2014 WASFAA Conference
Reno, Nevada
Mike Johnson, Director of Financial Aid,
Pacific University
High and increasing cost of college
High and increasing student and parent
indebtedness
Lack of transparency in cost and financial aid
information
Confusing or incomplete information about true
cost and financial aid program details
The Higher Education Act of 1965, as amended –
Section 472 defines Cost of Attendance
Only the COA components mentioned in statute
may be used:
 Tuition and fees, including rental or purchase of equipment
and supplies
 Books and supplies, transportation, and miscellaneous
personal expenses, including the rental or purchase of a
computer
 Room and board costs, described differently based on
students’ dependency status and whether they live with
parents
The statute also describes:
 How to treat less than half-time and incarcerated students
 How correspondence study, instruction through
telecommunications, and study abroad are treated
 How to include dependent care costs, disability-related
costs, cooperative education costs, and loan fees
The modern list of components is:
 Tuition and fees
 Room and board
 Books and supplies
 Transportation
 Personal and miscellaneous costs
When do you use actual amounts in the COA?
Average amounts? How do you calculate averages?
How and when do you present COA information on
award notifications and in other communications?
How does the COA at your school affect students’:
 “Unmet need”?
 Net price?
How do you describe the COA to students and
parents? Do you distinguish between direct and
indirect costs? How do you determine indirect cost
amounts?
What do you say about the price (sticker price and
net price) that your school charges? Do you find
yourself defending it or apologizing for it?
Need analysis has two parts:
 Estimating a student’s costs (COA)
 Calculating the Expected Family Contribution (EFC)
Widely used methodologies for determining
students’ need have included:
 John Monro’s “15% Rule” (1954)
 Institutional Methodology (1974)
 Congressional Methodology (1986)
 Federal Methodology (1992)
Federal Methodology is detailed in Part F of Title IV
of the Higher Education Act of 1965, as amended
 Updated tables appear each year in the Federal Register
Federal Methodology must be used to determine a
student’s eligibility for federal financial aid
Other methodologies can be used to determine a
student’s eligibility for institutional aid
Families – as defined by the FAFSA – have the
primary responsibility for meeting postsecondary
costs
The distribution of financial aid should be based on
the family’s ability – not willingness – to pay
Need analysis should provide a “snapshot” of the
family’s financial circumstances at the time of
application
Regular formula
 Parent required to file a 2013 IRS Form 1040, or had 2013
income of $50,000 or more
 Includes consideration of assets
Simplified formula
 Parent’s household member received a federal meanstested benefit in 2012 or 2013
 Parent filed, or was eligible to file, a 1040 A or EZ; or was
not required to file a federal income tax return; or is a
dislocated worker - and
 Parent’s 2013 income was $49,999 or less
 Excludes consideration of assets
Automatic zero formula
 Parent’s household member received a federal meanstested benefit in 2012 or 2013
 Parent filed, or was eligible to file, a 1040 A or EZ; or was
not required to file a federal income tax return; or is a
dislocated worker - and
 Parent’s 2013 income was $24,000 or less
 Excludes consideration of income and assets
Income:
 Parent and student information are considered
 Total income is the sum of taxable income or income
earned from work, and untaxed income (including
payments to retirement accounts)
 Additional Financial Information, which reduces reported
income, include education tax credits, child support paid,
and taxable income from need-based employment
Income
 Allowances against reported income include:
 U.S. income tax paid
 State and other taxes
 Social Security taxes
 Income protection allowance
 Employment expense allowance
State and other taxes:
 Amounts come from tables that consider differences in tax
rates in different states for families at different income
levels
 Amounts range from 1% to 9%
State and other taxes: % of total parent income
 Alaska
 Arizona
 California
 Hawaii
 Idaho
 Nevada
 Oregon
 Washington
$0 - $14,999 >$14,999
2%
1%
4%
3%
8%
7%
4%
3%
5%
4%
3%
2%
7%
6%
4%
3%
Student
0%
2%
5%
3%
3%
1%
5%
1%
Income protection allowance:
 Amounts come from a table that uses Bureau of Labor
Statistics (BLS) data for lower budget expenditures,
adjusted annually based on the Consumer Price Index (CPI)
 Amounts increase for each additional family member,
decrease for each additional college student
Income protection allowance*:
Household size
1
2 $17,440
3 $21,720
4 $26,830
5 $31,650
6 $37,020
Number in college
2
3
$14,460
$18,750
$15,770
$23,840
$20,870
$28,670
$25,700
$34,040
$31,070
4
$17,890
$22,710
$28,090
* set at $6,260 for dependent students
Employment expense allowance:
 Amounts represent additional costs that families incur
when two parents, or a single parent, work(s)
 Uses 35% of the lower income, or $4,000, whichever is less
Assets
 Reported on the FAFSA include:
 Current balances of cash, savings, and checking
 Net worth of investments, including real estate (excluding
retirement accounts and the family’s principle residence)
 Net worth of businesses and investment farms (excluding
small family owned businesses and family farms)
Assets
 Parent contribution from assets:
 Education Savings and Asset Protection Allowance
subtracted from net worth to determine discretionary net
worth
 Contribution is 12% of discretionary net worth
 Student contribution from assets:
 Contribution is 20% of net worth
Education savings and asset protection allowance:
 Amounts come from a table that uses the age of the older
parent, adjusted for one and two parent households
 Assets are increasingly protected as parent age increases
Education savings and asset protection allowance:
Age of older parent
45*
46
47
48
49
Allowances
Two-parents One-parent
$30,700
$7,100
$31,500
$7,200
$32,200
$7,400
$33,000
$7,600
$33,800
$7,800
* 45 is the default if no date of birth indicated
The formula’s use of actual, calculated, and assigned
numbers make the EFC a financial aid eligibility
index rather than an indication of a family’s true
ability to pay.
