“ Affording College & Solving
the Financial Aid Mystery”
Sponsored By
The Education Funding
Consultants Association
A National 501 (c ) 3 Non-Profit Organization
Handouts: Does everyone
have one?
• Strategies
• FAFSA WORKSHEET
• Evaluation Form
• www.efcagroup.org
Program Outline
• Who We Are
• The College Cost Environment
• College Facts & Myths
• The differences between the SAT VS ACT
• The Financial Aid Process
• Paying For College?
• Strategies & Programs-Making College a
Financial Non-Event!
Who Is The Education
Funding Consultants
Association?
• Federal tax-exempt 501(c)3 non-profit organization.
• Works in conjunction with member colleges,
universities, and organizations/companies.
• Provides HS informational programs to parents of
college-bound students.
• Provide the necessary information about - financial
aid, maximizing awards & coping with the costs of
college.
Do You Know What This Is?
Three Most Important Years
Schools use a students first three
years when considering acceptance for
that student into their school.
What they look at:
•GPA and SAT
•AP or Honors classes
•Extracurricular activities (Talent/Skills)
High School - 9th Grade
This is an important year!
• This year lays the foundation for the classes that
the student needs to take in the coming years (the
better the classes the better the chances for
acceptance at the most competitive colleges).
• Take challenging classes in English, mathematics,
science, history, geography, foreign language,
government, civics, economics, the arts AND DO
WELL IN THEM!!
• Get to know your career or guidance counselor as
well as other college resources available in your
school.
High School - 10th Grade
• This is the most important year and often not
considered as such…this is the “qualifying heat”
when determining where to place for 11th grade.
• Become involved in school - or community-based
extracurricular (before or after school) activities
that interest you and/or enable you to explore
career interests
• Take the Preliminary SAT/National Merit
Scholarship Qualifying Test (PSAT/NMSQT). You
must register early.
Myth about the PSAT
“Does my child’s score really matter on the PSAT?
I heard the score does not count towards anything.”
Yes it does…
The PSAT is used to disburse National Merit
Scholarships. This is not a test you want to take
for granted.
HIGH SCHOOL - 11th GRADE
• Meet with your career or guidance counselor to discuss
colleges and their requirements.
• Decide which colleges most interest you. Contact them
to request information and an application for admission.
Ask about special admissions requirements, financial
aid, deadlines and ask if you can see sample essay’s?
• Talk to college representatives at college fairs.
• Visit colleges and talk to students. Consider which
people you will ask for recommendations - teachers,
counselors, employers, etc.
• Investigate scholarships provided by private sources,
talk to your guidance department about local
scholarships.
• Register for and take the SAT’s or the ACT, SAT ISubject Tests or any other exams required for admission
to the colleges you would like to attend.
SAT VS ACT
Which one should you take?
The Correct answer is ….BOTH!
How Do These Tests Compare?
What is the Content?
SAT
• Math: up to basic
Geometry & Algebra ll
• Science: none
• Reading: sentence
completion, short & long
critical reading passages,
reading comprehension
• Writing: essay & testing
grammar, usage, & word
choice
ACT
• Math: up to Trigonometry
• Science: charts,
experiments
• Reading: four passages,
one each of Prose Fiction,
Social Science,
Humanities, & Natural
Science
• English: stresses grammar
• Writing: essay (optional)
Note: The ACT essay is optional; the SAT essay is not!
About the SAT / ACT
SAT Scoring
Critical Reading
Math
Writing
Essay
ACT Scoring
200 - 800
200 - 800
200 - 800
2 – 12
English
Math
Reading
Science
Writing
(Will account for 1/3 of English/Writing score)
1 - 36
1 - 36
1 - 36
1 - 36
2 – 12
(Will account for 1/3 of English/Writing score)
•
Required for admission by
most U.S. Colleges.
•
It is a reasoning test &
requires reasoning skills to
excel.
