Financial Aid Advice

*In This Section:
Money Doesn't Grow on Trees…Or Does It? by John B. Boshoven
Focus on Financial Aid: Terminology and Words to Know from the National Association for College Admission Counseling
Common Errors on the FAFSA: Senior Parent Alert! by Mike Pugh
Understand Your Student Aid Report by Chris Diehl

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Money Doesn't Grow on Trees…Or Does It?

by John B. Boshoven

Got enough money for college? Most of us would say NO. With decreased national savings and increased costs for college, the average American family shutters just thinking about it. Despite the fact that finding money for college takes a lot of work, finding some sources of aid to help could be like picking money from the money tree. It takes a ladder, time, and discernment about where and when to search. Before we suggest some useful "trees" to search, let's consider an "orchard map" to help you search more effectively. Where does money for college come from?

1. Your NEED for financial aid
Determined using a federal formula, most families rely on the Free Application for Federal Student Aid (FAFSA). Using their on-line forms (http://www.fafsa.ed.gov), families enter income and assets and receive a report listing their Expected Family Contribution (EFC). This will be the amount all colleges and universities will use to determine whether federal dollars can be used to support a student's college bill. More selective institutions may require additional financial information determined either by the college's own forms or the College Scholarship Search (CSS) Profile. By far, the most money for college comes from these formula.

2. The college's need/desire for your student
The second largest tuition support comes from the admitting colleges themselves. Colleges will use their resources (endowments, etc.) to further support students they are hoping to "land." Think bassoon player, diver, leader, National Merit winner, etc. One of my seniors is hoping to make a profit after all his scholarships are tallied. Find out from the college's financial aid office whether admitted students are automatically considered, or if there are tests or other applications to file.

3. The BIG Scholarships
Nike, Intel, Prudential, Toyota, Bill Gates, Coca Cola- these are just a few of the biggies. Lots of money is given to a very few, talented students. Extraordinary talents and/or community service is stressed. Unless you can get a recommendation from Mother Theresa or Kofi Annan, keep moving.

4. Your affiliations
Organizations that you and your family are connected to can really add up in the process. Consider:

-National organizations like Rotary International, Kiwanis International, Boy Scouts, labor unions. They and many others offer scholarships or free or low cost loans for college.

-Local organizations and contacts like your church, synagogue, or educational and/or youth foundations each could offer something earmarked for local students like YOU!

-Clubs and organizations such as your youth group, the local Rotary or Kiwanis or non profit organization (American Cancer, Hemophilia, etc) often offer support for worthy students.

-Employers, schools and governmental organizations often have special funds for the children of the employees or citizens of the town.

Use your contacts! Your guidance counselor, priest, rabbi, or local school librarian are all about helping you! Ask them for help!

-Web searches via search engines or google. When I googled, Scholarships Methodist, I received over ten pages of contacts. Search engines like fastweb.com or finaid.org can also help.

-Contests encourage students to write essays, take pictures, create art work and public service announcements. These awards can come with cash!

-Books at libraries, guidance offices and/or bookstores can help students find scholarships by categories (fine arts, religious studies, community service, etc.).

-Aunt Mary could help. Consider asking your family members for support. They may have made plans for you in their wills and estates and would rather be alive to see it work on your behalf!

Like picking from the money tree, finding support for college takes work and effort. Like fruit, financial support also has to be ripe and in season. Watch for deadlines, and strictly adhere to them. Watch for specific instructions for eligibility. Beware of any scholarship or service that charges you money to search for scholarships or to enter contests. Those work more like lotteries. If it sounds too good to be true, it probably is! Happy picking!

John B. Boshoven is the 2005-6 President of the Michigan Association for College Admission Counseling (MACAC). He serves as the Director of College Counseling at the Jewish Academy of Metropolitan Detroit in West Bloomfield, the Counselor for Continuing Education at Community High School in Ann Arbor, and has a private college counseling practice. He also coordinates the Jewish Schools and Students Special Interest Group for the National Association for College Admission Counseling.

