Navigating College Financial Aid Program Analysis Dr. Herm Davis

COLLEGE SELECTION PROCESS 1) Quality of Education 2) Happiness 3) Security and Health 4) Affordability

4-year College Graduation Comparison Chart (1 of 2) 4-year College Graduation Comparison Chart (1 of 2) College or University Year Grad Rate % Pell Recipients Among Freshman Estimated median SAT/ACTState Size (Undergrad FTE) Duke University87.3%14.3%1440NC6,665 Wake Forest University82.8%14.2%1325NC4,738 Georgetown University89.4%15.9%1395DC7,385 Loyola University Maryland79.2%14%1190MD3,832 Johns Hopkins University86.4%12.8%1400MD5,820 University of North Carolina at Chapel Hill76.2%19.7%1305NC17,768 Vanderbilt University86.6%14.4%1445TN6,770 Carnegie Mellon University71%13%1400PA5,830

4-year College Graduation Comparison Chart (2 of 2) College or University 4-Year Grad Rate % Pell Recipients Among Freshman Estimated median SAT/ACTState Size (Undergrad FTE) University of Maryland-College Park 63.2%14.7%1290MD25,407 Pennsylvania State University- Main Campus65.4%15.3%1195PA38,136 Ohio State University, Main52.6%21.4%1265OH40,461 Salisbury University48.4%18.5%1145MD7,500 North Carolina State University at Raleigh39.3%22.4%1185NC23,105 Towson University39%21.7%1080MD17,988 Hood College49.3%34.1%1085MD1,394 East Carolina University 32.8%33.4%1035NC19,600 University of South Carolina- Columbia 53%19.9%1185SC21,319

How to start the Financial Aid Process – KNOW your 4 worst enemies! Enemy #1 – Cost of Attendance Enemy #2 – Missed deadlines Two main reasons: “Student must be admitted before filing for aid” – WRONG! “Student must be admitted before filing for aid” – WRONG! “Parents must have their Federal income taxes submitted” – WRONG! “Parents must have their Federal income taxes submitted” – WRONG! Enemy #3 – Self discrimination Two main reasons: Two main reasons: “We make too much to file for aid” – WRONG! “We make too much to file for aid” – WRONG! “We can’t afford a private college” – WRONG! “We can’t afford a private college” – WRONG! Enemy #4 – Your College Student Student needs to check college’s financial aid website Student needs to check college’s financial aid website Parents need to obtain their student’s ID and password Parents need to obtain their student’s ID and password

University of Pennsylvania – Average Freshman Awards by Family Income

FAFSA Forms Analysis ► Free Application for Federal Student Aid (FAFSA) ► CSS Profile ► Institutional Aid Application (IAA) ► Verification Work Sheet (VWS)

Free Application for Federal Student Aid (FAFSA) ► ► Cost: Free ► Submit for each student per year immediately after Jan. 1 st. ► PIN Required to sign electronically ► ► fafsa4caster.ed.gov

FORMS PROCESSING Step 1: Apply for a PIN ► ► When? ASAP (before submitting the FAFSA) ► ► How? Sign on to “PIN.ED.GOV” ► ► Why? The PIN is an electronic signature for the FAFSA and is required by both the student and one parent. Both PINs will need to sign the FAFSA before it can be submitted to the processor. ► ► Who? Each student in the family applying for financial aid and one parent. ► ► How often? One time, it will be active for the period of time the student is in college. ► ► Comment(s): - If there are two students attending college, each will need their own PIN. However, the parent’s PIN can be used for both students. - When applying for a PIN, you will be able to assign your own number. - The same PIN number can be chosen for all family applicants.

FORMS PROCESSING Step 2: FILING THE FAFSA ► ► When? After January 1 st, ► ► How? Sign on to - “FAFSA.GOV” and the electronic application will be available. There is no paper FAFSA. ► ► Who? Each student in the family attending college ► ► Whose information will be used? ► ► - The Student will have to list his/her wages, savings and other assets. ► ► - The Parent(s) will have to list their wages, savings and other assets.

CSS Profile ► ► Cost is $25 for the initial application fee and and one college and $16 to add each institution ► CSS Non-Custodial Parent Profile cost is also $25 for the initial application fee and $16 to add each institution ► CSS IDOC (Institutional Documentation Service)

► ► Comment(s): ► ► 1. If the parent is single, then the parent where the student resides more than 50% of the time will be the parent who will need to complete the FAFSA. ► ► 2. If the parent, where the student is residing, should remarry, then the new step- parent’s wages and assets will need to be included on the FAFSA. ► ► 3. Excluded Assets a. equity in the home b. retirement accounts (annuities, 401k, C.D. etc.) c. business values unless the business employs over 100 employees.

