Financial Aid Answers - presented by eLearners.com : 09-10

Stimulus Plan Update

ter — Sun, 15 Feb 2009 20:07:00 GMT

Well, the Senate approved their version of the 2009 Stimulus Plan last Tuesday. Their version approved $838 billion dollars. Even though lawmakers tried to cut funding for Pell Grants, the Stimulus Plan was approved including a $14 billion increase in Pell Grants.

On Wednesday, House and Senate leaders struck at deal, after 24 hours of frenzied discussion, to agree on a trimmed $739 billion package. Everything I have read talks about tax breaks and bailouts. I've been having a tough time finding information about the proposed financial aid changes in the Plan. I found through a New Orleans Louisiana website that Congress approved a final Plan of $737 billion. However, no mention was given to financial aid results. I can tell you that nothing worthwhile has to come to my inbox at work, which makes it very frustrating to try and report on the Stimulus Plan status for financial aid purposes.

I found a news article from News.com that says President Obama is ready to hit the road to tout a nearly $790 billion dollar stimulus plan before he is expected to sign into law this coming week. However, the main focus in this article is the housing market. Does no one care about higher education?

Ah, I went to my trusty national financial aid adminstrators website to get the information I was looking for. The final bill covers the following:

Increase in Pell Grant to $5350 for 2009-10, and $5550 in 2010-12.
$200 million allocated for Federal Work Study.
$13.5 billion for a $2,500 education tax credit.
Computers as a qualified expense for 529 Savings Plan
No $2,000 Unsubsidized Stafford loan increase proposed by the House.
No increase in Perkins Loan as proposed by the Senate.

Over $507 billion, out of the nearly $790 billion, is being allocated for spending programs, but only about $17.2 billion is directly related to increasing financial aid for students through Pell Grant and Federal Work Study. Not much help.

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Mom or Dad Unwilling?

ter — Sun, 18 Jan 2009 23:34:00 GMT

Every year there I get a number of calls from students who say they must use parent information on the FAFSA, but their parent is unwilling to complete the form. In the past, there has not been an option for dependent students to complete the FAFSA without mom and/or dad's information. That has all changed for 2009-10. But are you really getting a better deal filing without their information?

Beginning with the 2009-10 FAFSA, a dependent student can complete the FAFSA without reporting parent information or using a parent PIN if the parent refuses to provide parent information. However, if the application is approved, the most you can receive is a federal Unsubsidized Stafford Loan of $3500, $4500 or $5500 as an undergraduate student, depending on class level. There is no consideration given for federal grants.

If you are a dependent student and file without parent information, your FAFSA will be rejected by the federal processor. You must contact your financial aid administrator to determine the next course of action. Federal regulations have been issued to financial aid personnel to gather required documentation. This can include:

A statement from your parent(s) stating their unwillingness to complete the FAFSA or support you financially in any manner;
Written evidence and/or documentation from a professional person (court, lawyer, school counselor, etc) that supports your claim that your parents are unwilling to help

As you can see, filing without parent information is not something you can arbitrarily decide upon. It's based on extenuating circumstances. Once your financial aid administrator has received the documentation, (s)he will make the final decision as to whether your FAFSA is valid without parent information. There are no appeals to the Department of Education.

If approved, the school will process your student loan. If denied, you will be instructed to correct the FAFSA by adding your parent information and PIN.

If you have extreme extenuating circumstances, such as abuse or abandonment, it's very important that you convey this information to your financial aid advisor before completing the FAFSA. Administrators do have the capability to make a dependent student independent based on professional judgment, but it's only for extreme circumstances.

My best advice is to try and get your parent information if you have to file as dependent. This way, you are considered for federal grants as well as student loans. If you're having difficulty getting parent information, you can always ask your financial aid professional to explain to your parent that it doesn't in any way make them financially responsible. The information is used solely for the purpose of determing financial aid eligibility.

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What is Packaging? Pt. 2

ter — Fri, 16 Jan 2009 00:57:00 GMT

Packaging begins with the school's Cost of Attendance minus Expected Family Contribution (EFC) minus Pell Grant eligibility minus any state aid. The remainder is your financial need for financial aid.

If you are receiving private scholarships, these will next be subtracted from your financial need. If there is need remaining, other forms of aid may be offered.

Campus Based Aid is Federal Work Study, Federal Perkins Loan, or Federal Supplemental Educational Opportunity Grant (SEOG). Each has very specific eligibility requirements, and I can attest that each is very underfunded by Congress. As a result, monies go very fast.

You are fortunate if you receive Campus Based Aid. If you do, the Campus Based Aid is subtracted from your financial need. If not, your next step is student loan. Some schools (like mine) automatically put a student loan in your financial aid package if you indicated interest in student loan on the FAFSA. Other schools may required you to request a student loan. Unfortunately, this is usually the last step in the packaging process because schools will always offer student loans last.

