Applying for Financial Aid 2019-2020 Academic Year Sean Martin - - PowerPoint PPT Presentation

Applying for Financial Aid 2019-2020 Academic Year

Sean Martin

Director of Financial Aid Services

Where do I start?

• Visit college websites for:

– Application REQUIREMENTS and DEADLINES

• Net Price Calculator

– Found on each College’s website to help you determine your ESTIMATED Expected Family Contribution (EFC) FOR ONE YEAR – Each calculator is unique to that college’s awarding policies. – Outcome is not an offer admission or financial aid.

NET PRICE CALCULATOR

TIPS

• Carefully read all instructions and pop ups.
• If necessary, estimate income as close as possible. OK

to use calculator more than once.

• Don’t forget untaxed income, e.g. tax deferred pensions or

losses on tax return

• What to do if parents are divorced --

– Combine income from both parents/households. – Be careful what assets you put in the calculator.

What goes into paying for Education?

• Family’s ability to pay; not their willingness to pay.
• Federal and State funding.
• Institutional grants (money given by the College).
• Outside scholarships.
• Does the college offer merit or athletic scholarships?
• Were the financial aid applications and supporting

documentation submitted on time?

Definition of Financial Need

Cost of Attendance Expected family contribution (EFC) Other financial assistance Financial need LESS LESS EQUALS

Cost of Attendance

฀ Tuition ฀ Room & Board ฀ Books & Class Supplies ฀ Transportation ฀ Miscellaneous and Personal Expenses (e.g. purchase of a computer, health insurance fee, dorm room items needed)

Comparison of Need by Cost (Assumes full-time enrollment)

4 Year Private 4 Year Public 2 Year Public Cost of Education $65,000 $25,000 $ 7,000 Expected Family Contribution (EFC) $10,000 $10,000 $10,000 Need $55,000 $15,000

Meeting the Full Need or Gapping

College A B Cost of Education $65,000 $65,000 Expected Family Contribution (EFC) $ 10,000 $ 10,000 Need $55,000 $55,000 Aid Awarded $55,000 $35,000 Unmet Need $20,000 Add this to EFC!

Family Contribution Components 2019-20

❑ USING “PRIOR-PRIOR” YEAR INFORMATION ❑ Parent(s)’ 2017 income ❑ Student’s 2017 income ❑ Parent assets value at the time of the application

฀ Exclude retirement account balance or primary residence home equity ฀ Include trusts, equity value of investment properties, business net worth

฀ Include 529 plans set up by parents (not UGMA/UTMA* accounts)

❑ Student assets value at the time of the application

฀ Include trusts, if student is beneficiary and UGMA/UTMA* accounts ฀ 529 plans set up by someone other than a parent

❑ # of household members: must provide at least 50% support ❑ # of dependents attending college (at least half-time)

*UGMA/UTMA: uniform gifts to minors act/uniform transfers to minors act where the student owns the account but the parent is the “custodian” or administrator of the account

Untaxed Income

Where do I find these?

FROM THE FEDERAL INCOME TAX RETURN, FORM 1040

• Education Credits (1040, line 50)
• Health Savings Account deduction (1040, line 25)
• Tax Exempt Interest (1040, line 8b)
• Untaxed portions of Pension/Annuity withdrawals (1040, line 16a – 16b)
• Untaxed portions of Retirement account withdrawals (1040, line15a – 15b)
• Untaxed portion of Social Security benefits (1040, line 20a – 20b)
• IRA or SEP/SIMPLE/Qualified Plan contributions (1040, line 28 & 32)
• Earned Income Credit (1040, line 66a), possibly
• Additional Child Tax Credit (1040, line 67), possibly
• Maybe: depreciation/losses from 1040, Schedule C, E or Business Income Tax

Return

Untaxed Income

Where do I find these?

ADDITIONAL ITEMS NOT FOUND ON THE FEDERAL INCOME TAX RETURN, FORM 1040

• Child Support Received (not on 1040)
• Military/Clergy* housing allowance benefit (not on 1040)
• Pension contributions (W2 box 12 D, E, F, G, H & S)
• Make sure you don’t put untaxed income /assets in multiple

places because it looks like extra income/assets! (i.e. retirement

funds in retirement balances and in investment balances)

*This includes any employer paid housing; i.e. school employees required to live

• n campus and not charged for that housing.

