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An Introduction to Financial Aid
Understanding the Basics
Gregory Mitton
Associate Dean of Admission
Director of Financial Aid
Muhlenberg College
Agenda • Resource information • What is financial aid? ◦ Application process
◦ Determination of eligibility
◦ Types and sources of aid
• How do admissions and financial aid offices interact?
• Side notes ◦ College planning services
◦ Scholarship searches and scams
September 2019 1
Sources of General FA Information
• The Student Guide (U.S. Department of Ed.) • College Financial Aid Brochures
• Websites ◦ Financial Aid Information page
• www.finaid.org ◦ U.S. Department of Education
• www.FAFSA.gov ◦ The College Board
• www.collegeboard.com/paying
September 2019 2
The Financial Aid Information Page www.finaid.org
Accurate, Comprehensive, and Objective Information
• Links to Free Scholarship Searches
• Scholarship Scam Alerts
• Financial Aid Consultant Guide • Loan Calculators
• Strategies- Maximizing Aid Eligibility
• Answers to Frequently Asked Questions
September 2019 3
What is Financial Aid?
• Money given, paid, or loaned to help finance college
• This includes: ◦ Gift Aid
• Grants and Scholarships (free money)
◦ Self-Help Aid
• Work study (job opportunity to earn money) • Loans (money borrowed that must be repaid)
September 2019 4
Goal of Financial Aid
• The primary goal is to assist students in paying for their
educational investment and is achieved by: ◦ Evaluating family’s ability to pay for educational costs
◦ Distributing limited resources in an equitable manner ◦ Providing a balance of gift aid and self-help aid
September 2019 5
Philosophy of Financial Aid
• Parents have the primary responsibility to pay for their
dependent children’s education. • Students also have a responsibility to pay for a reasonable
portion of their educational expenses. • Evaluation of family circumstances should be consistent and
equitable.
September 2019 6
Application Process – Most Schools
• Free Application for Federal Student Aid (FAFSA) ◦ Required for federal and state aid
◦ Deadlines vary from school to school
◦ Tax year 2018 information used for 2020-21 Academic year ◦ Available October 1 at www.fafsa.ed.gov
September 2019 7
IRS Data Retrieval Tool
• While completing FOTW, applicant may submit real-time request to IRS for tax data
• IRS will authenticate taxpayer’s identity
• If match found, IRS sends real-time results to applicant in new browser window
• Applicant chooses whether or not to transfer data to FOTW
September 2019 © 2016 NASFAA Slide 28 8
IRS Data Retrieval Tool
• Available October 2019 for 2020-21 processing cycle • Participation is voluntary
• Reduces documents requested by financial aid office
September 2019 © 2016 NASFAA Slide 29 9
IRS Data Retrieval Tool
• Some will be unable to use IRS DRT • Examples include: ◦ Filed an amended tax return
◦ No Social Security Number (SSN) was entered
◦ Student or parent married, but filed separately
September 2019 © 2016 NASFAA Slide 30 10
FSA ID
• Sign FAFSA electronically • Not required, but speeds up
processing
• May be used by students and parents throughout aid process, including subsequent school year
• Only the owner should create a FSA ID
September 2019 © 2016 NASFAA Slide 31 11
https://fsaid.ed.gov/npas/indexhtm
General Student Information
• Social Security Number (SSN) • Citizenship status
• Marital status
• Drug convictions • Selective Service registration
• Level of parents’ school completion
September 2019 © 2016 NASFAA Slide 33 12
Student Dependency Status
• FAFSA asks questions to determine dependency status for federal student aid (not IRS) purposes: ◦ If all “No” responses, student is dependent ◦ If “Yes” to any question, student is independent
September 2019 © 2016 NASFAA Slide 34 13
Information About Parents of Dependent Students
• Tax, income, and other financial information • Dislocated worker status
• Receipt of means-tested federal benefits
• Assets • Untaxed income
September 2019 © 2016 NASFAA Slide 35 14
Information About Students (and Spouse)
• Tax, income, and other financial information • Dislocated worker status
• Receipt of means-tested federal benefits
• Assets • Untaxed income
September 2019 © 2016 NASFAA Slide 36 15
Additional Information
• College and housing information • FAFSA preparer information
• Certification of Statement of Educational Purpose
September 2019 © 2016 NASFAA Slide 37 16
Signatures
• Required ◦ Student
◦ One parent (dependent students)
• Format for submitting signatures ◦ Electronic using FSA ID
◦ Signature page
◦ Paper FAFSA
September 2019 © 2016 NASFAA Slide 38 17
Frequent FAFSA Errors
• Social Security Numbers • Divorced/widowed/remarried parental information
• Income earned by parents/stepparents
• Untaxed income • U.S. income taxes paid
• Household size
• Number of household members in college • Real estate and investment net worth
September 2019 © 2016 NASFAA Slide 39 18
Application Process – Some Schools
• Institutional aid application • CSS/financial aid profile- available in September ◦ Can be filed earlier than the FAFSA
◦ Not all schools
◦ Registration fee of $25 (collegeboard.com) ◦ Per school fee of $16
September 2019 19
Application Tips (Making Your Efforts Count!)
