Feb 2nd

FAFSA: Reminders & Updates

New!

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Federally Independent Students

•  24 or older •  Married •  Graduate Student •  Active duty in U.S. Armed

Forces •  Veteran of U.S. Armed

Forces •  Provide more than half of

support for children or dependents

•  In foster care any time after age 13 or parents are deceased

•  Emancipated minor •  In legal guardianship •  Homeless, risk of being

homeless, or unaccompanied youth

• No Parent Information Collected

•  Criteria:

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Dependency Overrides

Students who do not qualify: • Parents refuse to financially contribute or provide data • Parents do not claim the student as a tax dependent • Student demonstrates total self-sufficiency

Students who may qualify: • Abusive household • Abandonment • Incarceration or institutionalization of both parents • Parents lacking the physical or mental capacity to raise the child • Parents’ whereabouts unknown • Parents’ extended hospitalization

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Dependency Overrides

Students should submit to each school:

•  A letter of explanation

•  Relevant documentation (court, medical, police, financial)

•  At least one third-party letter from non-family member: member of clergy, lawyer, social worker, etc.

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•  U.S. nationals

•  U.S. permanent residents with Form I-551, I-151, or I-551C

•  Those with Arrival-Departure Record (I-94) from U.S. Citizen and Immigration Services (USCIS) showing Refugee, Asylum Granted, Cuban-Haitian Entrant (Status Pending), Conditional Entrant (if issued before April 1, 1980), or Parolee (paroled at least one year and intending to become a U.S. citizen or permanent resident).

•  Those who hold a T-visa or have parents with a T-1 visa.

•  Any “battered immigrant-qualified alien” or a child of such a person under the Violence Against Women Act.

•  Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau.

Eligible Non-Citizens

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Verification

•  Colleges verify accuracy of FAFSA data

•  Students selected by Department of Education

•  In 2013-14, of 18.8million FAFSAs, 5.7million were selected

•  Customized

•  Additional documentation collected

•  New in 2013-14: High school completion Identity/statement of educational purpose

•  New in 2014-15: Removed SNAP-only group Household Resources: if insufficient income reported for family size

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Verification Acceptable Documentation

•  Tax return items: −  IRS Data Retrieval Tool (unchanged data) −  IRS Tax Return Transcript via Get Transcript

−  Provides immediate PDF of tax return transcript

−  Paper tax returns only accepted for amended, foreign, identity theft victims, and authentication difficulties

•  All other items: –  Verification Worksheet provided by the institution –  Possible additional documentation

•  Free tax prep for low-income families: irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers

New!

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IRS Data Retrieval Tool

•  9 million folks used it in 2012-13

•  When can it NOT be used:

– Married individuals who file married filing separately or head of household tax returns

– Change in the marital status after the end of tax year

– Amended Tax Returns

– Foreign Tax Returns (even if U.S. return is also filed)

– Filers with Tax ID Number (TIN)

– FAFSA and tax return address do not match

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•  Institutional Methodology – CSS PROFILE

•  Professional Judgment

•  Need-Based Aid

•  Merit-Based Aid

How Do Colleges Define Affordability?

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Cost of Attendance (COA) – Expected Family Contribution (EFC)

= Financial Aid Eligibility

Financial Aid Formula

Colleges fill in Financial Aid Eligibility with financial aid from multiple sources

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•  CSS/Financial Aid PROFILE®

–  Some colleges require for institutional aid –  $25 for 1st school, $16 for each additional –  Online application required: CollegeBoard.org –  Noncustodial Parent PROFILE required when applicable

•  College Financial Aid Application

–  Required by some colleges –  Usually part of the admissions packet

Other Financial Aid Applications

Don’t wait until you’re accepted to

apply!

