Talking Brass Tacks on Financial Aid: Institutional Aid

The federal government doesn’t expect you to finance a college education on Pell Grants and loans alone, and neither do most four year institutions. Colleges have money set aside to give to students as a way to offset the cost of their education, and this money comes in two forms: merit aid scholarships and need-based grants. Merit aid scholarships are scholarships awarded to the top percent of students within the applicant pool of any given year. These scholarships can range in amount according to how competitive an applicant is within the applicant pool. For instance, the most competitive applicants can be awarded full tuition scholarships and less competitive applicants might receive smaller tuition awards. Larger scholarships tend to look at the applicant as a whole, including community service and personal attributes, while smaller awards may only take a few factors into account, such as standardized test scores and unweighted GPA.

Need-based grants are awarded automatically based on need and are not competitive. Because they are given automatically to needy applicants, these grants are usually exclusive to smaller, well-endowed, private institutions and not prevalent at larger public colleges. For most needy families, this can significantly decrease the cost of a private education, especially if the school meets one-hundred percent of financial need. Schools that meet one-hundred percent of a family’s need fund the student’s education completely, excluding the family’s estimated family contribution (EFC). This EFC is calculated by the institution, and the institution’s aid formula would look like this “Cost of Attendance – Grants = EFC.” Not all institutions meet one-hundred percent of a family’s need, and not all institutions use the same formula to calculate an EFC, so it is always best to fill out a net price calculator specific to that institution.

Financial Aid: Different Ways of Saying IOU to the Government

Federal student loans may be the cheapest money you will ever borrow, but they still cost money by accumulating interest over time. The good news is there are ways to make the burden of student loans less significant, with a variety of loan options that adjust to family finances and make a college education possible. Non-PLUS loans are loans taken in the student’s name, and have a limit of 5,500 dollars for a student’s freshman year, the limit increasing to 6,500 dollars the student’s sophomore year and 7,500 dollars the student’s junior and senior years. Non-PLUS loans are usually available to students whose parents are not financially able to take out PLUS loans, making these types of loans for families with financial circumstances that inhibit parents from holding a loan in their name, such as bad credit or bankruptcy. Perkins loans can be taken out by students according to their need and the student’s cost of attendance at the institution of enrollment, making the value of the loan vary from student to student. As discussed in the previous blog, Parent PLUS loans are an unsubsidized loan taken out by parents with good credit, where payments on interest must be made while the student is in college; however, these loans come with a low interest rate at 4.292 percent and do not have limits like a loan taken in the name of a student.

Talking Brass Tacks on Financial Aid: Subsidized vs. Unsubsidized Loans

If need-based aid coupled with merit aid is not enough to cover outstanding college expenses, education loans may be the only viable option to cover the remaining cost. There are three types of education loans: federal student loans, federal parent loans, and private student loans. A later post will have detailed explanations of parent PLUS federal loans and federal student loans. Student loans were the talk of the 2000s, laced with a bad connotation. Student loans do not have to be a life-long curse or a future cause of bankruptcy if the loans taken out by the student or parent are manageable. The key to analyzing if a loan is manageable or not is having a basic knowledge of what a student loan is and the terminology used to describe a loan. Student loans are special federal loans given to students pursuing a post-secondary degree, baring low interest rates and no credit expectations. There are two main terms to describe these loans: subsidized and unsubsidized. Subsidized loans are low-interest loans in which the federal government is responsible for paying interest until six months after a student’s graduation or they leave school. This means the student will not have any payments on the loan until after the six-month grace period, allowing for more financial flexibility in college. Unsubsidized loans are also low-interest loans, but interest on the borrowed amount must be paid while the student is in school. Subsidized federal loans are only available to students with financial need, while unsubsidized student loans, including parent PLUS loans (which are unlimited), are available to all students pursuing a post secondary degree. The current maximum on federal student loans is thirty-one thousand dollars, with twenty-three thousand dollars eligible to be taken as subsidized loans. Students who require more than thirty-one thousand dollars in loans can take further loans out from private firms, which will be discussed in a later post.