• Find out application requirements and deadlines • Fill out forms completely, accurately, and legibly
• Make copies of all completed forms
• Comply with all information requests • Meet deadlines (obtain proof of mailing!)
September 2019 20
Definition of Need Analysis
• Need analysis is simply defined as: ◦ A process of determining a student’s financial need by analyzing
information provided by the student and parent on a financial aid form. ◦ Need analysis forms include the FAFSA and CSS/ Financial Aid Profile
September 2019 21
Basic Equation of Need
Cost of Attendance (COA)
– Expected Family Contribution (EFC)
= Student’s Financial Need (eligibility)
September 2019 22
Cost of Attendance
• Varies from school to school ◦ Tuition and fees
◦ Room and board
◦ Books and supplies
◦ Transportation
◦ Miscellaneous personal expenses
◦ Loan fees, study abroad costs, expenses associated with a disability, or expenses for cooperative education program
September 2019 23
Determining Expected Family Contribution (EFC) • Income ◦ Taxed
◦ Untaxed
• Asset Equity ◦ FAFSA excludes home equity
◦ Profile does not exclude home equity
• Family size
• Number of family members in college ◦ Excludes parents enrolled in college
• Age of parents September 2019 24
Need Varies Based on Cost
September 2019 25
1
2
3
Need (variable)
EFC
CostofAttendance(variable)
1
2
3
EFC
ExpectedFamilyContribution(constant)- =
Sources of Financial Aid
September 2019 26
Federal & State Grants
• Pell Grant • FSEOG ◦ Awarded to students with exceptional financial need (priority given to Pell
Grant recipients)
• State Grants ◦ Often do not travel out of state
September 2019 27
Student Employment
• Federal work-study • State work-study
• Institutional work-study
September 2019 28
Federal Loans
• Federal Direct Student Loan ◦ Subsidized (fixed rate of 4.53% for AY 2019-20)
◦ Unsubsidized (fixed rate of 4.53%)
September 2019 29
Institutional Aid
• Merit Scholarships • Athletic Scholarships
• Talent Scholarships
• Need-Based Grants
September 2019 30
Private / Other Government Aid
• Private Business Scholarships • Civic Organization Scholarships
September 2019 31
How does the college meet students’ needs?
September 2019 32
Preferential Packaging
• Student’s standing in the applicant pool ◦ Class rank
◦ Grade point average
◦ Standardized test scores
◦ Extracurricular activities / special talents
◦ “Overall attractiveness of the student to the college”
September 2019 33
Example of Preferential Packaging • Student A
◦ Need: $40,000 ◦ Rank: top 2% ◦ SAT’s: 700 Math, 700 R+W ◦ Class President ◦ Lead in School Musical ◦ Community Service
September 2019 34
• Student B
◦ Need: $40,000
◦ Rank: top 40%
◦ SAT’s: 550 Math, 500 R+W
◦ Stage Crew
◦ Key Club
Example of Preferential Packaging
• Student A Package:
$20,000 Merit $22,500 Grant $5,500 FDSL
$48,000 Total
September 2019 35
• Student B Package:
$5,500 FDSL
$2,000 Work-Study
$31,500 Grant
$39,000 Total
Financial Aid Consultants
• Several things you should know ◦ Caveat emptor
◦ Free assistance is available
◦ Be wary of any consultant who encourages you to use strategies that seem unethical to you
September 2019 36
Scholarship Searches
• Once again, let the buyer beware! • Several warning signs of a possible scam: ◦ Guaranteed winnings
◦ “Free seminars” on financial aid
◦ 1-900 telephone numbers
• Caution: As a general rule, if you must pay money to get money, it might be a scam.
September 2019 37
Free Scholarship Searches
• FastWEB – fastweb.com • College Board – collegeboard.com/paying
• Sallie Mae – SallieMae.com
September 2019 38
Something to Think About…
“Education is one of the best financial investments you can make. A bachelor’s degree yields an increase in lifetime earning potential of over one million dollars according to Census Bureau data. This is equivalent to a 20% annual return on investment.”
- The Financial Aid Information Page (www.finaid.org)
September 2019 39
September 2019 41