•
Used by all U.S. Colleges
as an admissions
requirement & to award
scholarships.
•
This exam tests more on
what you have learned in
school from the classes
taken.
Admissions Timeline
• Early
– Early Action vs. Early Decision
– Nov. 1st – 15th Submission
– Dec. 15th – Jan 10th Acceptance notification
• Regular
– Jan. 1st – Feb 1st Submission
– March 1st – April 15th Acceptance
– On or around May 1st decision by student
College Fairs / Visits
Great way to get information on colleges you
wish to consider or visit.
•
•
•
•
•
•
Graduation Rate
• SAT and GPA requirements
Financial Aid
• Admission requirements
Majors offered
• Internship programs
Campus life
• Job placement rate
Cost of Attendance
Give you a feel of their campus life (do you see
yourself at this school?)
Fear Factor - Control The Fear
• Get Your Forms Done
• Avoid Making Mistakes
• Follow the Admissions Time Line
• Search for Grants & Scholarships
Visit our website for entry to a $10,000
monthly scholarship giveaway!
www.efcagroup.org
• Visit a few Colleges
Marketing Opportunity for
Colleges
Besides tuition colleges have many
money making opportunities…
• Health Insurance
• Credit Cards
• Cell Phone Plans
College is EXPENSIVE !
Annual Costs
The $200,000 + Mark!
College / University
George Washington U.
University of Richmond
Sarah Lawrence U.
Kenyon College
Vassar College
Drexel University
Bucknell University
Bennington College
Columbia U.
Wesleyan
Trinity Coll.
UPENN
*Source Money.cnn.com
Chances of Graduating
In 4 Years???
• 2 in 10 from a Public School.
• Less than 1 in 2 from a Private School.
• 65% of enrolled students do not complete a
degree in 4 years.
• 50% do NOT finish where they started.
THIS WILL IMPACT YOUR TOTAL COST!
Useful Statistics
• Number of HS Grads expected to increase until 2014
(58% women, 42% men)
•
•
•
•
50% of apps filed on-line
70% of students file 3 or more apps
Steady increase in early apps (to 16%)
400 apps per admission officer
• 70% of HS’s rank
• Public HS counselor to student ratio is 315:1
• 21% of public HS’s have college counselor
Types of Colleges
(4200 total)
In the U.S. there is a higher education opportunity
for every level of student interest and ability.
My categories:
Register and attend (1900)
Routine enrollment process
Specialty schools (300)
Admit on interest and talent
Meet basic standards (1500)
Admit more than 75% of applicants
Competitive (400)
Admit from 40% to 75% of applicants
Selective (100)
Admit fewer than 40% of applicants
Specialty Schools
For students who have a very specific career interest
and don’t need the typical college experience.
Examples: (300)
•
•
•
•
•
•
•
Culinary arts: Johnson & Wales
Aeronautics: Embry-Riddle
Art, design, fashion: Art Institute of Philadelphia
Technology, engineering: Webb Institute
Business, accounting: Babson
Performing arts, music, dance: Julliard
Military academies: West Point
Competitive and Selective
• 5-year grad rate:
– 50% or more for publics
– 80% or more for privates
• 50% or more of freshmen have SAT over 1200, ACT
over 24
• 3.5 average high school GPA
• 1/3 or more from top 10% of H.S. class
• They are the types of colleges where good admission
planning is needed.
• They tend to be more expensive and information
about how to pay, with or without aid, is important.
Personality and Career
Assessment
• As a first step in the admission process, it
may be a good idea to make a connection
between ..
Personality characteristics
Areas of interest
College courses, majors, and schools
Career choices
• Collegeboard.com - Myroad.com
Increasing Pressures on
Middle Class America
INCOME IS DOWN
DEBT IS UP
And Parents are busier than ever!
* Parade Magazine – April 2006
The Cost of College
2008 – 2009
5 years
University of Maryland
RUTGERS U.