Federal Aid Eligibility Determined Using the

FAFSA

(FREE Application for Federal Student Aid)

❑ 2019-2020 FAFSA available 10/01/2018 on www.fafsa.ed.gov

❑ Must be a U.S. Citizen or an Eligible Non-Citizen ❑ A parent & the student must create a user name and password for the FAFSA at www.fsaid.ed.gov

❑ EXCLUDE:

❑ Home Equity in your primary residence ❑ Information about the noncustodial parent

❑ INCLUDE:

❑ Custodial parent and stepparent incomes are included

❑ MULTIPLE DEPENDENTS IN COLLEGE

❑ Parent contribution is divided by the # of dependents* in college ❑ *dependents must be enrolled at least half time in undergraduate or graduate studies ❑ Parents in college are NOT included in this number.

❑ Unmarried but living together/same sex marriages: Income from both partners is used.

www.fafsa.ed.gov

Helpful Tips When Completing the FAFSA

• Make sure you use your LEGAL NAME (cross checked w/ SSA)
• Parents and students must provide their SSNs and DOB

– if a parent does not have a SSN, enter zeros.

• When reporting assets, in addition to savings/checking and liquid

(non retirement) investments, remember to include:

฀ % of ownership of Investment real estate equity (Value minus Mortgage)

฀ If renting out a portion of primary residence, include that % of value – debt. ฀ % of ownership in legal trusts (Remember wills are not trusts.)

฀ 529 College Savings Plans: ฀ in parent’s name -- include in parent’s investment balances.

฀ in name of someone other than parent – include in student’s investments.

฀ Business/investment farm net worth (value minus debt)

฀ not if more than 50% family owned and with less than 100 employees

Changing the FAFSA

• You can update the FAFSA for the following:

– adding a college – updating income, if necessary – correcting errors

• It is recommended to use the IRS Data Retrieval

tool on the FAFSA to update your income

CSS Profile (not used by all schools) determines Institutional Grant Eligibility

฀ CSS Profile: on College Board website cost: $25 + $16 for every additional school listed

฀ College Board website has a list of those schools that use the CSS Profile ฀ Completed using custodial parent and student information

฀ The non-custodial parent information required

฀ By completing the Non Custodial Parent Statement on College Board website

฀ Items that may be included:

฀ Primary residence equity ฀ Losses on federal income tax return or depreciation associated with a business or investment property may be added back

฀ Parent contribution might not be divided equally for # in college:

฀ no allowance for dependents in graduate school ฀ reduced allowance for a lower cost institution (i.e. community college) ฀ Reduced or no allowance for siblings receiving substantial merit/athletic aid

฀ Minimum student contribution: anywhere from $1,000 to $2,200

http://student.collegeboard.org/css-financial-aid-profile

CSS Profile Tips

In addition to the assets reported on the FAFSA, you will also be required to report:

– Primary Residence Equity (value minus mortgage balance) (not

necessarily used in formula)

– Value of your retirement accounts

(although not used in formula)

– Business net worth (value minus debt)

Also, use the comment section to indicate special circumstances

• e.g. a loss of income, one time income or unusual

expenses.

CSS Profile Tips

• Once the Profile has been submitted, you will not be

able to make corrections. So be careful!

– Contact your school if you need to update the information.

• Many colleges participate in the College Board’s IDOC

document imaging service.

– You send your federal income tax returns, W2 forms, income statements and other required documents to IDOC – Participating colleges listed on your profile can then access the docs electronically. – Saves you multiple copying /mailing time and expense.

Remember!

฀ Grants/Scholarships do not have to be repaid

฀ unless a student withdraws during a term. ฀ May be considered taxable income -- any amount of grants/scholarships

• ver the cost of tuition and books.

฀ Student loans must be repaid.

฀ Additional online requirements must be completed.

฀ Federal Work Study provides income from a campus job

฀ This does not go toward the tuition bill. ฀ This is paid to the student in the form of a paycheck or direct deposit.

Sources of Need Based Aid

Federal Aid

❑ Federal Pell Grant – up to $6,095 ❑ Federal SEOG Grant – up to $4,000

www.studentaid.ed.gov for detailed information about these programs.

❑ Federal Direct Loan ฀ 1st year maximum: $5,500 (of this up to $3,500 can be subsidized) ฀ 2nd year maximum: $6,500 (of this up to $4,500 can be subsidized) ฀ 3rd-5th year maximums: $7,500 (of this up to $5,500 can be subsidized) ฀ Each student’s loan eligibility is based on their demonstrated need determination. ฀ 2018-2019 interest rates/fees ฀ 5.05% interest rate ฀ 1.069% origination fee For more information go to: www.studentloans.gov ❑ Federal work study limits usually between $1,400-2,500

Sources of Need Based Aid

Federal Student Loans and Workstudy

❑ Federal Direct Loan – dependent student levels (There are online requirements.)

