college financial aid

FINANCIAL AID STRATEGYpresents

What every parent needs to know about financial aid

www.financialaidstrategy.com

http://www.financialaidstrategy.com/



TOPICS1. College Statistics

2. College Facts

3. College Costs

4. Financial Aid

5. 529 Plans

6. UTMA/UGMA

7. GPA,SATs.ACT

8. Expected Family

9. Contribution (EFC)

10. Understanding Financial

Aid Forms

11. Sources of Financial Aid

12. Financial Aid Statistics

13. Awards & Appeals

14. Summation

http://www.financialaidstrategy.com


Our Philosophy

An excerpt from a quote by the Honorable Learned Hand, U.S. Appeals Court Judge, Helvering v Gregory, 69F.2D, 809 (1934)…..

“Over and over again the courts have said there is nothing sinister in so arranging ones affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands. Taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.”

The same can be said about college financial aid planning in so much as there is nothing sinister in arranging ones affairs as such to keep tuition costs as low as possible. Everyone does it, rich and poor alike.



Sharing Our Knowledge

• Our goal today is to educate you as to the rules of the game and how to win.

• The common theme all parents share is to send their children to the best college that they can afford in order to give their child a leg up in life without jeopardizing their retirement.



GPA, Class Ranking, SAT & ACT

Scores Matter• All of the above have a major impact on both Merit Awards and Acceptance into the

University of your Choice……

•

• A Helpful Hint regarding taking the SATs………..

• Did you know that College Board reports only the “highest score” for each section of

the SAT…?

• Therefore if your student takes the SAT test 3 times but concentrates his/her studies

to only 1 section at a time he/she will increase the likelihood of much higher scores

…

•

• Hypothetical example….

•

• SAT #1 Math score 610 Critical Reading 0 Writing 0

• SAT #2 Critical reading 625 Math 0 Writing 0

• SAT #3 Writing 640 Math 0 Critical reading 0

• College Board would report your SAT scores as 1875



Ugma/Utma owned by the student

• Beginning with the 2009-2010 school year, student- and UGMA/UTMA-

owned 529 accounts are to be reported as parental assets, if the student

files the FAFSA as a dependent and has to include parent assets and

income. This treatment confers a financial aid benefit as the parental rate of

5.64% is considerably less prejudicial than the 20% rate on non-529 assets

owned by the student.

*This rule does NOT apply to private universities…..



529 plans held by parents or other

non-beneficiary

• A 529 account owned by a

parent for a dependent student

is reported on the federal

financial aid application

(FAFSA) as a parental asset.

Parental assets are assessed

at a maximum 5.64% rate in

determining the student's

Expected Family Contribution

(EFC).

*This rule does NOT apply to private universities



College Statistics

• Nationwide there are 2533

accredited four year colleges.

• There are 1683 accredited two-

year colleges.

• Four year colleges: 2533

• Public 639 (25%)

• Private 1894 (75%)

• Non-profit (80%)

• Two year colleges: 1683

• Public 1061 (63%)

• Private 622 (37%)

• Non-profit (18%)

Source: National Center for Education Statistics



College StatisticsGraduation Rates for Undergraduates:

• Four years35.3%

• Public 27.9%

• Private 50.2%

• Private Non-profit 22.1%

• Five years52.3% • Public 48.3%

• Private 61%


• Six years57.1%• Public 54.1%

• Private 64%


Source: National Center for Education Statistics



College FactsFinancial Aid

Many families qualify for financial aid even though they think they earn too much money.

Many families qualify for financial aid even though they have substantial equity – almost 90% of colleges don’t care.

Many families can send their child to a private college for less money “out-of-pocket” than a public school.

There are 75 colleges that meet 100% of a family’s financial need.



College Costs

Annual College Costs

• Average Public University - $15,000

• Average Private University - $30,000

• Many Private Universities < $45,000

• Annual costs increasing @ 6% per yr.

