Presented By: Michael Lopata CPA, CCPS Paying for college is the - - PowerPoint PPT Presentation

Presented By: Michael Lopata CPA, CCPS

Paying for college is the most complex financial transaction a family will make. More complex than buying a house. More complex than getting a car loan. The reason is the escalating costs accompanied with the variety

• f systems that must interact to get to the

difference between price and cost.

• Dr. Joseph Moore, President of Lesley

University

The federal government provided 67% of all student aid in 2000-01 and 2006-07 and 73% in 2011-12.

70.8 34.5 32.8 16.4 13.4 9.8 6.6 1.1

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 Funding Source Dollars (Billions)

Student Aid 2011-2012

Federal Loans Federal Pell Grants Institutiional Grants Education Tax Credits Federal Grants State Grants Private/Employer Grants Work Study

Bas ased ed on a " a "needs eds an anal alys ysis" is" fo formul rmula

 COA – EFC = Need – Resources = Adj. Need  Example:

COA (Cost of Attendance) $20,000 EFC (Expected Family Cont.)

• 12,000

Need: = $ 8,000 Resources (Scholarship)

• 2,000

Adjusted Need = $ 6,000

FEDERAL METHODOLOGY

• Used to determine eligibility

for Title IV federal aid

• FAFSA
• Principally used by state,

community, trade and regional private colleges

• Includes resources of one

parent group and the student

• One uniform application

without special circumstances

• No offsets for medical

expenses or private school tuition

• Often integrated with state

programs* INSTITUTIONAL METHODOLOGY

• Used to determine eligibility for

selective institutional aid

• CSS Profile
• Includes resources of younger

siblings and relatives

• Several options for NC parent

contribution (noncustodial)

• Customized application
• Offsets standard for unusually high

medical expenses and private school tuition

• Limits assessment on earnings of

students from low income households

 Annuities  Life insurance  Retirement accounts  Unexpended financial aid  Personal items  Restricted bank accounts  Personal residence (IM will assess)

• Second or vacation residences are assessed

 Family farm (IM will assess)

• Family farm corporations, partnerships, etc., are not assessed
• Investment farms are assessed

 Siblings’ assets (IM will assess)  Businesses with less than 100 full-time employees

(IM will assess)

 Employer education assistance plan (resource)  Loan proceeds  Rollovers  Food stamps  Gifts and support, other than money  Gifts paid to college for tuition (resources)  Contributions to or payments from flexible spending

accounts, including MSAs (IM will assess)

 Federal and state disaster funds  Insurance used for reimbursement of loss  Financial aid proceeds  QTP withdrawal  Nonqualified deferred compensation contribution

School

• l “B”

Cost: $20,000

• EFC: $5,000

Need $15,000 100% of need met Gift Aid – 80% Self Aid – 20% 60% of need met ($9000) - $6000 short! Gift Aid – 50% Self Aid – 50% EFC: $5,000 +Unmet Need: $0 Total Cost: $5,000 Total Gift: $28,000 Total Self: $7,000 School “A” Cost: $40,000

• EFC: $5,000

Need $35,000 EFC: $5,000 +Unmet Need: $6,000 Total Cost: $11,000 Total Gift: $4,500 Total Self: $4,500

 The FAFSA (Free Application for Federal Student

Aid) www.fafsa.ed.gov

 FAP (Financial Aid Profile)

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

 The 568 Presidents’ Group - Consensus

Methodology www.568group.org

 College’s own institutional forms  Other Forms:

 Business/Farm supplements  Divorce/Separated Agreements

 Appea

eal l A formal request to have a financial aid administrator review your aid eligibility and possibly use Professional Judgment to adjust the figures.

 Asset

et Protecti tection n Allo lowan ance ce A portion of your parents' assets (or Independent Student) that are not included in the calculation of the parent contribution.

 Expec

ected ted Famil amily y Contr

• ntribu

ibuti tion (EFC FC) ) The amount of money that the family is expected to be able to contribute to the student's education.

 Feder

deral al Metho thodo dolo logy gy The need analysis formula used to determine the EFC.

 Ga

Gapping ing The practice of failing to meet a student's full demonstrated need.

 Instit

itutiona utional l Methodolo

• dology

gy (IM) M) If a college or university uses its own formula to determine financial need for allocation of the school's own financial aid funds, the formula is referred to as the Institutional Methodology.

 Leveraging

eraging The controversial practice of figuring out how much it will take to attract such students and customizing aid offers to optimize the quality of the incoming class.

 Need Cost of Attendance (COA) - Expected Family

Contribution (EFC) = Financial Need

Deter termi mini ning ng Majors and Degree rees

• Target outcome

> Income potential, market demand, geographic opportunities

• Desired majors

> Joint, major and minor, compatible, transferable

• Years to completion

>Certificate, Technical, Associates, Bachelors, Masters, MBA, JD, PhD, MD ACT study found that more students are expressing a desire to enter certain fields than there are positions while other high need occupations have more positions than students desiring to enter. Pay scale le College ge ROI Report rt PayScale has ranked more than 850 U.S. colleges (for both in and out-

• f-state tuition when applicable) by their college tuition ROI - what you

pay to attend versus what you get back in lifetime earnings. http://www.payscale.com/college-education-value/

Colleges in the blue are colleges a student may want to consider applying to their honors program. There are many perks for the honors group plus funding will be very good. A good but not necessarily complete list of colleges with honors programs can be found on the following link. Honors

Programs HONORS PROGRAMS. Parents Note: Call the college

admissions department or double check the colleges website to see if a honors program exist as not all colleges have honors programs. Colleges identified by red type with a red asterisk are approximately one of the 60 colleges that offer 100% funding of the need formula. Remember the formula is: Cost of Attendance Minus the expected family contribution equals the need. Some of these need based only colleges do offer merit aid but only to a very, very small percentage of the incoming freshman class. Colleges below the blue section represent colleges that could be too easy and a waste of your time. The money the colleges would invest in you would be good but the time spent here would not be challenging and therefore be a potential waste of your time.