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CSS/Financial Aid PROFILE

•  For institutional aid •  More detailed questions:

o  untaxed income, home, expenses, household, special •  Customized based on registration & college selection •  Noncustodial PROFILE & waivers •  Updates sent to colleges on paper •  PROFILE FAQs and Glossary

•  Customer Service: o  305-829-9793 o  help@cssprofile.org

MEFA PROFILE webinar on Trainings & Events page

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PROFILE Participating Institutions and Programs

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•  $25 first school, $16 each additional

•  Fee waivers –  Automatically granted based on family finances –  For first-time, undergraduate applicants –  Parents must live in the U.S. and not be self-employed –  Automatic for orphans & wards of the court –  Covers up to 8 institutions

•  Fee Payment Codes –  Purchased by colleges and organizations for students –  Each pays for one college –  Limit of 16 per year

PROFILE Costs

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Changes in circumstance, special situations not already reported, and requests for additional funds (appeals) should be submitted to the Financial Aid Office to include:

•  Letter of explanation •  Documentation (bills, financial statements, medical

records, layoff notices, final paystubs) •  Summary of current financial plan

Special Circumstances/Appeals

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•  Awarded based on family’s financial eligibility as determined by standardized formula

•  Includes grants, loans and/or work-study

•  Most federal, state and institutional aid is awarded based on financial eligibility

Need-Based Aid

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•  Awarded in recognition of student achievements (academic, artistic, athletic, etc.)

•  Applicants often compared against one another

•  May or may not be renewable

•  Not offered at every school

Merit-Based Aid

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•  What College Gives Me The Most Free Money? – Grants – Scholarships*

•  Unclaimed Scholarship Myth They Tell Their Child – “There’s tons of FREE MONEY out there!!”

•  Focus on current student, not others next in line to go to college, or current student’s possible grad study

*average 3rd party award = $500-$2500

How Do Parents Define Affordability?

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Calculating the Balance Due: Direct vs. Indirect Costs Direct Costs: Billed from the college:

–  Tuition –  Fees –  Room –  Board/Meal Plan –  Health Insurance

Indirect Costs: Incidentals throughout enrollment:

–  Books –  Transportation –  Laptop –  Personal expenses

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Comparing Award Letters: Award Totals Vary

COA: $30,000 EFC: $5,000 Total Eligibility: $25,000

College A College B College C

Grants/Scholarships $18,000 $15,000 $10,000

Student Loans $5,500 $5,500 $5,500

Work-Study $1,500 $1,500 $1,500

Total $25,000 $22,000 $17,000

Unmet Need $0 $3,000 $8,000

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•  Types of aid: 1.  Grants/Scholarships 2.  Work-study 3.  Loans

•  Not all financial aid award letters are the same

•  Financial aid could be from federal, state & college sources

•  Formally accept all or part of the financial aid award by May 1st

This example is an estimate only.

Understand Your Financial Aid Award

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•  Deadlines and application requirements are IMPORTANT

•  Most applications are due in Feb or March, before the admissions decisions are mailed

•  Estimate information if necessary

•  Use online options whenever possible

•  Apply every year

•  KNOW YOUR NUMBER!

–  Stick to your family’s definition of affordability

Applying for Aid: What Parents Need to Know

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•  Small Business Owner – $50,000 yearly income •  Family Size = 6 •  Limited assets •  1 child in college in 2014-2015

•  Currently debating where to send his son: •  In state - $22,500; received $20,500 in aid •  Out of state - $43,000; received $43,000 in aid

•  Q: Where should he send his son to college?

Case Study - Evan

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A ‘Full Ride’ Isn’t Always What It Seems

In-State Out-of-State Private

Grants/Scholarships $13,550 $18,280 $20,780

Student Loans/Work Study $7,000 $5,500 $7,800

PARENT LOAN $0 $20,056 $0

Total $20,550 $43,836 $28,580

Unmet Need $2,039 $0 $23,420

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– “Saving for college means no financial aid.” – “It’s not worth saving for college if I can’t

save the entire cost.”

– “Times are tough. I can’t save at all.”

Myths about saving for college

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Expected Family Contribution (EFC)

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+ + + =

$ Parent Income

0% to 47% of adjusted gross income minus all taxes and allowances

50% over $6,130

20% of all assets

3% to 5.6% of nonretirement assets

•  529 College Savings Plans

•  Brokerage and/or mutual funds

•  Coverdell Education Savings Accounts

•  Prepaid Tuition Programs

•  UGMA/UTMA accounts

•  Other savings

$ Parent Assets

$ Student Income

$ Student Assets $ EFC

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An example. 4 in the family, 1 child in college:

Income & Asset Impact on EFC

Family A Family B Family C Family D

Income $40,000 $60,000 $60,000 $60,000

Assets $0 $0 $30,000 $60,000

EFC $934 $4,227 $4,227 $4,939

Difference $3,293 $3,293 $4,005

Based on 2014-15 Federal Methodology

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*Based on 10 years at an interest rate of 7%. This example is an estimate only and market conditions may change.