• Direct costs:

-Tuition and fees

-Room and board

• Indirect costs:

-Books

-Living expenses

-Transportation



College Costs

Financial Aid….the breakdown Need based financial aid includes:

-Grants (free money)

-Loans (pay it back…with interest)

-Work study (earn it)*Parents most often equate financial aid solely to grant (free) money, but work

study programs and loans are also included.

Merit based financial aid includes:-Grants/Scholarships only



College CostsFinancial Aid – Need Based

The Needs Based Formula

COA (Cost of Attending)

- EFC (Expected Family Contribution)

= Financial Need

Example: $41,000 (COA)

- $16,000 (EFC)

= $25,000 (NEED)



Effective Family Contribution

The Importance of EFCQualifying factor for the majority of financial aid

Directly determines eligibility of family

EFC can sometimes be lowered IF you understand

how the calculation works ahead of time

Financial Aid EligibilityYou will not qualify for need based financial aid if....

Your EFC is greater than COA (cost of attendance)

unless you receive merit based money and in some

instances “research scholarships



Methodologies Used to Determine EFC

The Federal Formula (FAFSA)• Used by 89% of all 2533 colleges

• 99.7% of Public College (637 of 639)

• 86% of Private Colleges (1628 of 1894)

The Institutional Formula

(CSS Profile)• 11% of colleges (268 of 2533) require it

• Local examples….Boston College, Boston University, Brandeis University, Bentley, College of the Holy Cross, Brown University

• Highly Selective



The Breakdown

EFC as determined by FAFSA– Parent contribution from income 22%-47%

– Parent contribution from assets 2.6%- 5.6%

– Student contribution from income 50%

– Student contribution from assets 20%

Other variables– # of household members

– # of family members currently attending

college



FORMS

FAFSA (Free Application for Student Aid)

• The FAFSA form is used to collect the family’s financial

information (www.fafsa.ed.gov)

• The U.S. Government Dept. of Education determines a

family’s EFC

• Used by all accredited Public & Private Colleges and

Universities

• It is required in order to qualify for Federal and State

financial aid, grants and loans



FORMS

ABOUT FAFSA• Assesses liquid funds-cash,savings,checking accounts,C.D.s,money

market,stocks,bonds,mutual funds & rental or other property

• Does not assess Primary Residence home equity

• Does not assess Retirement funds 401k, 403b.IRA’s

• Everyone should submit a FAFSA form regardless of income &

assets

• WHY?

• Qualification for loan programs

• Insurance for appeals

• Often required for Merit aid



Divorced/Separated Parents

Clarifying the facts for students of

divorced or separated parents:

• Question: Who’s information goes on the FAFSA?

• Answer: Whichever parent the student lived with the most during the base year defined as physical custody for 6 months+ 1 day

• The base year is the year before high school graduation

• Seniors 2012

• Juniors 2013

• Sophomores 2014

• Freshman 2015

• Assets are valued as of the date on which you sign off on and submit the financial aid form



FAFSA Multiple Students

• Parent contribution is split

equally

• Does not require both

students to attend the same

college

• The younger student

typically qualifies for more

need based financial aid

• Student contribution is not

split



Forms / Institutional Methodology• CSS Profile is used to collect the financial

data( www.collegeboard.com)

• Used by some (Primary) and 268 Private colleges to distribute endowment funds

• In addition to (not in lieu of) the Fafsa form

• Several Public schools began using this form beginning in the 2005-06 academic year

• More assets are assessable

• Primary residence home equity is considered

• Younger siblings assets

• Small business value

• These assessment often result in an EFC which is “much higher” than the Fafsa calculation

• Required by most Private schools

• Asks for additional information

• Typically an easier form to understand (1-2 pages)



Sources of Financial Aid

Over 90% of all financial aid is from:

• Federal Government

• State Government

• Endowment funds (private colleges)

STATS

• Federal aid 66%

• Endowment aid 19%

• State aid 6%

• Employer provided aid 6%

• VA 2%

• Private scholarships 1%



Sources of Financial Aid/ Federal

Government

Stafford Loan:• Student loan

• No credit check

• Deferred payments

• Subsidized or unsubsidized

• 10 year repayment

• Entitlement program

• Loan limits

5500/5500/6500/7500



Loans

Plus Loans• Parent loan

• No deferred payment

• Always unsubsidized

• 10 year repayment

• Can be used toward EFC “gas”