FORMS PROCESSING Step 3: FAFSA DISCUSSION and TIME TABLE ► ► January 1 and after   a.The FAFSA should be submitted by February 15 th to meet all deadlines and no later than March 1st. The FAFSA is used by all state scholarship programs and their deadline for filing is normally March 1 st. b.You don’t have your taxes done yet? No problem, just use estimated income for 2013 using your last year’s 1040 or your pay check receipts as a guide. ► ► March 1 st and after Updating the FAFSA, now that you have your taxes completed, open up the FAFSA and make your adjustments from your submitted taxes. ► ► April 1 st and after Verification process- If the student’s FAFSA has been flagged for verification, it will require the parent’s to update their FAFSA using the: a. IRS DATA RETRIEVAL TOOL, instructions will be on the FAFSA. (or) b. By calling the IRS ( ) and using the IRS INCOME TAX TRANSCRIPT.

ONLINE FAFSA Flow Student Student Aid Report S A R FAFSA entered by Student/Parent Central Processor Student Corrections School Award “Package” Process School ISIR Individual Student Information Report __ __ 3. __ 6. 9.__ 10.__ School Award Letter Sent to Student Maryland State Scholarship Include a Maryland College on the FAFSA

FAFSA- Student Resources

FAFSA- Parent(s) Resources

FAFSA Preparation Question?StudentParent What is the value of your cash, checking, savings account? $ 10,000$ 20,000 What is the Value of investment accounts excluding all retirement accounts? $ 6,000$ 50,000 What is the value of your business account (excluding a family farm or family business with <100 FT employees)? $$ 20%Age APA

Asset Protection Allowance Example: If the age of the older parent is 50 and 2 parents are in the household: The asset protection allowance is $31,800 Age of older parent as of 12/31/14 Allowance if there are 2 parents Allowance if there is only one parent 40$25,100$6,800 44$27,500$7,400 48$30,300$8,100 50$31,800$8,500 52$33,500$8,900 54$35,400$9,300 56$37,300$10,000 60$41,700$10,800 64$46,700$11, and over $48,100$12,300

EFC FORMULA EFC = Expected Family Contribution (ESC-I) Expected Student Contribution from Income (ESC-I) Expected Student Contribution from Income + (ESC-A) Expected Student Contribution from Assets + (EPC-I) Expected Parent Contribution from Income + (EPC-A) Expected Parent Contribution from Assets = (EFC) [Expected Family Contribution]

FAFSA / CSS Profile Preparation and Analysis FAFSA Step-by-step Preparation Step-by-step Preparation Federal Methodology CSS Profile Step-by-step Preparation Step-by-step Preparation Institutional Methodology CSS Profile Step-by-step Preparation Step-by-step Preparation Consensus Methodology Item Analysis Student’s Income Student’s Assets Parent’s Income - NO Untaxed Social Security Parent’s Income Business/Farm Income Untaxed Social Security Income Parent’s Income Business/Farm Income Untaxed Social Security Income Parent’s Assets -Business and Farm Assets -NO Home Equity - NO Retirement Plans Parent’s Assets Including: - Home Equity -Retirement Plans -Business and Farm Assets Parent’s Assets Including: 1.2 x AGI x 5 % -Retirement Plans -Business and Farm Assets Number in College Special Circumstances Non-Custodial Profile

Award Calculation LC MC 1 MC 2 HC COA$16,000$25,000$50,000$60,000 - EFC $14,000$14,000$14,000$14,000 = NEED $2,000$11,000$26,000$42,000

Concensus Methodology Concensus Methodology HOME EQUITY VERSUS PERCENTAGE OF AGI Home equity is only a concern for students planning to attend a college using the CSS Profile. When the home equity value is calculated by the CSS Profile processor it is calculated at 5%. Assuming the parent’s income (AGI) is $90,000 and equity in the home is $500,000 would result in the following: IE: Equity of $500,000 X 5% = $25,000 However, many of these high costs private colleges have replaced the home equity assessments to a percentage of the parent’s adjusted gross income (AGI). This percentage may vary from school to school from 1.2 to 3 times the AGI. IE: AGI of $90,000 X 1.2 = $108,000 In this example, the school would reduce the equity of $500,000 to $180,000 and apply the 5 % calculation.. IE: $108,000 X 5% = $ 5,600 Treatment of the AGI in this manner has reduced the EFC by $ 19,000.

RESOURCE ANALYSIS Self Help Programs (Awarded before gift aid) Work-study or student employment programs: federal and college. Loans: Direct Loans, PLUS Loans and Private Loans – borrowed money that you must pay back, usually with interest. Gift Aid Programs – “Free Money” Grants – Need Based Money you don’t have to repay, typically based on financial need. Scholarships – Merit and May be Need Based Institutional, State and Private Free money awarded usually based on your area of study or merit.

Federal Loans: The smart way to borrow ► Federal Direct Loans Subsidized Direct Loans Subsidized Direct Loans ► Based solely on financial need ► Federal government pays the interest while you are in school Unsubsidized Direct Loans ► All eligible students can receive them, regardless of income or assets ► You’re responsible for paying the interest while in school.

