Financial Aid: 101
Paying for Postsecondary
Education
John M. Szentesy, M.Ed.
Associate Director of Financial
Planning-Mansfield University
Agenda
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Session I
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Session II
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Types and Sources of Financial Aid
Application Process
Eligibility
Federal, State and College Financial Aid Programs
Session III
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Next Steps—Determining Affordability
Resources
Financial Aid: 101
Session: I
Types and Sources
Application Process
Eligibility
What is Financial Aid?
Financial aid consists of funds
provided to students and families
to help pay for postsecondary
education expenses
Types of Financial Aid
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Gift Aid – Free money
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Self-Help
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Grants and Scholarships
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 based
on income, assets, other factors
Where does the money come from?
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Federal Government
State Government
Colleges and Universities
Private Scholarship Sources:
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HS Counselors
Clubs & Organizations
Employers
Internet scholarship Searches
Basic Principles
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Joint responsibility of the student and parent(s) to
pay, to the extent possible, unless the student is
independent per federal determination
Need-based financial aid is determined by a federal
calculation based on the FAFSA
Not all families qualify for need-based financial aid.
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There is no guarantee you will get any need-based financial
aid to pay for higher education
Application Process
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Free Application for Federal Student Aid (FAFSA) is
a federal form used to determine student eligibility
for the following:
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Federal programs, such as Pell Grants, work programs, and
student loans
State programs, such as Pennsylvania State Grant, state
work programs, and other special programs
Campus based aid such as need based grants and
scholarships
When to apply
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The FAFSA may be filed beginning on
January 1st of the upcoming award year
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Must be completed each year
For the 2014-15 award year this would be
January 1st, 2014
Ways to apply
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Complete the FAFSA as soon as possible
after January 1st of the year for which the
student is seeking financial aid
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On-line at www.fafsa.gov
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Safe, secure, skip logic, built in edits
Complete the FAFSA on the Web worksheet
Print the confirmation page when complete
www.fafsa.gov
Apply for PA Grant from FAFSA
confirmation page
Signing the FAFSA on-line
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Student and parent sign electronically with a
Personal Identification Number (PIN)
Apply for the PIN at www.pin.ed.gov
Don’t lose it, write it down
Can use for future FAFSA filing, corrections,
parents can use for other children’s FAFSA
Use to sign federal loan applications
IRS Data Retrieval Tool
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Real time request to the IRS for tax data
IRS will authenticate tax payer’s identity
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Match found, results to applicant in a new window
Applicant chooses whether or not to transfer data
to the FAFSA
Available early February 2014
FAFSA correction to select IRS Data
Retrieval Tool
Whose information
goes on the FAFSA?
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Divorced or separated parents (the parent
that provides more that 50% of support)
Step-parents – YES
Adoptive parents – YES
Foster parents – NO
Legal Guardians – NO
Anyone else the student is living with – NO
Who is Independent?
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24 years of age or older
Veteran (includes active duty personnel)
Working on a graduate degree
Emancipated minor in legal guardianship
Orphan, in foster care, or ward of the court at
anytime when the student was age 13 or older
Have legal dependents other than a spouse
Student deemed homeless by proper authority
Other Financial Aid Forms
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Know what financial aid forms each school requires
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FAFSA required by all schools, PHEAA, and some
scholarship organizations
State Grant Form (SGF) required for 1st year students
(maybe required for subsequent years)
CSS (College Scholarship Service) profile required by
schools and scholarship organizations (Privates)
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www.collegeboard.com
Institutional Financial Aid Forms
KNOW YOUR DEADLINES!
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School Deadlines ???
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PA State Grant Deadline
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Date and necessary forms
May 1st, 2014-first time and renewal applicants
Federal Deadline
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June 30th, 2014 - end of award year for 2014-15
How is financial aid determine?
Expected Family Contribution (EFC)
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Parent’s income & assets
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Excludes primary home value
Student’s income & assets
Size of the family
Age of older parent
Number of children in college
How is financial aid determine?
Cost of Attendance (COA)
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Determined by the school
Tuition and fees
Room and board
Books and supplies (allowance)
Personal expenses & transportation (allowance)
How is financial aid determined?
Cost of Attendance – Expected Family Contribution = NEED
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Cost of Attendance (COA) is determined by the school
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FAFSA process calculates the Expected Family Contribution
(EFC)
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The school attempts to fulfill NEED with financial aid
programs
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Gift aid or free money first
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Self-help: loans and work programs
Eligibility Examples
COA
EFC
Low
$17,000
$15,000
Medium
$27,000
$15,000
High
$47,000
$15,000
Need
$2,000
$12,000
$32,000
Financial Aid Office notifies student by an Award
Letter, which indicates the types and amounts of aid
provided to the student.
Reviewing Financial Aid Award Letters
After reviewing the award letters, students should be
sure to know and understand the following:
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How much of their financial aid is gift aid and how much is
not?
Which awards are based on need and which on merit?
Are there any conditions on the gift aid; in particular, is there
a GPA requirement?
Will their awards change from year to year?
Will institutional awards increase as tuition increases?
