Please silence your cell phones!

Thank you for being considerate to the people around you.

Financial Aid 101

Paying for Postsecondary Education

College Expenses

Trends in Higher Education

Student loan debt burden continues to grow. Is College worth the money? 34% of college graduates end up living back at home with mom and dad (US Census report).
Cant find a job Under-employed just cant pay their bills

80% of jobs require some form of post-secondary education (not necessarily a 4-year degree).

Unskilled jobs are disappearing; demand for high skills is rising The FACTS:
100% 80% 60%
54% 16% 10% 40% 19% 26%

80% of jobs today require some sort of training beyond High School
Professional Skilled Unskilled

40% 20% 0%

73% 40% 20%

1950

1994

2011

Source: U.S Bureau of Census and Pennsylvania Department of Labor & Industry, Center for Workforce Information & Analysis (Pennsylvania statewide)

Does your student have a plan? (from the Gallop Student Poll)
The PURPOSEFUL:
Found something meaningful, sustained, interest and clear sense of future purpose

The DISENGAGED:
Neither a purpose in life nor an inclination to find one

The DABBLERS:
Tried potentially purposeful pursuits, yet to commit

The DREAMERS:
Imagining great things, no practical pursuits

Things to Think About

Have you talked to your student about their goals and how they can get where they want to go? How can you get money to pay for school? How can you get someone else to pay for it? Are there things we should be doing that we arent? Would I buy a ______________ if I couldnt afford it?

79.5% of students use Financial Aid options

Work Study 7%
PLUS loans 4%

Grants 52%
Student loans 39%

SOURCE: U.S. Department of Education, National Center for Education Statistics. (2009)

Secrets to Financial Aid

There arent any!
Complete all the paperwork. Do your homework. (How much will it cost? What kinds of scholarships can we apply for?) Visit schools, Plan ahead, and follow up.

3 things to take away

File the FAFSA *(and State Grant Form) Meet deadlines! Follow up and advocate for yourself!

What is Financial Aid?

Types of Financial Aid

Gift Aid FREE MONEY
Grants and scholarships

Self Help Aid

Loans and work programs

Merit-Based Aid based on - academic ability, special talent or achievement, program of study, family or ethnic background Need-based grants, loans, and employment usually based on - income, assets, other factors

Where does the money come from?

Federal Government State Government Schools/Colleges
Get a copy of last years graduation program. Majority are probably from the schools they were going to attend.

Where does the money come from?

Private Scholarship Sources:
HS Counselors Clubs and organizations Church Credit Union or Bank Employers Utility Companies Department stores Check the newspaper!

Internet scholarship searches

www.pittsburghfoundation.org www.fastweb.com www.finaid.org www.scholarshipexperts.com www.collegeboard.com

Basic Principles
Joint responsibility of the student and parent(s) to pay, to the extent possible. Not all families qualify for need-based aid. There is no guarantee that you will get any need-based financial aid to pay for higher education.

The Free Application for Federal Student Aid (FAFSA)

Used to determine student eligibility for: Federal programs State programs School programs

FAFSA
The FAFSA may be filed beginning on January 1 of the senior year of high school. Complete the FAFSA as soon as possible after January For the 2014-15 academic year, the FAFSA may be filed beginning January 1, 2014

The FAFSA must be completed every year!

www.fafsa.ed.gov

Signing FAFSA Online

PIN is used to electronically sign FAFSA The student needs a PIN and 1 parent needs a PIN Parents can use their same PIN for all students, but each student needs their own PIN. www.pin.ed.gov or can complete the application while filing the FAFSA form Use to sign Stafford Loan MPN and Parent PLUS loan application/MPN.

IRS Data Retrieval Tool

While completing the FAFSA, applicant may submit request to IRS for tax data IRS will authenticate taxpayers identity If match found, IRS sends results to applicant in new window Applicant chooses whether or not to transfer data to FAFSA Cannot use tool if filing married but separate, amended returns or No SSNs entered.

Whose information goes on the FAFSA?