Talking Brass Tacks on Financial Aid: CSS Profile

If the FASFA is the minimally invasive “cool aunt” of financial aid, the CSS Profile is the nosey mother, interested in knowing everything about a household’s financial state. Three hundred schools currently use the CSS Profile as a supplement to the FASFA, but over three-thousand colleges that use the FASFA alone, so some students won’t fill out the CSS at all. For all other students, especially those applying to private colleges that grant large need-based aid grants, the CSS will be an essential part of the financial aid process. The CSS profile is considerably more thorough than the FASFA, evaluating more aspects of a household’s income and expenditures, such as retirement accounts, outstanding debts, and business expenditures. Despite financial probing that could appear to negatively impact higher income families, the CSS is actually an excellent tool for higher income families. The CSS allows for colleges to use institutional methodology instead of federal methodology to determine need, meaning at some schools income levels that receive no federal assistance might qualify for institutional aid. The best way to ensure that the CSS benefits more than harms financial offers is to evaluate how to use the profile’s details to your advantage. Simple moves such as shifting assets from accounts held in a student’s name to accounts held in a parent’s name and not overpricing assets owned can increase aid offers. The CSS is not meant to harm and provides as a way for institutions to give access to need-based scholarship funds outside of the limitations of federal need. The CSS has a per school fee that must be paid in order to submit the profile, but fee waivers for needy applicants can be easily obtained from the College Board.

Talking Brass Tacks on Financial Aid: FAFSA

The FASFA, short for the Free Application for Federal Student Aid, is the big momma of financial aid. Many scholarships and grant awards outside of the government are based directly on the outcome of a student’s FASFA. We will talk about these other forms of aid in later posts. The FASFA’s primary purpose is to determine a student’s eligibility for aid from the federal government. Types of federal aid include the Pell grant, federal work-study, and the federal supplemental educational opportunity grant (FSEOG). All of these forms of aid are based on need, where a family’s income determines eligibility for aid and the amount of aid given. This is dependent on the family’s finances, which is used to determine a family’s expected family contribution (EFC). We will discuss more in depth what an EFC means and how to calculate an EFC in a future post, but for now we’ll focus on just understanding the basics of federal aid. There are no income cut-offs for federal aid as many factors, such as number of children and liabilities, are taken into account along with income. That being said, in 2009 96% of students who received a Pell grant or the FSEOG grant had a family income of less than $50,000. Higher income families can still take advantage of the loan programs offered by the government, which will be discussed in detail in another post. The FASFA is important, and it is important that it be completed as soon as possible on or after January 1 so students can receive their aid options, and families can decide what’s best financial option for their family before school matriculation deadlines.

Financial Aid: Talking Brass Tacks on College Costs

It’s a bird; it’s a plane; it’s the looming college bill everyone has been dreading for 18 years! College is as expensive as it has ever been and each year the cost of attendance increases. Since 2010, the average price of a 4 year public university has risen from $15,918 to $22,826 this last year, a thirty percent increase. Private schools do not fare much better as the average cost of attendance soared from $32,617 to $44,750, a twenty-seven percent increase. Overall, the cost of a 4 year college education has an inflation rate of seven percent a year, just over triple the rate of inflation for the US dollar. However, there is a silver lining within this wallet-breaking reality: Financial aid can significantly offset the actual cost of attending a college. Last year more than 150 billion dollars of aid was made available to students to help cover the cost of tuition, books, and living expenses. That amount does not count private endowments set aside by colleges to give as grant aid to matriculates. Need-based grant aid is provided by many private institutions to lower-income families, and merit based aid from private scholarships and most colleges is available to academically accomplished or athletically gifted students. Given the right factors, a school with a “sticker price” of $60,000 can cost from $5,000 to $20,000 a year. In this blog series, we will delve into student aid, explaining loans, grants, scholarships, and everything in between.

Blueprint Workshop

Blueprint for College Planning Workshop 

Lane Music in Franklin Square, 9648 Kingston Pike

Tuesday, April 15th from 7-8:30 pm

A message from Laurie Brandow:

Does your son or daughter have a dream college? Or are they even thinking about college? What’s the plan? Where do you start?

Let’s start with our workshop!

Along with my colleague Jesse Hedrick from Testing Solutions, we are holding the second annual “Blueprint for College Planning and Admission” workshop. We’ll give you the resources that you are looking for…

From Your-Personal-Statement-is-NOT-an-English-Essay, to Crafting the College List,  our topics and information will get you ready for it all. Learn about Demonstrated Interest and resources for Unraveling the Mysteries of Merit and Financial Aid.  Find out whether the ACT or the SAT might be a better fit for your student.

This year each of my 20 students received multiple acceptances from what we call ’right-fit’ colleges. My mantra: Organization and timeliness minimizes stress and maximizes smart decision making. In other words: Procrastinate Later!

Come by Lane Music at 9648 Kingston Pike in Franklin Square Tuesday April 15th from 7-8:30 pm to get the inside scoop.

SPACE IS LIMITED! So RSVP now by emailing either Jesse at jesse@helpmytestscore.com or Laurie at Lbrandow@collegiateblueprint.com.

The cost is $25 per family. We will be giving away door prizes of a Regal Cinema gift basket courtesy of Collegiate Blueprint Consulting as well as a tutoring package courtesy of Testing Solutions.