 Swarthmore College

91.3%

 Vanderbilt University

86.5%

 Emory University

82.5%

 Rhodes College

71.1%

 Spelman College

70.4%

 University of Delaware

64.0%

 University of Georgia

54.4%

 University of Tennessee

33.8%

 Georgia Southern

19.9%

 University of Memphis

11.1%

 Savannah State

9.1%

 Merit Based

 Athletic  Academic  Music  Other Talents

 Need Based  College Specific  Local Scholarships

 Guidance Counselors  Charitable Trusts  Non Profits  Chamber of Commerce  Volunteer Organizations  Trade Unions  Places of Worship

 Career Specific

 Nursing  Education

 Student Specific

 Minority  Religious  Family History  Medical History  Other Student Specific

Factors

 College Loans

 Federal Subsidized and Unsubsidized Stafford Loan  Federal Perkins Loan  Federal Plus Loan  College’s own loan program

 Personal Residence Loans  Margin Account Loans  Retirement Account Loans  Life Insurance Loans  Private Loans  Intrafamily Loans

ABILITY (IQ):

 Academic Record (AR)

 Cumulative GPA  Curriculum (AP, honors,

science/math, foreign lang.)

 Class rank (rankings)

 Standardized Tests (ST-

rankings)

 PSAT (NMSQT), SAT

Reasoning

 ACT, SAT Subjects

 Special Skills (SS)

 Athletic  Music  Others

MOTIVATION (EQ):

 Academic History (AH)

 Absences and details  NHS & merit  Recommendations

 Extracurricular Activities (EA)

 Employment  Volunteerism

 Yield Enhancement (YE-

rankings)

 Visits and relativity

 Special Circumstances (SC)

 Adversity  Diversity

Colleges in the orange are the most competitive colleges from your college search based on the comparison of the colleges standardized scores as compared to your standardized scores. Admissions to these colleges can be accomplished but funding by the college will not be there for the family. These colleges could also represent institutions were the student becomes

• verwhelmed and slip into serious stress. Adding to the last two points plus

the lack of investment in the student by the college can make the overall selection of the college as less than desirable. Colleges in the yellow are colleges a student should readily get admitted to. The good funding starts here in the yellow colleges. The combination of the admissions and some good funding will make this list of colleges more desirable than the Orange set. Colleges in the green are colleges a student should also readily get admitted

• to. This group also represents colleges that you should academically and

socially excel at. This group of colleges will also represent colleges who should offer the best funding in the form of merit aid and better than average need based aid. We would like you to have at least three colleges in the green in the six to ten colleges that you apply to in the fall. Remember “three in the green” for the best overall results academically and financially.

Colleges in the blue are colleges a student may want to consider applying to their honors program. There are many perks for the honors group plus funding will be very good. A good but not necessarily complete list of colleges with honors programs can be found on the following link. Honors

Programs HONORS PROGRAMS. Parents Note: Call the college

admissions department or double check the colleges website to see if a honors program exist as not all colleges have honors programs. Colleges identified by red type with a red asterisk are approximately one of the 60 colleges that offer 100% funding of the need formula. Remember the formula is: Cost of Attendance Minus the expected family contribution equals the need. Some of these need based only colleges do offer merit aid but only to a very, very small percentage of the incoming freshman class. Colleges below the blue section represent colleges that could be too easy and a waste of your time. The money the colleges would invest in you would be good but the time spent here would not be challenging and therefore be a potential waste of your time.

Rank College Name State Student SAT(1600 Point System) College SAT 25% Bottom Fourth College SAT Mean Average College SAT 75% Top Fourth 1 Georgia State University GA 1360 1000 1095 1190 2 Mercer University GA 1360 1060 1160 1260 3 Rollins College FL 1360 1095 1187 1280 4 University of Georgia GA 1360 1120 1215 1310 5 Elon University NC 1360 1130 1225 1320 6 St. Louis University MO 1360 1080 1205 1330 7 Rhodes College TN 1360 1190 1285 1380 8 Wake Forest University NC 1360 1250 1330 1410 9 Georgia Institute of Technology GA 1360 1260 1355 1450 10 Emory University GA 1360 1280 1375 1470 11 Washington University in St. Louis MO 1360 1400 1470 1540 12 Duke University* NC 1360 1360 1455 1550

 Financial Aid Diagnostic Test  Financial Aid Part II

 Applying the lessons from Financial Aid Part 1.  A strategy that can increase financial aid awards by

15%.

 Ways to create competition amongst colleges.  A deeper look into financial aid award letters.  FAFSA and CSS/Profile tips