Divorced or separated parents - the parent that provides more than 50% of students support (household) Stepparents - yes Adoptive parents - yes Foster parents - no Legal guardians - no Anyone else the student is living with - no

Who is independent?
24 or older on Jan 1st of award year (born before January 1, 1990) Veteran (includes active duty personnel) Working on graduate level degree Emancipated minor in legal guardianship Orphan, in foster care, or ward of the court at anytime when student was age 13 or older Have legal dependents other than spouse Student deemed homeless by proper authority

Applying for Financial Aid

FAFSA required by all schools, PHEAA, and some scholarship organizations PA State Grant Form required for first year students (and may be requested for subsequent years) CSS Profile required by some postsecondary schools and scholarship organizations (www.collegeboard.com) Institutional financial aid forms (if requested by the school)

FAFSA Completion Page

Apply for your State Grant From the FAFSA Completion/Confirmation Page
Start your state application to apply for Pennsylvania state based financial aid

Know Your Deadlines

Know all of your state and school/college deadlines and file the FAFSA by the earliest deadline.
School Deadlines vary by school

PA State Grant deadlines

May 1, 2014 - First Time and Renewal Applicants that plan to enroll in a degree program or a college transferable program at a junior college or other college or university August 1, 2014 - First Time applicants that plan to enroll in a community college; a business, trade, or technical school; a hospital school of nursing; or a 2-year program that is not transferable to another institution

Expected Family Contribution (EFC)

An EFC will be provided to you on your confirmation page of the FAFSA. This is the final result of completing the FAFSA.

How is the EFC calculated?

Parent contribution + student contribution = EFC Bulk of EFC comes from income Home, personal property, qualified retirement funds, and value of life insurance excluded from assets Asset protection allowance (based on age of older parent, or the parent if single parent household) Parent asset contribution = roughly 6% Student income contribution = 50% of amount over $6,260 Student asset contribution = 20% of assets Parent contribution divided by number of children in college at the same time

What school costs are considered by the financial aid office at the school?
School costs include: Tuition and fees Room and board Books and supplies Transportation Miscellaneous living expenses

Varies widely from college to college

Calculating Financial Need

Schools/colleges receive financial aid information and calculate financial need. School cost. $26,000 EFC.. - $ 3,000 Financial need $23,000 FAO packages student based on financial need and available funding (varies from school to school).

Financial aid award letter sent to student.

Financial Aid Award Letter

Is official notification from school about financial aid, terms, and conditions. Lists the type and amount of each award to be received. Describes what must be done to accept or reject any award.

Discloses students rights, responsibilities, and academic requirements.

Sample Award Letters

Sample 1st year Award Letter

COST: $ 51,660

GIFT AID: 22,000 SELF AID: 17,500* OUTSIDE AID: 3,000 Total: 42,500 Balance: $ 9,160

True cost Balance: 9,160 Self Aid 17,500* Total debt: $ 26,660 EFC = 0 * Discretionary: PLUS Loan Work Study Alternative Loans

Financial Aid 101

Federal, State and College Financial Aid Programs

Federal Programs
Pell Grant (2013-14 max award $5645) *.must have high need Campus-based aid amounts determined by FAO FSEOG up to $4000 Perkins loan... up to $5500 Federal work-study FAO determines

For most programs, student must be enrolled at least half-time.

Other Federal Programs

TEACH (must meet teaching commitment)
For more information, visit studentaid.ed.gov.

Iraq and Afghanistan Service Grant

For more information, visit studentaid.ed.gov.

Americorps
for details, go to www.americorps.gov

Pennsylvania State Grant (PHEAA)

PA State Grant Full-time, in PA....up to $4,363 Part time, in PAup to $2,182 Out of state.. Up to $600 in DE, MA, OH, RI, VT, WV, and DC All other states.up to $500 (NJ, NY, and MD = $0)
For additional details, see the PA Student Aid Guide page 16, or visit www.pheaa.org

Pennsylvania State Grant (PHEAA)

A Pennsylvania State Grant is based on financial need and other requirements The maximum amount of the grant is determined, in part, by the cost of attendance at the school: Community College $2,313 State University $3,713 State Related $3,991 Private Institution $4,363

Other State Programs

State Work-Study - job related to major

Educational Assistance Grant (EAP) National Guard

Chafee Education and Training Grant administered by the Department of Public Welfare Blind or Deaf Beneficiary Grant Postsecondary Educational Gratuity Program (PEGP) Partnerships for Access to Higher Education (PATH) Pennsylvania Targeted Industry Program (PA TIP)
For details, see the PA Student Aid Guide page 19, or visit www.pheaa.org