Saving vs. Borrowing

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Strategies for Saving •  Start saving as early as

possible. Use time to your advantage.

•  Use automatic transfers

•  Get the word out and let your family and friends know they may contribute or open a plan up on behalf of your child.

•  Involve your child in the

process. There are great savings tools for kids online.

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How Do Students Define Affordability?

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•  Family size – 4 •  Family yearly income – $12,887 •  Kenny = only student in college 2011-2012

•  Sought help in deciding where to go to college: •  In state - $4,500; received $5,500 in aid •  Out of state - $39,170; received $34,150 in aid

•  Q: Where should he go to college?

Case Study - Kenny

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Strategies for College Affordability

•  Use tools to identify ‘affordable’ schools

•  Prioritize saving •  Apply for scholarships •  Use payment plan •  Graduate in fewer

semesters •  Choose a specific

major for its career prospects

•  Work while in school* •  Rent textbooks •  Live at home •  Understand your

student loan options

*don’t sacrifice grades for

earnings – students are better off going to school part-time if working is priority or necessity

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•  Online tool in graphic format

•  Compare colleges: o Average net price o Graduation rate o  Loan default rate o Median loan borrowing

•  Coming soon: alumni employment

College Scorecard

CollegeCost.ed.gov/Scorecard/

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Financial Aid Shopping Sheet

•  Provides institution’s cost and student’s financial aid

•  Intended to illustrate net price (for comparison)

•  School data: grad rate, loan default rate, median borrower debt

•  2nd page added for 2014-15 with glossary

•  Used by 1,937 institutions

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FinancialAidToolkit.ed.gov

Financial Aid Toolkit •  New tool for counselors and educators •  Financial aid information, outreach tactics & resources •  New tools will continually be posted

New!

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Tools and Resources – DURING COLLEGE

•  Q: How does your program support students during college? – Does your program offer alumni support? – How is it working? Areas for improvement?

•  Q: How do you support students during college? – What resources/recommendations do you give

them? – Do you just have contact with the student or do you

have contact with the parent as well?

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•  Online college search tool

•  General institutional info: admission requirements, academic programs, graduation rate, average net price, loan default rate

•  Can save a search and return to it later •  Can compare schools side by side •  CollegeNavigator/gov

College Navigator

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•  Online tool – on each institution’s website

•  Provides personal, estimated net college price

•  Questions about finances and academics

•  Displays federal & institutional aid

•  Merit-based aid may be calculated

Net Price Calculators

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•  In-State College graduate •  $30,000 yearly income •  Family Size = 1 •  $45,000 in FEDERAL student loan debt •  Currently wrestling with how to repay her loans: •  Standard repayment = $518/month •  Income-based repayment = $166/month

Q: Which repayment plan should she choose?

Case Study – Chelsea

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Loan Repayment Comparison

Standard  Repayment  

Income-­‐Based  Repayment  

Monthly  Payment   $518   $166  

Repayment  Term   10  years   25  years  

Total  Interest   $17,143   $65,854  

Total  Paid   $62,143   $95,564  

Source: Texas Guaranteed Student Loan Corporation (TGSLC)

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Tools and Resources – AFTER COLLEGE

•  KNOW WHAT YOU OWE! – www.nslds.ed.gov – www.studentloans.gov

•  Income Based Repayment – www.ibrinfo.org •  Public Service Loan Forgiveness –

www.studentaid.ed.gov

•  Potential tuition reimbursement/loan forgiveness employer benefit

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•  Loan Counseling Demos: Entrance, Exit, & Financial Awareness (FACT) –  Understand your loans –  Manage your spending –  Plan to repay –  Avoid default –  Make finances a priority

•  Students with loans can log-in for personalized info

•  Repayment Estimator without log-in

StudentLoans.gov

New!

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•  Full of information on all federal financial aid programs •  Repayment Estimator •  1-800-4-Fed-Aid

Studentaid.gov

New!

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Thank You

Questions? Contact Us:

Julie Shields-Rutyna jshields-rutyna@mefa.org

617-224-4839 www.mefa.org

Kevin Fudge kfudge@asa.org

617-728-4649 www.asa.org