Presented By: Michael Lopata CPA, CCPS
The Cost of College. Public - $10K to Private - $40K Undermatching and Overmatching in college enrollment Largest sources of financial aid. $185 Billion. Financial Need=COA – EFC – Resources Expected Family Contribution (EFC) Formula Differences between Federal Methodology and Institutional Methodology Assets and Income that are assessed
Paying for Private University at the cost of a Public University Focus on desired outcome – Payscale ROI 4, 5, and 6 Year Grad Rates – 27% vs. 48% Types of Scholarships Loans to Pay for College Academic Fit to Financial Aid Student Positioning and Financial Fit IN THE NEWS – Converse College announced that it was cutting its tuition for next year by 43%.
2. A Georgia student majoring in business can study Coastal Environmental Science at which of the following colleges and pay in- state tuition: a. University of Florida b. West Virginia University c. Louisiana State University d. Mississippi State University 5. Which of the following colleges has the highest average financial aid package? a. Furman University b. Davidson College c. Rhodes College d. University of the South 6. Which of the following would be included in financial aid income for the FAFSA? a. Contributions to or payments from flexible spending accounts b. Loan Proceeds c. Current year retirement plan contributions d. Employer Education Assistance Plan
11. The FAFSA (Free Application for Student Aid) has an asset protection allowance that allows individuals or families to exclude a portion of their assets from the financial aid calculation. The allowance is based on the older parent. The asset protection allowance for a 52 year old that is married is: a. $65,900 b. $49,200 c. $38,500 d. $17,235 12. Assets that are reported on the financial aid application are reported as of what date? a. Year End b. Latest Statement Date c. Date of Signing the Application d. Date of Filing the Application
Family of 4 with one child in school AGI-Adjusted Gross Income Federal Methodology Institutional Methodology $50,000 $3,228 $2,694 $75,000 $10,076 $8,227 $100,000 $18,225 $13,770 $125,000 $25,316 $19,559 $150,000 $33,817 $27,863
FM FM IM IM AGI 1 student 2 students 1 student 2 students $50,000 $ 3,228 $ 1,646 $ 2,694 $ 1,724 $75,000 $10,076 $ 5,139 $ 8,227 $ 5,265 $100,000 $18,225 $ 9,295 $13,770 $ 8,812 $125,000 $25,316 $12,911 $19,559 $12,518 $150,000 $33.817 $17,472 $27.863 $17,832
FAFSA A Data for Family 1 1 a and 2 Nontaxed ed Income – Family 2 Student cash/investments $1,000 Tax-exempt interest $2,700 Student AGI $300 Parent investment in sibling’s name $150,000 Parent AGI $25,000 Business net worth $200,000 Father’s income from work $5,000 Home value $900,000 Mother’s income from work $20,000 Home debt $600,000 Nontaxed income $2,700 Mortgage payment $3,600 Parents’ cash and savings $1,000 Prior year income $250,000 Nonta taxed ed Income come – Famil mily 1 Famil ily 1 Famil mily 2 Disability $1,200 EIC $1,500 Federal $645 $645 Rent payment $800 Methodology Prior year income $45,000 – FM Institutional $250 $24,071 Methodology - IM Fee-Waiver Yes No Designation
Award Letter Results: Hiram University, Hiram, OH ◦ initial award letter of $5,000/yr FAFSA submitted ◦ Updated award letter of ½ tuition waiver and opportunity to earn other ½ from scholarship competition. College of Wooster, Wooster, OH ◦ Initial award letter of $15,000/year A private education is now at parity with many large, ◦ public universities.
The student was invited to Hiram for personal interview and scholarship competition. Results: The University President called him and offered a full tuition waiver for 4 years. Special note: this is unusual in the current world of college funding. “Full rides” are VERY infrequently seen.
Increase your financial aid award by 15% by having 2 or more competitive offers. Selecting competitive schools. Example: GWU – Marquette, Univ. of Rochester, Univ. of Miami, American Univ. The FAFSA gives schools a view of where they rank in regards to your interest. Pay attention to the timing of your filing date.
School Home Equity Additional Info. Wake Forest, NC 2x income Use NC Profile Rice, Tx 2.5x AGI Use NC Profile Elon, NC 100% No NC Profile Amherst College 1.2x AGI Use NC Profile Duke, NC 1.2x AGI Use NC Profile Brown, RI 3x AGI Use NC Profile Let’s compare Elon against Amherst. Using the chart for $100,000 income w/$400K equity, Elon will expect a family to contribute $15,680 more per year. A calculation of financial aid eligiblity is as follows: Elon – COA $43,546 less EFC $36,170 = Financial Need $7,376 Amherst – COA $62,544 less EFC $20,490 = Financial Need $42,054
Take control of your capital gains, distributions, and liquidations at year end. Conversion of IRA’s to Roth IRA’s may result in excessive income. Cancelling life insurance policies. $20,000 Gain results in $10,000 in financial aid. Surrendering annuities can increase reported income.
Lassiter High GPA – 4.125 Weighted SAT – 1710 Expected Family Contribution ◦ Federal Methodology - $8,200 Institutional Methodology - $22,150 College Selection ◦ University of Georgia ◦ Georgia College and State University ◦ Auburn University ◦ Virginia Tech
Chattahoochee High GPA – 3.77 SAT – 2270 Expected Family Contribution ◦ Federal Methodology - $21,800 Institutional Methodology - $36,970 College Selection Williams Yale Brown Swarthmore
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 of systems that must interact to get to the difference between price and cost. Dr. Joseph Moore, President of Lesley University
Any Questions? Complete Evaluation.
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