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*Focus on Financial Aid: Terminology and Words to Know

Part I. The Application Process

FAFSA-Free Application for Federal Student Aid. A detailed form
that is the first step in applying for federal aid, offered by the U.S. Department of Education. The FAFSA is available from colleges, high school guidance counselors, public libraries, and on the Internet. Only one FAFSA needs to be completed each year, even if you are considering several different colleges. You may be able to use the FAFSA to apply for state and college aid as well. Contact your state agency and financial aid
administrator to find out whether you can use the FAFSA to apply for state and college aid, and to learn what types of aid may be available to you.

The FAFSA is available in two formats: paper and electronic. If you complete a paper FAFSA, you will mail it directly to the application processor listed on the FAFSA. If the school you plan to attend participates in the Department of Education’s electronic application system, you can give your completed FAFSA directly to the school. The school enters your FAFSA information into its computer system and electronically transmits the data for you to the Department of Education.

You can also apply electronically for federal student aid by using
FAFSA on the Web. MY PREFERENCE, BY THE WAY!!! You can complete the application online, at www.fafsa.ed.gov. The site also contains useful information about the electronic process and what to expect after completing it.

CSS Financial Aid PROFILE-A supplemental need analysis document used by some colleges and private scholarship programs to award their non-federal aid funds. Early in your senior year, participating colleges may ask you to file a PROFILE so that a predetermination can be made of your financial aid eligibility at that school. The PROFILE does not replace the FAFSA-you must still file a FAFSA in order to be considered for federal student aid. You should file a PROFILE only for those colleges and programs that request it. PROFILE registration forms, which are processed by the College Scholarship Service (CSS), are generally available from high schools or colleges. Financial Aid Package-Describes the total amount of aid that a student receives. A package generally consists of several parts:
grants/scholarships, loans and jobs. Grants and scholarships are considered “gift aid.” Loans and jobs are considered “self help.”

Part II. Types of Financial Aid

Grants and Scholarships
Money given to a student that carries no stipulation of repayment is known as a scholarship or a grant. Scholarships and grants can originate from the federal or state government, private sources or the college itself. Grant eligibility tends to be based on need; when need is high, the grant aid tends to be high as well. Scholarship eligibility is often based on financial need, academic achievement, particular talents or skills, or a combination of one or more of these factors. In some cases, the terms “grant” and “scholarship” are used interchangeably.

Loans
Any program described as a loan requires repayment, usually with interest, the source of the funding. Loans often come from the institution or private lender. Generally, the greater the financial need, the larger the loan. A variety of repayment options are usually available, and sometimes permit payment to be deferred while the borrower is enrolled in school. The time frame for loan repayment can be as little as two to
three years, or as long as twenty years. Many banks and lending
institutions now make special loan programs available to help parents finance their student’s education. These loans are not based on financial need, but can help stretch the family’s budget over the years of schooling. Loans may be referred to as “self-help” aid.

Jobs
On and/or off-campus employment for hourly wages during the
academic year. In some cases, the jobs are designed to complement the student’s field of study. Jobs may also be called “self-help” aid.

Part III. Federal Student Aid Programs

Eligibility for federal student aid programs, except the Federal
PLUS loan and unsubsidized Federal Stafford Loan, which we’ll describe later, is primarily based on financial need. Families demonstrate need for federal student aid by completing and filing the Free Application for Federal Student Aid (FAFSA), available from colleges, high school guidance counselors, public libraries, and/or the Internet.

Federal Pell Grant
The largest single aid program. Grants are awarded to students demonstrating high financial need and are not required to be repaid. Using FAFSA data, financial need is determined according to the Federal Methodology, a formula established by Congress to assess the family’s ability to contribute to the student’s educational costs. For each eligible student, the Department of Education forwards funds to the school, which are then
delivered to the student’s account at the school, or are paid directly to the student. The maximum award varies annually, according to the level of federal funding. For 2003-2004, the maximum Pell Grant is $4,050.

Federal Perkins Loan (formerly National Direct Student Loan)
A federally funded campus-based loan that is administered by the college aid office. Students do not apply separately for the Federal Perkins Loan-it is awarded to eligible students as part of an aid package at the college. A five percent interest rate is charged annually after completion of studies, and a grace period is specified in the promissory note. The maximum Federal
Perkins Loan that most colleges can award to an undergraduate is $4,000 per year. In order to distribute limited funds to as many students as possible, most schools make awards that are smaller than the maximum.

