Download Financial Aid Basics for Parents

Financial Aid Basics for Parents
John Leach
Davidson College
-College Financial Aid Officers are counselors, they are there to help! They hope that students will be
able to find a bridge to college. They have been described as the one profession that gives away millions
of dollars but are “hated”.
-Financial Aid applications are geared to the students but are usually completed by parents.
Need Based Financial Aid
-Students should be able to attend 1st college of choice.
-This is a yearly process based on taxes.
-Eligibility is measured by four criteria
Income and expenses
Assets and debts
Size of family
# of students in college
This information is analyzed to come up with a family’s ability to pay for college.
How students apply for Need Based Aid:
-FAFSA WWW.fafsa.ED.GOV
-If family is divorced, FAFSA completed by parent that the child lives with (custodial parent). If
custodial parent remarries, custodial parent and step parent complete the form. Noncustodial
Parent has no input in FAFSA except that their income will be reflected as child support and
alimony.
-CSS Profile www.profileonline.collegeboard.com
-used by approx 300 schools. Usually schools that have their own significant resources. This will
be used in addition to FAFSA. Cost is $26 for first school, $15 for each additional school. Fee
waivers are available. Custodial parent and noncustodial parent both contribute information on
this form. Emory requires CSS. CSS profile tables are more realistic and generous.
-At Davidson’s discretion, they may also ask for tax returns, W2 forms, non custodial parent
profile and have an institutional application.
-In cases where noncustodial parent is not part of the student’s life, the college will waive
information requirement. This is done via a third party statement (usually high school
counselor).
-The federal government “flags” some students for FAFSA verification.
-Early Decision- legally binding agreement. There is a contract that student and parent sign. You
may get a need based estimate from the school before you sign the contract. Also, schools will
be required, beginning in Fall 2011 to have a net cost price calculator on their websites.
-Early Action-non-binding
Federal definition of whether a student is considered independent is found at the beginning of
the FAFSA. If the student answers yes to any question, the student is considered independent
from parents. Questions involve age, emancipation, student dependents, etc.
How is Eligibility Determined?
-Cost of Education
Minus Expected Financial Assistance (including outside resources)
Minus Family Contribution
This is the Student’s Financial Need
-Cost of Education includes
Tuition and Fees
Room and Board
Books and Supplies ($1000 avg)
Transportation
Miscellaneous Personal Expenses ($1300 avg) (computer, health insurance, child care, special
needs)
-
Outsides Resources are parent’s income and assets and student’s income and assets.
Parent’s Contribution from Income (this part was confusing to me)
-adjusted gross income from taxes
-untaxed income (401K, IRA)
-allowances are subtracted out
- These items are considered available income and are considered at a rate of 22% to 47%
-Total Assets are considered at a rate of 3% to 5%
-CSS asks for home equity (FAFSA does not)
-529 plans are considered parent assets that are protected.
Student Contribution from Income and Assets
-considered minimally
-some schools have set contribution amounts for students because these schools expect
students to work and save during the summer. Usually around $2000
-Student savings account considered at a rate of 20%
-UTMA/UGMA considered at a rate of 20%
-trust funds considered at a rate of 20%
What are the components of the Financial Aid Package?
Gift Aid
-Grants (institutional)
-Merit Based Scholarships
Self Help
-student employment
-Loans
Direct Student Loan (Stafford, Perkins)
Direct PLUS Loans (Parent)
Alternative loans – not too many any more
Loans are now available only through the school. You can no longer go to a private lender.
Merit Based Scholarships
-They are used as recruitment and enrollment tools.
-Procedures for consideration:
-nomination
-scholarship application
-admission application
-Questions to ask about Merit Based Aid. Is it renewable? What are the requirements for
renewal? Will it affect my need based aid eligibility?
Other Helpful Options
-summer work
-payment plans over the school year
-lines of credit
-Federal Perkins Loans (5% interest) (some professions will forgive the loan)
Other Important Considerations
-be very aware of DEADLINES!!!!
-be aware in school is Need Blind and Need Sensitive. You can call the school and ask.
-May 1st- National Candidate Reply Date