Federal Direct Loan Limits Year Dependent Undergraduates Subsidized + Unsubsidized = Tota l Independent Undergraduates Graduate and Professional Students First Year $3,500 + $2,000 = $5,500 $9,500 $20,500 – Only Unsubsidized Loans ______________ Interest Rates – SEE Next Slide Second Year $4,500 + $2,000 = $6,500 $10,500 Third Year $5,500 + $2,000 = $7,500 $12,500 Fourth Year $5,500 + $2,000 = $7,500 $12,500 Total amount you can borrow $27,000$45,000

Federal Direct Loan Interest Rates Loan TypeCurrent Interest Rates ( NOT Fixed rates) Undergraduate Direct Subsidized and Unsubsidized Loans From 3.9 % Currently 4.66% Not to exceed 8.25% Graduate Direct Unsubsidized Loan From 5.4% Currently 6.21% Not to exceed 10.5% Direct PLUS Loan (Parent Loan for Undergraduate Students) From 6.4% Currently 7.21% Not To exceed 10.5% Federal Pell Grant = $5,730

Federal Direct PLUS Loans ► Enable parents or stepparents (whose information is reported on the FAFSA) to borrow up to the cost of attendance.  Minus any other aid the student may receive  Legal guardians cannot borrow PLUS loans.

Components for Discussion Components for Discussion 1 – Overview 2 – Forms Analysis 3 – Process Analysis 4 – FAFSA / CSS Profile Preparation & Analysis 5 – Resource Analysis 6 – Award Analysis

The Award Process ► Colleges assign each student a password and user name after the admissions applications are received. The user name and password is assigned to allow students to monitor their admissions application, financial aid status, academic record and billing statements. ► The financial aid offices uses this process to communicate with the students regarding their financial application status.

(The Award Process Continued) ► After each college receives the aid application/documents it will post receipt of the document on the student’s financial aid page. 1. The posting will tell the student the status of the document received regarding its fulfillment. 1. The posting will tell the student the status of the document received regarding its fulfillment. 2. If the college requires additional information, it will post the listing on the student’s aid page. 2. If the college requires additional information, it will post the listing on the student’s aid page. (PROBLEM: Student fails to monitor his/her financial aid page in order to take further action and thus complete the aid application process.)

(The Award Process Continued) ► After the student meets all requirements for awarding, the aid office will post the award on the student’s account. 1. The awards will be posted for the student to accept or decline. 1. The awards will be posted for the student to accept or decline. 2. If accepted, the student will be instructed regarding any additional action to be taken. 2. If accepted, the student will be instructed regarding any additional action to be taken. (Note: A student should check his/her college account as well as their personal account and regular U.S.P.S) (Note: A student should check his/her college account as well as their personal account and regular U.S.P.S) (Problem: Student fails to monitor his/her financial aid page to either accept or decline awards. In addition, even after accepting, many times the student fails to complete the award process by not fulfilling the loan application process.)

FAFSA Forms Analysis ► Free Application for Federal Student Aid (FAFSA) ► CSS Profile ► Institutional Aid Application (IAA) ► Verification Work Sheet (VWS)

Institutional Supplemental Forms ► Institutional Aid Application (IAA) “Institutional Funding Form” “Institutional Funding Form” Financial Aid Form found on college financial aid website Financial Aid Form found on college financial aid website ► Verification Work Sheet (VWS) -IRS Data Retrieval Tool (DRT) FAFSA Update -VWS Form + w-2’s +IRS Tax Transcript IRS ph:

Process Analysis ► Online processing ► How colleges receive data ► How to correct data ► EFC Formula ► Awarding of Aid Formula

FAFSA Preparation -Who fills out the FAFSA? Parent(s) of the student, where the student has resided more than 50% of time of the calendar year. - Who’s information do you use? Parent(s) who are married or remarried OR Single, Divorced, Separated or Widowed?

FAFSA Preparation ► Student Financial Information “As of today, what is your (student’s) total current balance of cash, savings and checking account(s)?” “As of today, what is your (student’s) total current balance of cash, savings and checking account(s)?” “As of today, what is the net worth of your (student’s) investments, including real estate…”

FAFSA Preparation ► Parent(s) Financial Information “As of today, what is the parent’s total current balance of cash, savings and checking account(s)?” “As of today, what is the net worth of the parent’s investments, including real estate? (Don’t include the home in which your parents live. Net worth means current value minus debt.)” “As of today what is the net worth of your parent’s current business and/or Investment farms? (Don’t include a family farm or family business with <100 FT employees)”

(Resource Analysis Continued) ► Academic Common Market “College 411” Guide “College 411” Guide ► Innovative Opportunities “Best College Deals” - “Best College Deals” - ► College Graduation Rates by years of study ► Net Price Calculator

Navigating College Financial Aid Program Analysis Dr. Herm Davis ww.drhermdavis.comww.drhermdavis.com