Federal Student Loans

Statistics
Number of student loan borrowers in the US: 37 million Percentage of borrowers who owe less than $6000: 25% Average starting salary for 2012 college graduates: $44,482 Unemployment rate for college graduates: 4.6% Percentage of 2010 college graduates working jobs that require less than a high school diploma: 38% Student borrowers under the age of 30: 14 million Number of Americans age 60 or older who owe money on student loans: 2.2 million

Loan Debt by the Numbers (according to the

Consumer Financial Protection Bureau)
$1.1 trillion: Approximate amount

of outstanding student loan

debtsecond only to mortgages. 1-in-5: U.S. households that have student loans. $26,682: Average outstanding balance for a borrower with student debt. 1-in-8: Share of borrowers with more than $50,000 in student debt. $165 billion: additional Private Loan Debt

www.studentloans.gov

Federal Direct Loan Program

Stafford student loan:
Subsidized = no interest in school
Interest will be charged during the grace period 3.86% fixed rate for loans between 7/1/13 and 6/30/14 1.051% origination fee deducted from disbursement

Unsubsidized = interest accrues in school and grace

3.86% fixed rate for loans between 7/1/13 and 6/30/14 Any interest unpaid during grace will be capitalized at repayment 1.051% origination fee deducted from disbursement

Gross Loan Amount of $5500 loan will be $5442.20

Calculating Accrued Interest

To calculate your daily interest accrual, use the following formula: Interest rate x current principal balance number of days in the year = daily interest Example: Sara Student has a $2000 current principal balance and 3.86% interest rate this year. Using the formula: .0386 x $2000 365 = $0.21 (~$18.90 quarterly interest payment) What if she borrowed $10000 over 4 years? .0386 x $10000 365 = $1.06 daily (~$95 quarterly interest payment)

Servicers
Fed Loan Servicing (PHEAA) Nelnet Sallie Mae Great Lakes
You may look up your servicer and their contact information at any time on www.nslds.ed.gov

Federal Direct Loan Program Borrowing Limits

Additional Eligibility

Repayment Examples
Loan Balance: Adjusted Loan Balance: Loan Interest Rate: Loan Fees: Loan Term: Minimum Payment: $27,000.00 $27,000.00 3.86% 0.00% 10 years $50.00

Monthly Loan Payment: Number of Payments:

$271.57 120

Cumulative Payments: Total Interest Paid:

$32,588.25 $5,588.25

It is estimated that you will need an annual salary of at least $32,588.40 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. This corresponds to a debt-toincome ratio of 0.8. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $21,725.60, but you may experience some financial difficulty.

*source: www.finaid.org

Repayment Examples
Loan Balance: Adjusted Loan Balance: Loan Interest Rate: Loan Fees: Loan Term: Minimum Payment: $16,000.00 $16,000.00 3.86% 0.00% 10 years $50.00

Monthly Loan Payment: Number of Payments:

$160.93 120

It is estimated that you will need an annual salary of at least $19,311.60 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. This corresponds to a debt-to-income ratio of 0.8. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $12,874.40, but you may experience some financial difficulty.
*source: www.finaid.org

Cumulative Payments: Total Interest Paid:

$19,311.57 $3,311.57

Federal Direct PLUS Loan

For parents of dependent students or graduate level students No borrowing limit: May borrow Cost of Attendance minus other Financial Aid Credit check is required on this loan; if fail, may get an endorser 4.204% origination fee will be deducted from disbursements (ex: if you borrow $10,000 $9579.60 will be credited to the bill) Principal payment can be deferred while student is in school (interest will continue to accrue).

Interest rate = 6.41% for loans between 7/1/13 and 6/30/14

$10,000 ~ $120/mo. (10-year repayment) Can apply for the PLUS loan at www.studentloans.gov.

Alternative/Private Education Loans

Student borrows in his or her own name. Based on credit so co-signer is usually required. Some loan products have a co-signer release option. Repayment may be deferred until education is completed. Fees, interest rates, loan amounts, and repayment provisions vary by lender. Compare loans before making choice and read the fine print!

Borrowing for Higher Education

Always consider federal loans first. They have the best interest rates and repayment provisions. Borrow in the following order:
Subsidized Stafford and Perkins Loan (if qualify) student Unsubsidized Stafford Loan student PLUS Loan (6.41% fixed) parent and graduate student Alternative Loan (variable rates) last resort

Financial Aid 101

Financial aid forms are filed whats next?

