Rockville High School December 3, 2013

1. FINANCIAL AID 101 for High School Seniors & Their Families Rockville High School December 3, 2013

2. The information in this presentation was based on rules and regulations interpreted as of the date of its creation. Please note that programs may change over time. Also, many forms of aid are based on individual schools’ policies and available funding. Examples used in this presentation should not be considered guarantees of aid a student would receive. Contact your school for details about application procedures and eligibility questions. This presentation was developed by Suzanne Hanlon, Stacey Musulin, and other staff members at the University of Connecticut Office of Student Financial Aid Services. This presentation uses materials created by the National Association of Student Financial Aid Administrators

3. Topics to Discuss 3 • Types of financial aid • Cost of attendance (COA) • Expected Family Contribution (EFC) • “Financial Need” • Free Application for Federal Student Aid (FAFSA) • Post-Application processes • Special circumstances appeals

4. What is Financial Aid? Financial aid is funds provided to students and families to help pay for postsecondary educational expenses Principles of Need Analysis: • To the extent they are able, parents have primary responsibility to pay for dependent child’s education • Students also have responsibility to contribute to educational costs • Families should be evaluated in their present financial condition • Family’s estimated ability to pay for educational costs must be evaluated in an equitable & consistent manner, recognizing that special circumstances may affect family’s ability to pay

5. TYPES OF FINANCIAL AID

6. Types of Financial Aid • Scholarships (not repaid) • Need or merit-based • Grants (not repaid) • Need-based • Loans (must be repaid) • Need and non-need types • Federal or private lenders • Student or parent as borrower • Employment ($ earned through work) • Need and non-need types • Work-Study (need-based)

7. General Student Eligibility Criteria • Must be enrolled or accepted for enrollment in eligible program of study • Must be pursuing degree, certificate, or other recognized credential • Must be U.S. citizen or eligible noncitizen • Must be registered with Selective Service (if male and required) • May not have eligibility suspended or terminated due to drug-related conviction • Must have valid Social Security Number (SSN) • Must be making satisfactory academic progress GPA , % of completed credits, maximum credit limit

8. Scholarship Searches • Local businesses and civic organizations • State Dept. of Education • School Counselor • Places of employment • Student or parent • Internet - many sites, including: • http://fastweb.com • http://fastap.org • http://hfpgscholarships.org • College or University • Academic, athletic, and other talent-based scholarships Important Tip: There are scholarship scams! Do not pay for scholarship searches/ applications. Important Tip: Start Early! Application deadlines and procedures vary depending on source of aid!

9. FASTWEB.com • Students are matched to scholarships, colleges, internships, part-time jobs, and more. With 1.3 million scholarships worth over $3 billion, FastWeb is a comprehensive source for scholarships.Students get a customized experience and tools to stay organized.It’s all FREE!

10. Pell Grant • Awarded to high-need, eligible undergraduates pursuing first Bachelor’s degree and certain students enrolled in post-baccalaureate teacher certification or licensing programs • Portable (not attached to a particular school) • Actual need-based award amount based on COA, EFC, and enrollment status (more to come later) • Maximum authorized award for 2013-2014 academic year was $5,645

11. Federal Supplemental Educational Opportunity Grant (FSEOG) • Need-based – High-need students a priority • Maximum award $4,000, but dependent on school packaging policy and available funds

12. Federal “Self-Help” Aid • Federal Work-Study (FWS) • Federal Perkins Loan • Federal Stafford Loan • Subsidized Stafford Loan • Unsubsidized Stafford Loan • Federal Parent PLUS Loan

13. Federal Work Study (FWS) • Eligibility based on need, available funding, and school policies • Allows student to earn money to help pay educational costs • Paycheck or other compensation (e.g., payments off fee bill) • Determined by school policy • Employment may be on or off-campus (per school policies) • Eligible employers may be: • School that student attends • Federal, state, or local public agencies • Certain private nonprofit and for-profit organizations Tip: FWS earnings, if indicated specially on the FAFSA, do not count in the expected family contribution (EFC) calculation for the following school year!