NYU
BOSTON COLLEGE
VILLANOVA
GEO WASHINGTON U
Annual
Cost
$37,218
$24,500
$52,290
$48,934
$48,530
$53,760
Total Cost
** Pre-tax
(5yrs.)
$ Needed
$200,297
$138,109
$294,763
$267,108
$273,568
$303,050
$266,395
$183,685
$392,035
$355,254
$363,845
$403,056
*Assumes 6% Tuition Increase Annually.
**Assumes 33% Federal Tax & NJ State Tax
What is Financial Aid?
How is it Dispensed?
• Merit
– Academic
– Athletic
– Other Talents
• Financial Need
– Family income
– Assets
• Scholarships
• Grants
The Goal of Financial Aid
Assist students in paying for college and achieved by:
• Evaluating family’s ability to pay
• Distributing limited resources in an equitable manner
• Providing a balance of gift aid and self-help aid
Meeting a Student’s
Financial Need
• Choose your college wisely, because:
• Not all will meet 100% of need
• Private colleges generally:
• Meet a higher percentage of need
• Award a higher percentage of gift aid
• Loans
• Work Study
• Many students can attend a private college for
the same cost as a public university!
Need Based Formula
Based on a "needs analysis" formula
Total College Costs (COA)
Expected Family Contribution (EFC)
“Financial Need”
$30,000
– 12,000
$18,000
What is the "Expected Family
Contribution (EFC)"?
• How much the family is expected to contribute,
based on the “FAFSA” or “PROFILE”
The Cost of Attendance
Tuition and Fees
Room and Board
Books
Transportation
Cost of Computer
Misc. Expenses
+
____________________
=
Cost of Attendance COA
2007 – 2008 EFC Calculations
Based on Parent Income and Family Size
Methods Used to Determine EFC
• Federal Formula (FM)
• Institutional Formula (IM)
Federal Methodology
• Used by all accredited public and
private colleges and universities
• Used to disburse Federal financial
aid funds
• Does not assess home or family
farm equity or retirement accounts
(including annuities and cashvalue life insurance)
• FAFSA form is used to collect the
information
FAFSA on the Web:
www.fafsa.ed.gov
To Register for a PIN:
www.pin.ed.gov
Reportable Assets
On FAFSA
• Brokerage Accounts, Savings Accounts
• In Parent and Student Names – includes:
Mutual Funds, Stocks, Bonds, etc.
• 529 QTP*
Note! Section 529 plans can CAUSE A LOSS OF
FINANCIAL ELIGIBILITY. Value is based on Parents
accessibility formulas and no longer assessed as a
student asset. However, all children 529 accounts are
included in formula.
Institutional Methodology
• Used by some private
colleges to distribute:
– Endowment funds
• Assesses the home and
family farm equity
• Assesses a fee to
complete the application
• PROFILE® form is used to
gather the information
CSS Profile Application
Some Colleges,
Universities, Graduate
Schools & Scholarship
Programs
Information collected
on PROFILE awards
non-federal student aid
funds.
Pay a fee to register &
submit to each specific
school or program
Reportable Assets
on CSS / Profile
Institutional Methodology
Savings
Stocks
Bonds
Mutual Funds
529 QTP
Sibling Assets
Home Value
Retirement Plans
Note! Some Schools may ask for the values of NonRetirement Annuities, Cash Value Life Insurance, the
value of Family Cars and Personal Property.
Special Situations
Two in College
Having more than one student in post-secondary
school at one time will lower your EFC per student
EFC $10,000
Two Students
$10,000
2
Three Students
$10,000
3
EFC=$5,000
EFC=$3,333
Be careful of Gapping!
Avoid ERRORS!
Errors made in completing the FAFSA and/or
supplemental forms may delay application processing
and result in the loss of financial aid funds.