Financial Aid: 101
Session II:
Federal, State, and
Campus based
Financial Aid Programs
Federal Programs
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Pell Grant (maximum award $5,645) must be high
need
Campus based aid—determined by FAO
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FSEOG
Perkins Loan
Federal Work-study
max $4,000
max $5,500
variable by school
For most programs, student must be enrolled halftime
Goes to financially needy students first
Federal Programs—service based
www.studentaid.ed.gov
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TEACH Grant (must meet teaching commitment)
Iraq and Afghanistan Service Grant
Aid for Military Families
www.americorps.gov
PA State Grant
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Full-time in PA
Part-time in PA
Out of State
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CT, DE, MA, ME, OH, RI, VT, WV, and DC
All other States
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max $4,348
max $2,174
up to $600
up to $400
NY, NJ, and MD - $0
Amount determined in part by COA
Must be at least half-time to be eligible
Other State Programs
www.pheaa.org
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State work-study-job related to major
Educational Assistance Grant (EAP) National Guard
Chafee Education and Training Grant – administered by the
Department of Welfare
Blind and Deaf Beneficiary Grant
Postsecondary Educational Gratuity Program (PEGP)
Partnerships for Higher Education (PATH)
PA Targeted Initiative Program (PA TIP Program)
Federal Direct Loans
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Effective July 1, 2010, all federal loans are
made directly through the U.S. Department of
Education
Web-based application
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www.studentloans.gov
Federal Pin is used for authentication
Federal Direct Student Loans
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Subsided Student Loan-no interest while in school
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3.86% fixed interest rate
1% origination fee deducted from disbursements
6 Month grace period
Unsubsidized Student Loan-interest accrues while in
school and during grace
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3.86% fixed interest rate
1% origination fee deducted from disbursements
6 Month grace period
Federal Direct Student Loans
Dependent
Student
Base Loan Amount
Subsidized/Unsubsidized
Additional
Unsubsidized Loan
Amount
Freshman
$3,500
$2,000
Sophomore
$4,500
$2,000
Juniors &
Seniors
$5,500
$2,000
Additional Federal Direct Student Loan
Eligibility
Independent Student
AND students whose
parents cannot borrow a
PLUS Loan
Base Loan Amount
Subsidized/Unsubsidized
Additional
Unsubsidized
Loan Amount
Freshman
$3,500
$6,000
Sophomore
$4,500
$6,000
Juniors & Seniors
$5,500
$7,000
Repayment Example
Loan Balance
Interest rate
Loan Term
$23,000
3.4%
10 years
Monthly
Payment
$228.65
Number of
payments
120
Total Payments
Total Interest
$27,437.73
$4,437.73
It is estimated that you will need an
annual salary of at least $27,438.00
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
$18,292.00, but you may
experience some financial difficulty.
This corresponds to a debt-toincome ratio of 1.3.
Source: www.finaid.org
Federal Direct PLUS Loan
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For parents of dependent students
Credit Check is required, yet no debt-to-income
No borrowing limit
Annual loan maximum is the COA – other financial aid
4% Origination fee will be deducted from the disbursement
Principal amount can be deferred while student is in school
(interest will accrue)
10 year repayment period
6.41% Fixed Interest Rate
$10,000 Loan amount = ~$118.00 monthly payment
Private/Alternative Education Loans
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Student borrows in their name
Co-signers usually required. Some loans offer a cosigner release option
Based on credit scoring & debt-to-income
Repayment may be deferred while in-school
Fees, interest rates, loan amounts, and repayment
provisions vary by lender and are generally more
costly than federal loans
Compare loans before making choices and read the
fine print!
Borrowing for Higher Education
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Always consider Federal loans first. They
have the best interest rates and repayment
provisions
Borrow in the following order:
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Federal Perkins Loan
Federal Direct Student Loan
Federal Direct PLUS Loan
Private/Alternative Loan
Financial Aid: 101
Session: III
Next Steps
Resources
Determining Affordability
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Approach this as though you are not buying a school, you are
buying an Education
Look at the sticker price. Tuition costs range from $2,500 to
$40,000 plus Room & 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 yesterday’s money, today’s money, and
tomorrow’s money
Determine how much you can afford to borrow
Set some parameters right up front
What you can be doing now!
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Gather personal financial records for parents &
student
Determine your financial resources to pay for college
File your tax return early and utilize the IRS Data
Retrieval Tool
Request your pin for parent and student
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www.pin.ed.gov
Required to apply for Federal Student Aid
What you can be doing now!
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Perform Scholarship Searches
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Estimate your federal aid eligibility
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www.fastweb.com
www.finaid.org
www.fafsa4caster.ed.gov
PA residents review the State Grant Website
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www.pheaa.org
What you can be doing now!
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Review the Federal Loan Programs
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Review Private/Alternative Loan Programs
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www.studentloans.gov
www.elmselect.com
Utilize college planning websites
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www.studentaid.ed.gov
www.collegeboard.org
Tips
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Know and understand key dates
Ask questions
Review all loan terms and conditions
Avoid using retirement funds
Avoid high interest rate products like credit cards
Provide a valid email address
Keep all copies of your paperwork
Make a sound investment—choose a college you
can afford
Other Resources
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Federal Student Aid Information Center
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800-443-3243
PHEAA: 800-692-7392
Youcandealwithit.com
Myfedloan.org
Educationplanner.org
QUESTIONS