14. Federal Perkins Loan • School lends Federal funds up to its allocation limits • Student is borrower – no cosigner or credit check • No fees! • Amount dependent on funding and school policies but there are maximums • Interest rate: 5% • Does not accrue while in school or in grace period • 9-month grace period after graduation (or if student drops below ½-time status) • Repayment period may be up to10 years • Deferment and cancellation provisions available

15. Federal Direct Stafford Loans • Student is borrower – no cosigner or credit check • Amount undergraduate and graduate students can borrow varies by academic year/ # of completed credits • 1.072 % fee charged • i.e., if $100 borrowed, $98.93 will disburse • No repayment required while in school at least ½-time • 6-month grace period after graduation or if drop below ½-time status • Maximum repayment period between 10 and 30 years depending on repayment plan chosen and total amount borrowed • Deferment and cancellation provisions available

16. Federal Direct Stafford Loans • Subsidized: Must demonstrate “need” • Unsubsidized: Not based on “need” • Annual loan limits (combined subsidized and unsubsidized) for dependent students: • $5,500 for 1st year undergraduates • $3,500 maximum subsidized • $6,500 for 2nd year undergraduates • $4,500 maximum subsidized • $7,500 for each remaining undergraduate year • $5,500 maximum subsidized • Total/aggregate limit for dependent undergrads: $31,000 • $23,000 maximum subsidized

17. Federal Direct Subsidized Stafford • Need-based, dependent on Cost of Attendance (COA), Expected Family Contribution (EFC) figures, and other aid sources • Annual maximum eligibility to borrow dependent on student status • Interest rate fixed 3.86% for undergrads as of the August 1st of the 2013-2014 school year • Interest rate for upcoming aid year (14/15) will be determined in July 2014 • Interest does not accrue while in school at least ½-time

18. Federal Direct Unsubsidized Stafford • Not need-based, but must fill out FAFSA to borrow maximum possible subsidized loan type • Interest Rate fixed 3.86% and accrues from time money is disbursed • Can pay interest while in school! • Amount eligible to borrow dependent on student status

19. Parent Direct PLUS Loans • Loan program for parents (biological, adoptive, or step-parent in household) of dependent undergraduate students • Applicants must have “no adverse credit” • Application does NOT look at debt-to-income ratio or credit score • Annual loan limit: COA minus other aid • Fixed interest rates • 6.41% Direct PLUS Loans as of July 1, 2013 • 4.288% fee charged • i.e., if $100 borrowed, $95.71 will disburse • Repayment begins 60 days after loan is fully disbursed for parent borrowers • Parents may defer payment while student is in school at least ½-time • Must apply for deferment with Dept of Education – not automatic! • Other deferments, forbearances, cancellations possible in special circumstances

20. Financing Alternatives • Monthly Payment Plans • Allows payments to be spread over 10 months or less • Dependent on school • Contact school for information • Alternative/Private Loans • Applicants must be “credit–worthy” • Payments may be deferred while student is in school • Dependent on lender • Interest rates, fees, and repayment policies determined by individual lenders and subject to change

21. Tips for Borrowing • Additional unsubsidized loan eligibility available for independent undergraduate and dependent students whose parents are unable to borrow PLUS (credit denied): • $4,000 per year for 1st and 2nd year undergraduates • $5,000 per year for remaining years of undergraduate study • Parents and students who will be applying for PLUS or private/alternative loans should: • Consider lower-cost/interest Federal loan options first • Consider the total cost of borrowing • Double-check credit scores (www.annualcreditreport.com) prior to filling out applications • Consider co-signing options for better interest rates on private loans

22. CONCEPTS & DEFINITIONS

23. What is Cost of Attendance (COA)? • Combined direct and indirect costs related to educational program • Direct: Billed by the college (e.g., tuition, room & board) • Indirect: Usually estimates not on the fee bill, but needed (e.g., books, computer expenses, dependent care, mileage) • Varies according to: • School (tuition/fee rates differ) • Student status (in-state vs. out-of-state, full-time vs. part-time) • Housing status (on-campus, off-campus, with parent)

24. What is the Expected Family Contribution (EFC)? 9 • Misnomer: EFC is NOT necessarily what a family will actually pay! • Measurement of a family’s financial strength • Calculated using data from a federal application (FAFSA) form and a federal formula • Stays the same regardless of college • Exception: Special Circumstance appeal • Two components for dependent students: • Parent contribution • Student contribution • Determines the types and amounts of aid that students are eligible to receive

25. EFC for Dependent Student (very basic Federal Methodology version) Parental contribution from income & assets + Student contribution from available income & assets = Expected Family Contribution (adjusted if more than one dependent in college)

26. Financial “Need” - Federal Methodology NB: The official “Need” figure is not necessarily what is needed to pay the bill Cost of Attendance (COA) - Expected Family Contribution (EFC) = Financial Need (billed & miscellaneous non-billed expenses) (schools will use this figure to determine eligibility for need-based aid)

27. “Need” Based on Cost

28. Institutional Methodology • Some schools, through the CSS Profile application or their own financial aid applications, may require different information to calculate a separate, Institutional EFC • The Institutional EFC and those schools’ policies determine how institutional aid is distributed

29. Important Tips: Cost of Attendance • KNOW YOUR COST OF ATTENDANCE! • COA may be adjusted to meet individual students’ needs, if the school accepts an appeal • COA increase may result in more need-based aid • Must be able to document additional expenses • E.g., fee bill for more-expensive meal plan or receipt for computer purchase • Contact your school for details!