Federal Supplemental Educational Opportunity Grant (FSEOG)
A federal campus-based grant awarded to students who demonstrate significant financial need. Like Federal Perkins Loan, students do not apply separately for FSEOG-it is awarded to eligible students as part of the aid package at the college. The maximum Federal SEOG that most colleges can award is $4,000 per year. However, due to extremely limited funding in this program, awards are frequently smaller than this amount.

Federal Work-Study (FWS)
A part-time work program awarding on- or off-campus jobs to students who demonstrate financial need. FWS positions
are primarily funded by the government, but are also partially funded by the institution. FWS is awarded to eligible students by the college as part of the student’s financial aid package. The maximum FWS award is based on the student’s financial need, the number of hours the student is able to work, and the amount of FWS funding available at the institution.

Federal Family Education Loan Program
This term encompasses two separate loan programs: a student loan known as the Federal Stafford Loan; and a parent loan known as a Federal PLUS Loan. A FAFSA must be filed for Federal Stafford Loan consideration.

Federal Stafford Loan-A long-term, low interest rate loan
administered by the Department of Education through private commercial lending agencies (banks, credit unions, etc.). The maximum amount a dependent borrower can receive is $2,625 for the first year of study; $3,500 for the second year of study; and $5,500 for third year and beyond, with a limit of $23,000 for an undergraduate education. The interest rate to first-time borrowers is variable, but will not exceed 8.25 percent.
Students can borrow Federal Stafford Loan funds regardless of financial need. However, if financial need is demonstrated, the federal government may subsidize (i.e., pay to the lender) part or all of the interest while the student is in-school and during grace and deferment periods. If the student does not demonstrate financial need, part or all of the loan will
be unsubsidized-that is, the student, rather than the federal government, is responsible for the interest during in-school, grace and deferment periods. An additional cost of borrowing is an origination fee up to 3 percent and an insurance premium up to 1 percent that are deducted from the loan.

Federal PLUS Loan
A long-term, variable interest rate federal loan that is capped currently at 9 percent and is available to the parents of
dependent students. Like Federal Stafford Loans, Federal PLUS loans are administered by the Department of Education through private commercial lending agencies. There is no set limit on the amount of Federal PLUS funds that a parent may borrow; however, the maximum loan cannot exceed the student’s portion of the cost of education minus any other aid the student receives. Federal PLUS loans are not subsidized, and eligibility is not based on financial need. Repayment usually begins immediately after the entire loan is disbursed. Federal PLUS Loans, like Federal Stafford Loans, have a maximum 3 percent origination fee and 1 percent insurance premium that are deducted from the loan.

William D. Ford Federal Direct Loan Program
A program almost identical to the Federal Family Education Loan Program, except that the federal government is the lender and the funds are delivered directly to the school. If the college the student plans to attend participates in the Federal Direct Loan Programs, he or she will apply for a Federal Direct Stafford Loan and/or a Federal Direct PLUS Loan, rather than a Federal Stafford or Federal PLUS Loan. Federal Direct Stafford Loan applicants must file a FAFSA, and if eligible, must complete a promissory note provided by the college. Federal Direct PLUS Loan applicants must complete an application available at the college.

*Part V. Institutional Aid, Institutional Scholarships and
Grants-Non-federal gift aid programs administered by the college.*

Institutional grants are generally based on financial need. Institutional scholarships are often awarded based on particular abilities or skills in areas such as athletics, music or academic achievement. These scholarships are often renewable for each college year, usually contingent on the student continuing to engage in the activity that prompted the award, or, in the case of academic achievement, maintaining a certain grade point
average. Unfortunately, there are relatively few scholarship awards available through institutions. In many instances, it is the college that controls the scholarship process, inviting only certain students to become candidates.

Institutional Loans
Non-federal loan programs administered by the college. These loans usually bear low-interest rates and have favorable
repayment terms. In many cases, loan payments are deferred while the student is enrolled in school. Collegeshave individual application requirements for institutional loans. Applicants should contact the college to learn the types of loans that are available, the criteria that must be met to qualify, and the terms and conditions of the available loans.

Institutional Student Employment
On- or off-campus employment programs, similar to the Federal Work-Study program. These positions may be awarded based on financial need, the student’s job qualifications or a combination of the two. In some cases, these positions may be related to
the student’s field of study. The financial aid office should be contacted to learn what types of student employment are available through the school.

