Financial Aid 101
What You Need to Know About
the College Financial Aid
Process
Presented by Lisa Branson & Jack Zegeer
Northern Virginia Community College
Topics
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Why is college important?
What is Financial Aid? What is Financial Need?
Need Components
Types of Aid
Applying for Aid
Dependency Status and Parents
Change in Circumstances
Tax Credits – Making College Affordable One Debt
Ceiling Debate At A Time
• What Should You Do Next?
Why is College Important?
Why is College Important?
• Compared to an individual High School Diploma
• An associates degree recipient earns 20%
more in each paycheck, and has a 40% greater
chance of being employed
• A bachelors degree recipient earns 70% more
in each paycheck, and has a 90% greater
chance of being employed
• A masters degree recipient earns 105% more
in each paycheck…
What is Financial Aid?
Financial aid consists of funds provided to
students and their families to help pay for
postsecondary education.
Financial aid helps to bridge the gap between
the Cost of Attendance and the Expected Family
Contribution.
What is Cost of Attendance (COA)?
Other
Room and
Board
Books
Tuition and
Fees
Travel
Personal
Varies based on the school
What is Expected Family
Contribution (EFC)?
• Amount a family can reasonably be expected
to contribute
• Two Components
– Parent Contribution + Student Contribution
• Calculated using data from the FAFSA
• Does not change based on the school
Financial Need Calculation
Cost of Attendance
– Expected Family Contribution
= Financial Need
Financial Need Cont.
$16,500 Cost of Attendance
–
$ 5,000 Estimated Family Contribution
=
$11,500 in Grants/Loans/Scholarships
Where Does Aid Come From?
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Federal government
State government
College/University
Private sources
Types of Financial Aid
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Grants
Work-study
Loans
Scholarships
Grants
• Money that does not have to be paid back, some
may require an “agreement to serve” after
graduation
• Typically based on financial need
• Federal Grants
– Federal Pell Grant, Federal Supplemental Education
Opportunity Grant (FSEOG), Teacher Education Assistance
for College and Higher Education Grant (TEACH)
• State Grants
– Virginia Guaranteed Assistance Program, Commonwealth
Award, Virginia Tuition Assistance Grant
Work-Study
• Allows student to earn money to help pay for college
costs
• On and off-campus jobs available
• Paid by:
– Paycheck
– Credit to student account
– Non-monetary compensation
Example: Room and Board (resident assistants)
• Not all colleges participate
Loans
• Money that is borrowed to finance educational
costs, which must be repaid
• Borrower - Student and/or Parent
• Repayment
– Student - After graduating or dropping below half-time
enrollment
– Parent - Typically 60 days after the first disbursement or
can request deferment while student is enrolled at least
half-time (interest accrues while deferred)
– Repayment terms and options vary for students and
parents
Loans
Common Federal Loan Programs
• Federal Perkins Loan – fixed 5% interest rate
• Federal Direct Student Loan
– Subsidized – fixed 4.66% interest rate, interest does not
accrue while in school, based on need
– Unsubsidized – fixed 4.66% interest rate, interest accrues
while in school, but does not require in-school repayment
on interest, not based on need
• Federal Parent PLUS Loan – fixed 7.21% interest rate,
one parent borrower, good credit history
Loan Debt
• On average, college borrowers graduating
from public institutions with a Bachelor’s
Degrees had ~$24,000 in federal student loan
debt.
• On average, college borrowers graduating
from private, non-profit institutions with a
Bachelor’s Degrees had ~$29,500 in federal
student loan debt.
• 67% of college students graduate with debt!
Loan Debt cont.
• What does $27,000 look like in repayment?
• At 6.0% (likely future rates), this equates to
a $300 monthly payment for 10 years
• You will pay $8,500 in interest, for a total
payment of $35,500
• Income based-repayment plans will lower
your monthly payment, but can drastically
increase your overall interest paid.
Loan Debt cont.
• While, these numbers may be striking, the
fact still remains that a college education
provides an incredible return on money
invested.
• Average lifetime earnings for a bachelor’s
recipient are $800,000 to $1,000,000 greater
than a high school diploma recipient
• Approach borrowing and paying for college
realistically!
Scholarships
• Money that does not have to be paid back
• Usually based on merit, skill, a unique characteristic,
and/or need
• Think of scholarships as a competition – Sell Yourself
• Sources
– Civic organizations, churches, employers, schools
• Free online web searches
– https://bigfuture.collegeboard.org/scholarship-search
• CAUTION – Beware of scams
– http://www.finaid.org/scholarships/protecting.phtml
Question Intermission
FAFSA Process
Complete the Free Application for Federal Student Aid
(FAFSA) each year.