30. THE AID APPLICATION PROCESS

31. CSS Financial Aid PROFILE • Used primarily by private colleges • Pay for each report sent to a school plus small registration fee • https://profileonline.collegeboard.com Institutional Applications • Check school publications and websites The Forms FAFSA (Free Application for Federal Student Aid) • Required for all types of Federal and some state and institutional aid • www.fafsa.ed.gov • DO NOT go on the .com site – that’s a service for fee

32. What is the FAFSA? • A standard form that collect demographic and financial information about the student and family • Information is used to calculate the EFC using the federal formula • Electronic version is preferred & faster • English and Spanish versions • Information is sent to secure Dept. of Education system called CPS • Did I mention it’s free?

33. About Deadlines: • Each college may set its own deadline for filing the FAFSA, the Profile, or an additional institutional financial aid application • Know the deadline for each school to which you apply! • For the 2014-2015 academic year, the FAFSA is available on January 1, 2014 • The FAFSA may be filed at any time during the academic year to be considered for Pell Grant and Stafford and/or PLUS loans • Understand that if you file late, you may miss out on forms of aid that are limited

34. First Step: Get Student & Parent Financial Aid Personal Identification Numbers (PINs) • Web site: www.pin.ed.gov • Can request PIN now • Sign FAFSA electronically • May be used by students and parents throughout aid process, including subsequent school years’ FAFSAs and signing Federal Direct Loan MPNs Tip: Get student AND parent PINs (1 each) now!

35. What information to collect before starting the FAFSA: • Social Security Numbers (student and parents) • Alien Registration # (permanent residents only) • Student’s driver’s license number • State residency information • Marital information (dates) • 2013 W-2 Forms if available (statement of earned wages) • May estimate for initial completion by deadlines • 2013 Tax forms if available (student & parent) • May use last year’s data to estimate for initial completion by deadlines • Email addresses • Other income info (contributions to tax-deferred pensions/savings, child support paid/received, etc.) • Investment information (NOT retirement accounts) • School codes (also available on online FAFSA)

36. FAFSA on the Web Worksheet • Usually a 4-page PDF booklet • Cautions: • Worksheet does not include all FAFSA questions • Section #s on Worksheet don’t necessarily coincide with section #s on FAFSA • Many families will be asked to provide additional information • Child Support Paid • Untaxed Income (including untaxed interest, IRA deductions, Child Support received) • Assets (NOT IRAs) Businesses/Investment Farm value Tips: • Using this worksheet might help to organize information prior to going online • Have this and supplemental information handy to make data entry easier

37. Good reasons to file electronically 40 • Built-in edits to prevent errors • Skip logic allows student and/or parent to skip unnecessary questions • Option to use Internal Revenue Service (IRS) Data Retrieval (usually in early-mid February, if returns have been processed by IRS) • More timely submission of original application and any necessary corrections • More detailed instructions and “help” for common questions • Ability to check application status on-line • Simplified application process in the future

38. FAFSA on the Web 39 • Website: www.fafsa.ed.gov • 2014-15 FAFSA on the Web available on January 1, 2014 • FAFSA on the Web Worksheet: • Used as “pre-application” worksheet • Questions follow order of FAFSA on the Web

39. General Tips for completing the FAFSA: • Read each question carefully • Some questions apply to students, others to parents – don’t mix! • Some questions tell you what income/ asset data NOT to include – be careful! • Double-check all data entry • If estimating income/ asset information, supply your best HONEST guess • You may go back and make corrections (possibly IRS Data Retrieval) if there are significant changes • When using tax forms, double-check the type of form you are using (1040EZ, 1040A, 1040) to reference the correct specific line numbers

40. General Info Section TIPS for General Information: • “You,” “Your,” and “Yourself” refer to the Student! • Use full, legal names – no nicknames! • You are not a 1st year Graduate student - yet • Citizenship information • Drug conviction status • Parent’s educational background • Grade level for the 2014-2015 school year • First year undergraduate • Type of Program? • Certificate/ Diploma • Associates degree • Bachelor’s degree

41. Dependency Status(Whether or not parent information required on FAFSA) Students may be only considered Independent if they are: • Born before January 1, 1991 • Married at time of application • Have children/ dependents for whom student provides over ½ financial support during upcoming year • In Graduate school (already earned a Bachelor’s degree) • On active duty stats in US Armed Forces • A veteran of the US Armed Forces • An orphan, Ward of the Court, or in foster care • anytime when age 13+ • Considered “unaccompanied youth” and “homeless” / “at risk of being homeless” • As determined by director/ professional staff of shelter or program any time on/after 7/1/2013 • Legally considered “emancipated minor” or in “legal guardianship” • NOTE: THIS IS DIFFERENT FROM A DIVORCED PARENT HAVING CUSTODIAL STATUS!!!! Tip: In extreme circumstances, dependency status may be appealed. Contact your school’s financial aid office for more details.