Part IV. State Aid Programs

Various states have different financial aid programs for residents
of their own states. To determine the programs available in your state, consult your guidance office or email the department of education in your state.

Part V. Private Aid Sources

Private Scholarships
Non-federal scholarships that originate outside of the college, and generally require the student to file a separate application. Although academic standing or financial need may be conditions for some private scholarships, these funds may also be awarded
based on such qualifiers as field of study, religious affiliation, ethnic background, leadership skills, place of residence, or other criteria. Because these scholarships are from private funding sources, the criteria can reflect whatever qualities their benefactors wish to reward or encourage. You should seek out and apply for as many of these awards as you can. High schools, Dollars for Scholars, churches, local businesses, and civic service organizations frequently have scholarship programs. So may the company where a parent works. Information about private awards, including how to apply for these funds, is usually available at the high school or local library.

Private Loans
Like private scholarships, private loans originate outside of the college and usually require a separate application. Some
private loans are awarded based on the same factors as private
scholarships. Others, particularly those offered through commercial lenders, are approved according to the family’s ability to repay the loan. Non-federal loans through commercial lenders are often available only to the student’s parents. Amounts, interest rates and repayment terms, and application procedures vary according to the individual loan program.
Before considering a private loan, students should be certain they understand their rights and responsibilities under the loan program, including how interest is assessed, when repayment begins, and what repayment options are available.

Exerpted from:
http://www.nacac.com/p&s_steps_0903terminology.html

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*Common Errors on the FAFSA: Senior Parent Alert!

by Mike Pugh
http://www.fastweb.com

A mistake on your FAFSA can delay the processing of your application by up to three weeks. One in seven FAFSA forms is returned due to errors. It could happen to you.

Avoid the most common mistakes:

*The most frequent mistake made is leaving a field blank. If the answer is zero or the question does not apply to you, write in a zero. If you leave a question blank, the processor will assume that you forgot to answer.

*Use the 1040 federal tax return for income reporting and reporting taxes paid. Some parents and students mistakenly use their W-2 form.

*Don’t forget to report all the required sources of untaxed income. These include Social Security, child support and Aid to Dependent Children (ADC).

*Report your correct marital status. If you plan to file as a married student, you must be married on or before the date that you sign your FAFSA.

*Make sure to include your stepparent’s information.

*Include yourself in the household size. Even if you didn’t live there during the previous year, you should always include yourself as part of your parent’s household.

*Don’t forget to sign the application. If you’re filing as a dependent, both you and your parents must sign. If you file online, you and your parents can sign the form electronically using your PIN numbers.

*Remember to file on time. Priority for programs with limited funds is often given to students who file the FAFSA as soon after January 1 as possible.

*As with all forms and applications, make sure you read the instructions and questions carefully. If you’re unclear about a question or are having trouble filling out the FAFSA, check the FAQ section on the FAFSA Web site, or call the Federal Student Aid Information Center at 1-800-4-FED AID (1-800-433-3243).

*On the paper form, follow instructions with regard to using a pen or pencil.

To avoid these errors, get started early and use the Pre-Application Worksheet

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Understand Your Student Aid Report

by Chris Diehl

If you’ve never set eyes on a Student Aid Report (SAR) before, it can be a dizzying experience. What do all those acronyms and numbers mean? It all looks so official and important.

If you’ve recently submitted a Free Application for Federal Student Aid (FAFSA) you can expect to receive a SAR in return. And while the SAR is long on data, it is rather short on detailed explanation. Keep reading for a demystification of this sometimes inscrutable document.

When to Expect Your SAR
How you filed your FAFSA will affect how soon you get your SAR. If you filed electronically and chose to receive your SAR via email, you should receive your SAR within a few days.

The federal processor will send your SAR from the email address: cpsnotify@cpsemail.ed.gov. Consider adding this email address to your address book or email whitelist. Keep an eye on your bulk or junk mail folders after you submit your FAFSA in case the email with your SAR gets routed there.

If you’ve experienced previous problems receiving automatically generated emails, you may want to elect to receive the paper SAR instead of the electronic version.