Federal Work Study

Program (FWS)• Colleges determine qualification

• Pays part of student wages

• Helps build work experience

• Does not impact financial aid

• Wages are subject to income tax



Sources of Financial Aid / Private Universities

Endowment funds• Often offer 70% -100% of family's need• Offer the most grant (free) money• Often offer merit-based aid

Financial aid statistics• Some schools meet 90% or more of need• Some schools meet 50% or even less of need

ExampleCOA= $45,000

EFC= $14,000NEED=$31,000

XYZ University meets 65% of need:

$31,000(need) x 65%=$20,150(award)

ABC University meets 45% of need:

$31,000(need) x 45%=$13,950(award)

XYZ University (unmet need) $31,000 x 35%= $10,850

ABC University (unmet need) $31,000 x 55%= $17,050

At XYZ University it would cost you:

$14,000(EFC) + $10,850(unmet need)= $24,850

At ABC University it would cost you:

$14,000(EFC) +$17,050(unmet need)= $31,050



Sticker Shock• A common mistake most parents make is allowing the “sticker price” to influence

their decision by simply avoiding those schools that carry a high price tag.

• Don’t let this happen to you!

The example below illustrates the actual cost of attending a private “more expensive school” vs. attending a public “less expensive school”. *(2009 tuition costs)

College of the Holy Cross

COA=$43,181

EFC= $14,000

Need=$26,181 Holy Cross meets 100% of need of which 75% is Gift aid

Gift= $19635 ($26,181 x 75%) Money you do not have to pay back

Loan= $6546( 25% of $26,181unmet need)

EFC=$14,000

Loan= $6546+

Total=$20,546 Actual out of pocket costs

University of Massachusetts Amherst

COA=$19,246

EFC= $14,000

Need=$5246 UMASS Amherst meets 82% of need of which 40% is gift aid

Gift = $1720 ($5246 x 40%) Money you do not have to pay back

Loan=$3526 unmet need

EFC=$14,000

Loan=$3526

Total=$17,526 Actual out of pocket costs

*THE DIFFERENCE=$3020 more to attend Holy Cross at $43,181 vs. UMASS at $19, 246

Appealing a Financial Aid Award

Appealing

• The first award may or may not be the last offer

• Follow each school’s appeal procedure

• Base appeal on situations related to “mis-awards” or “special circumstances

Special Circumstances

• Loss of employment or dramatic reduction in parent’s or student’s income/assets

• Reduction in child support or social security benefits

• Financial responsibility for elderly parents

• Unusual medical/dental expenses not covered by insurance



Still Confused ?



So Where Do You Go For Help

• Well you could seek out assistance from your local

college financial aid office but that is like going to

the IRS for help to reduce your income taxes

• Or you could ask your high school guidance

counselor for their help but with a workload of

hundreds of students do you really think they have

the time or even the expertise to deal with your

specific situation

• Maybe even spend hours on end scouring the

internet doing research and looking for answers

• Better yet contact us………..



What you can expect to gain from a

confidential personal evaluation

• EFC Analysis

• Current & Best case scenarios

• Federal & Institutional methodologies

• Find out now exactly how much financial aid your student will be eligible for

• Evaluation of assets

• Impact of those assets on financial aid eligibility

• College profile report

• Learn your asset protection allowance

• Identify which assets /income are affecting your EFC

• Discuss strategic solutions to maximize the amount of financial aid which you can receive

• Create an action plan for paying college costs

• Discuss our fee structure which includes all of the above



Contact Us

1-800-698-1994Financial Aid Strategy (FAS)

255 Park Avenue Suite 1104

Worcester Ma. 01609



THANK YOU

We hope this

presentation has

been helpful and that

you now have a better

grasp of the college

financial aid process.



college financial aid

Documents

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college financial aid

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parental rate

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critical reading

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