42. Who is a “Parent?” • “Parents” do not include grandparents or other relatives/ friends/ legal guardians with whom the student may live, but who have not formally adopted the student • When parents are divorced, give information about the primary custodial parent(s) (with whom the student lived longer during the past year) • To break a tie, give information about which parent provided more financial support • When parents are remarried, given information about the primary custodial parent AND that parent’s spouse (the stepparent in whose household the student lives most)

43. Tips for Household Info • NEW: If parents unmarried, but living together, include both parents (i.e., combine income and tax information) • Include student and siblings if parent(s) will provide over half support from 7/1/2014- 6/30/2015 even if the student will not be living with the parent during that time (i.e., in college) • Include other dependents if they live in the house and if parent(s) will provide over half support from 7/1/2014- 6/30/2015 • # in college figure must be children/ dependents counted in the household who are enrolled at least ½-time • Do not include parents in # in college even if the parents are in college • Dislocated Worker Status for Parents: • Receiving unemployment benefits andunlikely to return to that field/job • Is “displaced homemaker,” laid-off, or lost own business due to economic conditions

44. IRS Data Retrieval 41 • Available early-mid February for 2014-2015 processing cycle • Participation is voluntary • Makes updating FAFSA information easier • Reduces documents requested by financial aid office • Not available when filing status is Married-Separately or if parents are unmarried and living in same household

45. How IRS Data Retrieval Works So long as the tax returns have already been processed: • While completing FAFSA, the student and/or parent may submit real-time request to IRS for tax data • IRS will authenticate taxpayer’s identity • If match found, IRS sends real-time results to applicant in new window • Student and parent choose whether or not to transfer data to the online FAFSA • These are separate transfers, one for the student and one for the parent

46. Tips for Student/Parent Income Info • OK to estimate and correct later! • Tax Filing Status and type of return (1040EZ, 1040A, 1040) • Eligible to file 1040 EZ or A if make less than $100,000, does not itemize, and does not have income from self-employment, own farm, alimony, or capital gains on a required Schedule D • Adjusted Gross Income for 2013 – not always the same as income from work on W-2 • May include income from other sources and certain deductions • Income earned from work – May be different than AGI – Include Self-Employment! • Federal Income Tax for 2013 (What was tax liability on 1040 – NOT necessarily paid on W-2)

47. Additional Tips for Income Info • Untaxed Income : • DO include annual IRA/pension contributions, Workman’s Compensation, untaxed disability, untaxed IRA distributions/pension/interest, and child support RECEIVED • Do NOT include Unemployment Compensation, untaxed Social Security benefits, SSI, IRA rollovers, and other such specified income. • Do NOT include scholarship/ financial aid amounts as income UNLESS you will pay taxes on it (i.e., if you must include this as taxable income on 1040) • This usually occurs only if the scholarship exceeds the billed educational expenses

48. Tips for Asset Info • Do NOT include these in assets questions: • Net worth of the home you live in • Retirement accounts (e.g., 401K, IRA, pensions) • Net worth of family-owned (greater than 50% ownership) business employing less than 100 people • Net worth of family farm on which you live

49. Tips for Asset Info (continued) Do include these in assets questions: • Cash, savings, checking account balances • 20% of student assets included in EFC calculation • Parents have Asset Protection Allowance, so not all assets included • Net worth (Value – Debt/Mortgage) of rental/investment properties • If you live in your investment property, do NOT include the percentage of the area in which you reside • Educational benefit/ savings accounts (e.g., 529, Coverdell) • Include as parent asset even if the student is the beneficiary • Net worth of family business if employ over 100 employees • Net worth of investment farm

50. Additional Info & Tips • Federal School Codes needed for each college • Up to 10 codes allowed – Feds will send data to schools • Available online if you don’t have them handy (follow prompts) • Housing plans for each college (used by schools to determine Cost of Attendance) • On-campus (allows for billed room & board/meals) • Off-campus (allows for rent & meals) • With parent (allows for meals) • For Dependent Students: Both Parent and Student must sign with separate PINs!