If you filed a paper FAFSA, you should receive your SAR via postal mail in three to four weeks. If you haven’t received an SAR within four weeks of filing your FAFSA using either method, call the U.S. Department of Education help desk at: 1-800-4-FED-AID (1-800-433-3243).

What to Look For
Below our some of the items you might find on your SAR. Don’t worry if you’re a little fuzzy on some of the terms; there’s an explanation of each item below.
• Expected Family Contribution (EFC): Page 1, underneath the date near the top right of your SAR. The EFC is the amount the federal government believes that your family is able to contribute toward your college costs, based on the financial information provided. This is not necessarily the amount you will have to pay -more on that later.
• Verification: If there is an asterisk next to your EFC, it means that your SAR has been flagged for verification. You will also be informed of having been selected for verification in the SAR Acknowledgement letter, which will be included with your SAR documents.
• Data Release Number (DRN): Page 1, in the lower left-hand corner (upper-right corner of the electronic version). The DRN is a four-digit reference number.
• Loan Summary: Page 3, top half of the page. If you have any outstanding federal student loans, they will be listed on this page.
• FAFSA Changes: Pages 5 through 8. These pages give you a chance to correct any information that sent incorrectly the first time you filed your FAFSA.
• Pell Grant Eligibility: SAR Acknowledgement letter, near the bottom of the text.

Making Sense of It

Even if you have a handle on where these items are located on the SAR, it is still important to understand what they mean and why they’re useful:

Expected Family Contribution (EFC): Keep in mind that the Expected Family Contribution is not necessarily the amount your family will actually end up paying. Instead, the figure represents the amount the government believes your family is able to contribute, based on your family’s income, assets, number of college-age students and other factors.

The amount that you end up having to pay could be less than, more than or equal to your EFC. Why is this? The federal processor uses its own formula when calculating EFC, based on your financial situation. However, not all colleges use the government’s methodology when calculating EFC; many colleges use their own formula instead (often referred to as institutional methodology). The methodology your college uses may influence how your EFC is calculated, resulting in a final EFC that is different from the one posted on your SAR.

Verification: If your SAR has been selected for verification, it means that you may have to show additional financial documentation to your college in order to qualify for federal aid. The federal processor has many automatic triggers in place to flag data discrepancies for verification. Sometimes the processor finds a mistake or conflicting data; other times, it may flag an SAR with data that are not reflective of a “typical” family.

Verification doesn’t mean you have done anything wrong. It affects about 30 percent of all SARs and is a relatively routine request. You may have to fill out a Verification Worksheet, which you can obtain from your college’s financial aid office. In all likelihood, you will have to provide supporting documentation (e.g., tax returns, W-2, etc.). Because so much aid is distributed on a first-come, first-served basis, it is very important that this step be completed in a timely manner.

Data Release Number (DRN): You’ll need to reference this number if you want to make your SAR available to schools you did not include originally on your FAFSA. You’ll also need to have your DRN handy if you need to change your address.

Loan Summary: Review the loans listed and make sure they are correct. If you want to review your outstanding loans in greater detail, you can visit the National Student Loan Data System’s Web site. You will need the same PIN you used to sign your FAFSA to access your loan information. If you have no federal loans, then there is no need to review this section.

FAFSA Changes: It is important that you check over your information on the last few pages of the SAR to make sure it’s correct. Make any necessary changes as soon as possible. You can make changes to your processed FAFSA in the space provided, or you make changes online. Be sure to correct estimated information, if you are able to do so.

Note that the FAFSA is meant to be a “snapshot” of your situation when you originally signed it. Therefore, even if your financial or marital situation has changed since you originally signed the FAFSA, such information should not be changed when reviewing your SAR. Make sure that you (and your parent, if you are a dependent student) sign the corrections before submitting them back to the federal processor. To electronically sign a corrected FAFSA, you will need your PIN.

Pell Grant Eligibility: Don’t be surprised if you are not eligible-most students aren’t. This is a grant given to low-income families and it is very difficult to meet the standards required to receive one.

If you have any further questions about the SAR or if you don’t receive one in a timely manner, contact the U.S. Department of Education Help Desk at: 1-800-4-FED-AID (1-800-433-3243) as well as your college’s (or prospective college’s) financial aid office.

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