Common FAFSA Errors
•
Divorced/remarried parent information
•
Not Obtaining Two PINs
•
Untaxed income
•
U.S. income taxes paid
•
Household size
•
Number in post-secondary education
•
Real estate and investment net worth
Meeting a Student’s
Financial Need
• Choose your college wisely, because:
– Not all will meet 100% of need
• Private colleges generally:
– Meet a higher percentage of need
– Award a higher percentage of gift aid
• Many students can attend a private college for the
same cost as a public university!
PUBLIC vs. PRIVATE
COLLEGE
Cornell University
University of
Virginia
Total Cost
$39,235
Total Cost
EFC
- 11,000
EFC
NEED
$ 28,235
NEED
% Need Met
Financial Aid Eligibility
45%
$ 12,705
% Need Met
Financial Aid Eligibility
$50,384
- 11,000
$39,384
100%
$39,384
Gift Aid (42%)
$ 5,336
Gift Aid (81%)
$31,901
Self-Help (58%)
$ 7,369
Self-Help (19%)
$ 7, 483
“Out-of-Pocket Cost”
$ 26,530
(Total Cost – Financial Aid
Eligibility)
“True Cost”
(Total Cost – Gift Aid)
“Out-of-Pocket Cost”
$ 11,000
(Total Cost – Financial Aid
Eligibility)
$33,899
“True Cost”
(Total Cost – Gift Aid)
* “Out of State” Public School
$18,483
Federal Loan Programs:
(Subsidized and Unsubsidized)
• Subsidized Stafford: Must demonstrate “need”
• Unsubsidized Stafford: Need is not a consideration
• Parent Loans: Helps parents cover the complete cost
of their child’s education, less any financial aid
received (Not based on income or assets…even Bill Gates
would qualify!)
– Federal Loan Consolidation: programs that takes
multiple loans and folds them into one entity with
fixed rates & extended payment terms
» Lowest Rates in 38 year history of program
» Lower interest rates than other consumer
options (Credit Cards, Home Equity, Private
Education Loans)
» Flexible repayment terms and options for
students and parents
» ***Remember NEVER go into debt without a clear plan to pay
it back!!!***
Deficit Reduction Act of 2005
• $39 billion in cuts to student loan
subsidizes
•
Stafford limit increased from $2,625 to
$3,500
•
Stafford interest rate increased to a fixed
6.8%
•
Plus loan interest rate increased to 8.5%
•
Academic Competitiveness Grants $750 to
$1,300
Home Equity Loan
PLUS Loan
VS.
• Potentially lower
interest rate
• You can borrow
more than the cost
of attendance
• If you sell your
home, you must
pay back home
equity loan
• Can borrow the cost of
attendance less
financial aid award
• If you sell your home,
you do not need to pay
this off
• If death or total
disability occur, loan is
forgiven
Know the System!
• Aid doesn’t necessarily go to the most needy…
• It goes to those with the most
KNOWLEDGE!!!
The Secret Weapon
Financial Aid Leveraging
• Financial aid now used as a tool to
attract affluent and high-scoring
students
• Data-mining and pricing techniques
from the airline and marketing
industries
The Sure Things
• Schools use detailed data to
systematically cut aid to students
whose behavior shows they are likely to
accept admission anyway.
***Source: The Atlantic Monthly, November 2005
Author: Matthew Quirk
The Result:
Financial Aid Leveraging
• Financial aid leveraging allows a school
to buy, within certain limits, whatever
class it wants.
“It’s a brilliantly analytical process
of screwing the poor kids.”
– Gordon Winston, economist at Williams College
Financial Leveraging
• A $20,000 merit-based scholarship
• Break into four $5,000 merit scholarships to lure
the wealthy
• School reaps an extra $240,000 over four years
• Windfall used to buy more rich students – or
gifted students to improve the school’s profile
“Admit-Deny” Tactics
• Schools intentionally gap poor
students
• The school knows they can’t afford
to attend
• Keeps poor students out claiming it
doesn’t consider a student’s
finances when making admission
decisions
The Numbers
• Since 1990, average discount on “stickerprice” has risen from 26.5% to just under
40%
• Proportion of students not paying full
price has grown from 62.5% to 80%
• Shifting from need-based to merit aid,
increases a school’s average SAT by 50
points and revenue 162%
There comes a moment in every
Parent’s life when it becomes clear….