฀ 1st year maximum: $5,500 (of this up to $3,500 can be subsidized) ฀ 2nd year maximum: $6,500 (of this up to $4,500 can be subsidized) ฀ 3rd-5th year maximums: $7,500 (of this up to $5,500 can be subsidized) ฀ Each student’s loan eligibility is based on their demonstrated need determination. ฀ Current interest rates/fees 2017-2018 (2018-19 not announced yet)

฀ 3.76% interest rate ฀ 1.069% origination fee

฀ For more information go to: www.studentloans.gov

❑ Federal work study limits usually between $1,400-2,500.

Sources of Institutional Grants and Outside Resources ❑ Institutional Grants/Scholarships come from the college’s endowment funds. ❑ Outside Resources – such as:

฀ Employee Tuition Benefit ฀ Contributions from relatives ฀ Outside/Private Scholarships

฀ Use High school guidance office as a resource ฀ Ask companies that are in the field of your major ฀ Search: www.finaid.org

What is the Federal Definition of a Parent?

• If your parents are divorced or separated,

– answer the FAFSA questions about the parent you lived with more during the past 12 months. – If you did not live with one parent more than the other, give answers about the parent who provided more financial support during the past 12 months.

• Biological/Adoptive parents who are together but

unmarried:

– Combine income and asset balances of both on the FAFSA and CSS Profile.

What is the Federal Definition of a Parent?

• If your Custodial parent has remarried, you must include

information about the stepparent on the FAFSA.

• The following people are not your parents unless they

have adopted you: – grandparents, – foster parents, legal guardians, – brothers, sisters, aunts, uncles, cousins or – other unrelated persons with whom you may live.

What if parent information is not available?

– If the student is experiencing any of the following:

• has no contact with their biological/adoptive parent(s)
• parents are incapacitated or whereabouts are unknown
• has left home due to an abusive situation
• can be considered an unaccompanied youth/homeless
• other reasons may apply – check with the College.

– then the College may ask you to provide:

• third party documentation to verify your dependency status
• r living situation – i.e. from: an attorney, court officer, social worker, school.
• a parent or dependency waiver form (depending on the College).

Dependent vs. Independent Status

Can only be considered independent IF:

• 24 years of age
• Married
• A graduate student
• Currently serving active duty
• Is a veteran of the US Armed Forces
• Has dependents other than a spouse that they are supporting
• Was an orphan, foster child, ward/dependent of the court after 13

years of age

• An emancipated minor
• Was determined to be an unaccompanied youth who was homeless
• r self supporting and at risk of being homeless

What if my family contribution seems unreasonable? Compare aid awards from similar colleges. If the family contribution is significantly different:

• Ask how the contribution was determined

฀ Is there a contribution expected from the non-custodial parent? ฀ Were losses reported on the tax return added back? ฀ What is the minimum student contribution? ฀ How were number of family members in college treated? ฀ Was home equity included in the analysis?

• Has there been a change in family dynamics since the

FAFSA was filed re: # in college, income, expenses?

• If you have special circumstances, request procedures for

an “Appeal” or “Review” and ask what the deadline is.

Aid Award in Subsequent Years

“The Four Year Plan”

❑ Most Colleges make you apply every year for financial aid. ❑ But ask: Is this award for just this year? ❑ Loan amounts increase as the student advances to the next grade level (causing grants to decrease). SOME OTHER REASONS YOUR EFC WILL CHANGE: ❑ Increases/decreases in the family income ❑ Increases/decreases in the family asset balances ❑ Change in the number of dependents enrolled in college ❑ Remember that only for federal purposes is a sibling attending graduate school included in number in college ❑ Change in the number in family (i.e. eldest child moves out)

❑ Change in amount of taxes paid, reported losses or tax deferred payments ❑ Federal and state funding levels change from year to year

How do I pay the rest of the bill?

❑ Withdrawals from Savings / Investments / 529 Plans ❑ The College’s Installment Payment Plan (not a loan) ❑ Home Equity loans, 401K loans, Stock loans ❑ Alternative Student Loans through private lenders (i.e. banks, credit unions, state institutions and national student loan lenders) ❑ Federal PLUS program (Parent Loan for Undergraduate Student) ❑ Apply for other outside scholarships ❑ Check with your financial planner or CPA for other options open to you specifically.

Federal PLUS Program

❑ PLUS = Parent loan to undergraduate student (student must be a dependent)

❑ offered by the Department of Education to custodial and non custodial parents

❑ Annual loan limit: cost of attendance minus other aid ❑ Fixed interest rate 7.60%, Loan origination fees 4.264% ❑ Repayment begins 60 days after the full loan is disbursed. ❑ Can defer payments (interest will still accrue) while student is enrolled at least half-time.

Resources

• High School Guidance Office
• Financial Aid Offices
• College’s Websites
• www.studentaid.ed.gov
• www.finaid.org
• www.fafsa.ed.gov