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Available January 1 of each year at www.fafsa.gov
Check with colleges for any priority deadlines
File electronically for faster processing and online tracking
Collects demographic and financial information
If “Will File”, you can provide estimated tax information, but
will need to update once taxes have been filed
• Information collected is used to determine EFC
• Apply for PIN (Personal Identification Number)
• Student and parent sign with their own PIN
PIN Process
• PIN PROCESS is being changed as of April 2015
• New username and password to be used for all
FAFSA applications after April 2015
• Student and parent each apply for a personal
identification number (PIN) at www.pin.ed.gov
• Can be requested at any time, even real-time as the
student completes the online FAFSA
• Must have PIN to electronically sign the FAFSA
• PIN can be used to sign loan master promissory note
(MPN)
General Student Criteria
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U.S. citizen or eligible non-citizen (next slide)
Registered with Selective Service (males)
Valid Social Security Number (SSN)
High school diploma, GED, or homeschooling
credential
• Enrolled or accepted in an eligible degree or
certificate program
• Criminal convictions (including drug convictions) may
limit eligibility, depends on the conviction type
Dependency Status
FAFSA will ask a series of questions to determine if the
student is dependent or independent, including:
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24 years or older
Married
Master’s or doctorate degree program
Military service – Active or Veteran
Children and/or dependents, provide half of support
Foster care, deceased parents, dependent or ward of court,
emancipated minor or legal guardianship, homeless
* If all “No” answers, student is dependent.
* If “Yes” to any question, student is independent.
Who is the ‘Parent’?
• Biological parents’ information or adoptive parents
should be provided on the FAFSA
• Grandparents, legal guardians, foster parents, older
brothers or sisters, and uncles or aunts are not
considered parents on the FAFSA unless they have
legally adopted you
• Possible dependency override in certain
circumstances – rare, but speak with your financial
aid administrator
Which parent?
In cases of divorce or separation:
• Who did the student live with the most during the
past 12 months?
• If neither or both, who provided the most financial
support?
– Example: Who paid for health or car insurance?
Household Size
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Student
Parents
Dependents
Others who live with you and you are
providing more than half of their support and
will continue to provide from July 1 – June 30
Errors can be costly!
• Read instructions and complete carefully! Incorrect
or missing information may delay the process and
result in loss of financial aid
• Most Common Errors
– Incorrect Social Security Numbers
– Divorced/remarried parental information
– Income earned/paid and untaxed income
– Household size and number of household
members in college
– Real estate and investment net worth
IRS Data Retrieval Tool (DRT)
• Applicants have the option to transfer IRS tax data into
their FAFSA using the DRT
• DRT allows the applicant to file more quickly and
accurately
• File taxes electronically and early, then file your FAFSA
using the IRS DRT after 10-14 days
• Not eligible for IRS DRT?
– Complete based on 2014 tax return and order an
IRS transcript of any 2014 tax returns filed at
http://www.irs.gov/Individuals/Get-Transcript
Verification
• At least one in three applications will be selected by
a school, greater probability for new students
• Did not use the IRS DRT and are selected for
verification? You must submit an IRS Transcript
• Contact your financial aid office about any other
documentation needed for the verification process
• Financial aid cannot be released to a student’s
account until this step is completed
Role of the College Financial
Aid Office
• Assists students and their families in understanding
and utilizing financial aid resources
• Determines federal and state aid eligibility
• Verifies FAFSA information
• Reviews special circumstances
• Packages financial aid depending on fund availability
• Sends award notification (electronic or paper) with
award amounts, disbursement methods, timeframes,
and any terms and conditions of each award
Change in Circumstances
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Loss of income or benefit
Death of a parent
Parent divorced or separated after FAFSA is filed
Unusually high medical expenses paid but not
reimbursed by insurance
You may be eligible for adjustment based on
professional judgment - speak with your financial aid
administrator
Education Tax Credits
• 1098-T – Tax Form
• www.irs.gov/pub/irs-pdf/p970.pdf
• American Opportunity Credit
• $2,500 credit per student, $1,000 is
refundable, 4 years of eligibility
• Lifetime Learning Tax Credit
• $2,000 per tax return, no portion
refundable, unlimited number of years
Education Tax Credits cont.
• Tuition and Fees Tax Deduction
• Deduct taxable income by up to $4,000
• Not a credit!
• Deduction expired for 2013 – Up in the air
for renewal for 2014
• Student Loan Interest Deduction
• Not a credit!
• Deduct yearly accrued interest from
taxable income
What’s Next?
• After FAFSA processing, student will receive a Student
Aid Report (SAR) via link in email if student provided valid
email address or paper by mail if no valid email address
provided
• Review SAR comments and check for accuracy
• Remember to update any estimated information
• Make sure you meet all admissions and financial aid
deadlines. Check each school’s website for details
• Submit any requested documents
• Search and apply for other sources of aid, such as private
scholarships and grants
Summary
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Start the process early
Know any and all deadlines
Know what information and forms you need
Provide accurate information
Make and save copies of everything
Follow up: typical processing times are 4-6 weeks
Check your email regularly
If you have a question – ASK!
Super Saturday Events
• You can receive in-person help in completing the
FAFSA at a “ 2015 Super FAFSA Week” event
• Financial aid professionals will help you complete the
FAFSA online
• Find an event near you
• February 1-8, 2014
• Details at www.vasfaa.org/super
• NOVA Financial Aid will hold multiple FAFSA filing
events at Loudoun County High Schools from MidJanuary - March
Other Resources
• www.vawizard.org – College-Cost Calculator,
FAFSA estimator, Career Finder
• www.studentaid.gov – Detailed information
on specific aid programs and aid eligibility.
www.studentloans.gov – Information on
federal loans, repayment plans, and
repayment calculators
• www.finaid.org – Financial aid information
and helpful tips in navigating the application
Questions?
Thank you for attending! Ask Away!
• jzegeer@nvcc.edu - Email