In light of that, how do the following affect a
school’s ability to assess a student’s need?
 A student who earned $6,200 is treated the same as one
who did not work
 Basic annual living costs for families of four with one in
college are set at just under $27,000 regardless of where
they live
 Parents are expected to spend no more than $4,000 per
year in work-related expenses such as clothing and
transportation regardless of where they work
 Money saved for retirement is not reported on the FAFSA,
yet the effect of reported assets on the parent contribution
is reduced as the age of the older parent increases
 At the same age of the older parent, two parents have
more than four times the asset amount protected that
single parents do
How would you explain these aspects of need
analysis to families? Would you explain them?
Schools’ awarding policies vary according to a
variety of factors, including:
 School size
 School ownership (public/private)
 Fund availability
 Program participation
 Recruitment goals
 Retention strategies
Policy considerations include:
 Merit-based vs. need-based aid (level of need
met/”gapping”)
 Price sensitivity of admit pool/school tolerance for
”discounting”
 Enrollment management goals/leveraging
 Packaging loans
 Continuing students’ aid packages
What level of detail does your school provide
concerning its awarding policies? How is that
decision made, and who makes it?
What format(s) do you use for award notifications?
How do you assess the effectiveness of the
format(s)? Do you assess it?
Net price calculators
 Required of all colleges that participate in Title IV programs
Financial Aid Shopping Sheet
 A “model financial aid letter” that schools are encouraged
to use
Explain and show direct and indirect costs
 Direct Costs
 Tuition and fees
 On-campus housing and meals
 Total direct costs
$38,510
$11,116
$49,626
 Indirect Costs
 Books and supplies
 Transportation
 Personal
 Total indirect costs
 Cost of Attendance
$ 1,050
$ 720
$ 900
$ 2,670
$52,296
Separate aid categories in award notifications
 Gift aid
 Presidential Scholarship
 Federal Pell Grant
 Oregon Opportunity Grant
 Pacific Grant
 Total gift aid
$15,000
$ 4,180
$ 2,000
$11,700
$32,880
 Self-Help aid
 Federal Work-Study
 Federal Direct subsidized loan
 Federal Direct unsubsidized loan
 Total self-help aid
$
$
$
$
2,000
3,500
2,000
7,500
Provide information about the full cost of borrowing
 Average loan debt
 Adjusted loan debt (1.072% fee)
$29,000
$29,314
 Monthly repayment (10 years)
 Total repayment (10 years)
$ 295
$35,381
 Monthly repayment (20 years)
 Total repayment (20 years)
$ 175
$42,116
Provide estimates of (and justifications for) future
cost increases
 First year
 Second year (4%)
 Third year (4%)
 Fourth year (4%)
Tuition and fees
$38,510
$40,050
$41,652
$43,318
Total
$52,296
$54,388
$56,564
$58,827
Provide financial literacy information, especially to
promote the importance of:
 Weekly budgeting
 Reducing expenses
 Developing savings plans
 Borrowing wisely
What concepts do you use to tell students and
parents how affordable your school is?
 Value of higher education/return on investment
 Comparisons with similar schools
 Comparisons with regional or national averages
 Based on certain metrics
Cost of attendance
Gift aid
Net price - Year 1
Annual increase
Net price - Year 2
- Year 3
- Year 4
- Year 5
- Year 6
Totals
Public 4-year
$24,000
$5,000
$19,000
7%
$20,860
$22,478
$24,401
$26,459
$28,661
$141,679
Private 4-year
$52,000
$20,000
$32,000
4%
$34,080
$36,243
$38,493
----$140,816
Cost of obtaining a Bachelor’s degree
More than $140,000
College Scorecard
 Web tool created to allow easy comparisons between
schools based on certain metrics
College Navigator
 More robust college comparison tool that uses information
from the Integrated Postsecondary Education Data System
(IPEDS)
How do you respond when students and parents
ask about previous or future price increases?
 Cost to the institution of educating students
 Comparisons with similar schools’ patterns
 Comparisons with regional or national averages
Are you comfortable defending your schools’
decisions in this area?
Thanks for participating
Enjoy the rest of the conference!