“Winging It”
is no longer an appropriate funding
plan for college.
Parents Need to Solve the
Dilemma Between…..
Education
Funding
Retirement
Funding
These are important & obvious concepts that need to be
examined & solved before settling on any specific school or
giving the student carte blanche to attend any specific school.
College is Paid with
After-Tax Dollars
Five-Year College After-Tax Cost
Tax
Brackets
Public
$107,000
Private
$202,900
Elite
$270,500
25%
$155,200
$294,000
$392,00
28%
$162,200
$307,400
$409,80
33%
$175,500
$332,600
$443,40
35%
$181,500
$343,800
$458,400
*Assumes additional 6% state and local tax and a 6% college
inflationary increase & only ONE child’s college expenses
Actual dollar amounts are higher---we rounded down!
College Cash Flow
Typical Family Plan of Action
Use of Parent Loans to Pay the College Expenses
*Based on $25,000 plus loan
Cash Flow for
Education/Retirement
• Can cash flow be increased?
• Can you save a comfortable
monthly amount?
• Which strategies to increase
cash flow?
1. Decrease discretionary
expenses
2. Debt consolidation
Understanding HOW to make
Paying
for college a NON-EVENT!!!
Identification of all appropriate financial strategies
which may include:
• Income Shifting
• Asset Reallocation
• Tax Concepts
• Academic Strategies
• Detailed action plan with instructions for
implementation of all appropriate strategies to effect
the most beneficial financial snapshot to enhance,
both financial aid eligibility as well as long-term wealth
planning
•
Long term wealth planning: Retirement
College Dollars Spent
equals
Retirement Dollars Lost
Four Year Costs (2006-2009)
Years Until
Retirement
Public
$ 90,000
Private
$150,000
Elite
$235,000
15
$285,495
$475,825
$745,459
20
$419,486
$699,143
$1,095,324
Assumes 6% investment rate, one child in college, after tax dollars
Let the IRS Help Pay for Your
Child’s College Education
• Deduction may be the same as scholarship
• Higher your tax bracket, the greater the benefit
• IRS rules allow you to keep more $$$
NOTE: All tax strategies MUST be reviewed with a tax advisor
Income and Asset Shifting
• Accomplished by putting income-producing
assets in a child’s name
• Creates income and estate tax savings
• Gifts of appreciated assets during college years
can reduce certain taxes.
• Compensating the child can reduce certain taxes.
• Gifts of highly appreciated assets prior to college
years can be an effective strategy.
What Are your Options?
• Do it yourself.
• Utilize the knowledge of
a Certified College
Planning Specialist
(CCPS designation)
A consultant/specialist
working in a little
known but very
important niche!
No matter what…have a game plan!!!
Important Internet Sites
• Financial Aid:
– www.fafsa.ed.gov
– www.pin.ed.gov
• Scholarship Searches:
– www.findtuition.com
– www.fastweb.com
– www.finaid.com
• College Resources:
–
–
–
–
www.collegeboard.com
www.petersons.com
www.college-retirement.com
www.myroad.com(collegeboard)
For College Funding
Assistance
When you need advice:
Certified College Planning
Specialist (CCPS)
Financial Aid Expert
Complete Evaluation Form:
Check YES for a Personalized
NO-OBLIGATION
ASSESSMENT
Thank you for coming!
The Education Funding Consultants
Association
National 501(c ) 3 Non Profit Organization
866-597- EFCA (3322)
www.efcagroup.org
Info@efcagroup.org