True or False?

Your childs education is a good investment.

Your childs AFFORDABLE education is a good investment.

Determining Affordability
Approach this as though you are not buying a school, you are buying an EDUCATION. Look at sticker price!! Tuition costs in PA range from $2,500 to more than $40,000.PLUS room and board. Understand that in higher education there is no direct correlation between cost and quality. Be open minded and diverse in college searches. Think in terms of yesterdays money, todays money, and tomorrows money. Determine how much you can afford to borrow. Set some parameters right up front.

Packaging Example
Low Cost Pell Grant State Grant Loans Merit Aid Work Total Aid Gap (what you owe) Actual Cost (Cost Free $) $19000 $2000 $2500 $5500 $0 $0 $10000 $9000 $14500 Medium $29000 $2000 $2500 $7000 $0 $1800 $13300 $17500 $24500 High $38000 $2000 $3100 $8000 $8000 $3000 $24100 $16900 $24900

How do we cover the actual family contribution (out-of-pocket expenses)?

Savings Family 529 Plans Family Scholarships Various Sources Grants Federal and State Tuition Payment Plans School Federal Student Loans Department of Education Institutional Loans School Private Education Loans Bank Home Equity Loans Bank

Special Circumstances
Recent death or disability Reduced income

Contact the school and ask for a special consideration AND Contact State Grant Division at PHEAA

Financial Aid 101

Final Thoughts

MySmartBorrowing.com

MySmartBorrowing.com

What can you be doing nowprior to completing the FAFSA?

Seniors: Student and parent apply for a PIN at www.pin.ed.gov Visit www.mysmartborrowing.org Juniors/underclassmen: Start Planning Today! Take college boards Visit Schools

Explore scholarship opportunities

Use the FAFSA4caster to estimate EFC and eligibility for federal financial aid Free online tool, available at www.fafsa4caster.ed.gov

Explore scholarship opportunities

www.fafsa4caster.ed.gov www.educationplanner.org www.mysmartborrowing.org

How do you identify offers that should be avoided?

Anyone who charges you a fee: for information about financial aid to complete the FAFSA to apply/receive a scholarship telephone scams

Think loan balances are no big deal?

Stafford borrowing (est. based on sub./unsub. loans &10 year repay) $20,000 @ 5.0% = $212.13/mo $50,000 @ 5.0% = $530.32/mo $80,000 @ 5.0% = $848.52/mo $140,000 @ 5.0% = $1,484.91/mo $200,000 @ 5.0% = $2,121.13/mo

Reduce the Need for Financial Aid

Graduate on Time 4 year for Bachelors Degree / 2 year Associates Degree Research and find the right school and major Minimize transfer and change of major Earn college credits while in high school through AP courses, Vo-Tech, and dual enrollment Consider options for cutting costs (commute, take summer classes, buy used books, make smart meal plan choices) 2 + 2 Strategy (2 years at a Community College then transfer credits to a 4 year school) 3 + 2 (Masters Degree)

Beware of the 5-Year Plan!

Things like double majors, study abroad, internships, and athletics can enhance the educational experience and improve marketability. But it comes at a price: Total cost just increased by 25%. The fifth year likely costs 20% more than the 1st year did. Loss of institutional funds if they only allow for four years. Loss of PA State Grant if all four years have been received. Reduction in student borrowing capacity if maximum loans received in the first four years (only $4,000 left). Talk it over and plan ahead!

Things to Talk About

Keep borrowing in line with future earning power Determine who will pay for what. Will the student work? How much debt can the family take on? Are there options for cutting costs? Give yourself a low-cost alternative. How many years will college take?

Resources
PHEAA toll free: 1-800-692-7392 Federal Student Aid Info Center 1-800-433-3243 www.pheaa.org www.EducationPlanner.org www.Mysmartborrowing.org www.Youcandealwithit.com www.Myfedloan.org www.fafsa.ed.gov www.federalstudentaid.ed.gov general financial aid info www.studentloans.gov information on federal loans www.nslds.ed.gov - information on your specific loans (need 4-digit PIN to access)

Presenter Contact Information

Kim McCurdy Higher Education Access Partner 724-734-8550 [email protected]