In summary, the following is considered financial aid assistance in determining your financial aid package:

Grant aid (Pell Grant, SEOG, state grant, etc.)
Scholarships
Net earnings from need-based employment (Federal Work Study)
Veterans benefits (excluding Chapter 30 benefits)
Employer tuition reimbursement
Tuitoin and fee waivers
Fellowship and assistantships
Educational benefits paid for college
Educational loans

So when is packaging complete? Packaging is complete when your financial aid advisor has exhausted all forms of financial aid eligibility. An award letter is then produced and probably sent to you via email. Pay close attention to whether you were offered a student loan. If not, and you're interested, contact your school. Also, contact your school if you're independent and interested in an additional Unsubsidized Stafford Loan, which may not be in the package initially.

Many students are told to call schools and bargain for financial aid. I believe this is highly worthwhile for private and independent schools, but if you are attending a public institution it's highly unlikely, and unfortunate, that the school can offer any other alternatives. Still, it never hurts to try!

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What is Packaging? Pt. 1

ter — Tue, 13 Jan 2009 12:36:00 GMT

Any long-term employee in just about any business is guilty of using acronyms and buzz words. The financial aid profession is notorious for using both. One buzz word you'll probably hear quite often is "packaging", or "package". You might hear, "we're working on your financial aid package". What does this mean?

After you file the FAFSA, the FAFSA information is sent to the schools you listed on your application. The school then uses that information to determine the best course of awarding financial aid using the Expected Family Contribution (EFC). The EFC is calculated by the Federal Processor, or basically the Department of Education. This indicator is the same for all schools you have chosen on the FAFSA. While it says Expected Family Contribution, it doesn't mean this is what you will be expected to pay--it's a guide to be used by schools.

Schools develop a cost of attendance each year. Depending on the school and your type of enrollment, a cost of attendance could include:

Tuition and fees
Room and board (not likely for online learners)
Books and supplies
Transportation (again, not likely for online learners)
Personal expenses
Loan fees
Disability related expenses

Each school listed on the FAFSA will use their Cost of Attendance to determine your educational expenses. Then, the school(s) will subtract the EFC to determine your financial need.

Pell Grant is the most common form of federal grant money, and is directly tied to the EFC rather than the financial need. The Department of Education issues guidelines mandated by Congress on how Pell Grant is to be distributed using the EFC. Schools have no discretion in changing eligibility unless changes are made or Professional Judgment is performed.

To bundle your financial aid, schools take their cost of attendance, minus EFC, minus Pell Grant (if eligible), to determine other financial aid eligibility. This is the packaging process. The school will then include any state aid for which you may qualify, and subtract this from your financial need. The remaining balance of you need can be met through scholarships, Campus Based Aid, or student loans.

We'll talk about other financial aid in Part 2.

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Assets: To Report or Not Report

ter — Thu, 08 Jan 2009 23:49:00 GMT

I mentioned in my previous post that asset information should be reported on the FAFSA. However, there are two cases where asset information is not required:

Simplified Needs Test: Combined family income is less than $50,000.
Automatic Zero Expected Family Contribution (EFC): Combined family income is less than $30,000.

In either case, asset information is not used. If you're not sure if you qualify for either of these, I encourage you to go ahead and complete asset information. If you qualify for either, the asset information will not be used even if it is reported on the FAFSA.

So, you have to report assets. What assets must be reported? Most common examples are:

Money markets
CDs
Stocks and bonds
Commodities
Trust funds
Real Estate
Sale of land of contract (asset of land)
Investment farm land
Business employing more than 100 employees

What's not to be reported?

Family home
Pensions and whole life insurance
Assets for Native Americans
Family-owned or small business that employs 100 or less employees
Farm on which the family lives

Every year we get questions about assets. There are some gray areas:

Trust funds. If the student (or parent, if dependent) is named in a trust fund, that asset must be reported even if you don't have access to the cash. The reasoning is that you can borrow against the trust fund. There is one caveat: if the trust fund is restricted by court order, the asset should not be reported.
Jointly shared CDs, money markets, stocks, and any other assets. It's common for a student's name to be on an asset with a parent or sibling. If this is the case, you need to calculate the percentage of the asset you own, and report only the percentage of the actual asset you own.
Contested ownership. If an asset is being contested (say, divorcing parents), the asset should not be listed. However, any part of an asset not being contested must be reported.

Remember, the FAFSA asks for net worth of invesments, business, and investment farms, which means the value of each after any debt is subtracted against the value. If there is a lien against any asset, you'll need to subtract the lien amount as well as the debt owed to get the net worth.

Hopefully this information will help you in completing the asset information section of the FAFSA.

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