“COLLEGE –
WHAT’S IT
ALL ABOUT?”
College Financial Planning Night
The Three-Step
College Plan
Find It.
Get Into It.
Pay for It.
LEARN ABOUT COLLEGE AND
https://studentaid.ed.gov/sites/default/files/my-future-my-way.pdf
“Tuition Setting – Rationale Behind Determining
Price”
by Howard and Matthew Greene 9/26/2011“…We believe that colleges
dramatically underestimate the level
of confusion and lack of knowledge
about college costs among families…”
WHY THIS PRESENTATION?
“The $50K club is getting crowded: 123
institutions now charge $50,000 or more for
tuition, fees, room, and board, according to
data released by the College Board. “
April 29, 1996
“…slowing since 1990, the total
cost of attending private colleges
and universities has grown
COLLEGE AFFORDABILITY
Why does college cost co much?
What about the college cost bubble?
“rising fees and increasing student debt, combined with shrinking financial
and educational returns are undermining at least the perception that university
is a good investment.”
FINANCIAL AID
PURPOSE AND PHILOSOPHY OF
FINANCIAL AID
What’s “Financial Aid” All About?
• Provide access to postsecondary education
• Allow students a choice of educational programs and
schools
• Provide initial and continuing financial support to assist
eligible students in completing their educational goals
PURPOSE AND PHILOSOPHY OF
FINANCIAL AID
Funding a College Education –
Who’s Responsible?
• Primary responsibility for meeting the postsecondary
educational expenses of a student lies with the student and
their parents
• Parents will contribute to the student’s educational
expenses to the degree that they are able
• The family’s financial circumstances should be evaluated in
a consistent, fair and equitable manner, while recognizing
that special circumstances may impact a family’s ability to
contribute toward educational expenses
UNDERSTANDING COLLEGE
FINANCIAL AID
• What is Financial Aid?
• Determining the Cost of Higher Education
• Understanding Need Analysis
• Sources of Financial Aid
• How to Apply for Financial Aid
What is Financial Aid?
• Scholarships
• Grants
• Loans
Two Categories of Aid
•Merit-based
•Need-based
Determining
Eligibility
for
Financial Aid
Cost of Attendance
- Expected Family Contribution
= Student’s Financial Need
DEFINITION OF NEED
(variable)
(constant) (variable)
Cost of - Expected Family = Need
Attendance Contribution
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
College A
College B
College C
C
os
t
of
A
tt
e
nd
a
nc
e
EFC
EFC
EFC
NEED
NEED
NEED
DEFINITION OF NEED
Cost of Attendance - Expected Family Contribution (EFC) = Need
(variable)
(constant)
(variable)
Need Varies with College Costs
Cost
Family expected to pay
Financial need
Cost
Family expected to pay
Financial need
$23,000
$12,000
$11,000
$41,000
$12,000
$29,000
College A
College B
Cost of Attendance
• Books and Supplies
• Transportation
• Miscellaneous
Expenses
DIRECT
Expenses
INDIRECT
Expenses
•Tuition and Fees
•Room and Board
Need Analysis
Evaluation of family’s financial circumstances to
determine family’s ability to contribute toward the
student’s educational expenses
Need Analysis Forms
• Free Application for Federal
Student Aid (FAFSA)
NEED ANALYSIS
FORMULAS
Federal
Methodology (FM)
Eligibility for Federal/State Financial Aid
Institutional
Methodology (IM)
Understanding the
Formulas
Federal
and
Institutional
Methodologies
Differ in both Theory and Calculations
Federal Methodology
–
2015-16
Parent’s Income
Taxable + Untaxed Income and Benefits - Taxes/FICA - Employment Allowance - Income Protection Allowance (IPA) ______________________ = Available IncomeParent’s Assets
Cash, Savings, & Checking Accounts Investments + Other Real Estate Equity (Exception: No Home Equity)
Business/Farm Net Worth
- Education Savings and Asset Protection Allowance (by age)
_________________________________ = Discretionary Net Worth
x 12% Conversion Rate
_________________________________ = Contribution from Assets
Student’s Income &
Assets
Taxable+ Untaxed Income - Taxes/FICA
- Income Protection Allowance ($6,310)
________________________ = Available Income x 50%
= Contribution from Income
+
Student’s Assets x
20%
_________________________ = Contribution from Assets =
Student’s
Contribution
Adjusted Available Incomex AAI Taxation Rate (max 47%) ____________________ = Total Contribution Children in College ____________________ =
Parents’ Contribution
= Expected Family
Contribution (EFC)
Institutional Methodology
- 2015-16
Parent’s Income
Taxable + Untaxed Income and Benefits- Taxes/FICA
- Med/Dental Expenses - Employment Allowance - Annual Education
Savings Allowance (AESA)
- Income Protection Allowance (IPA)
_______________________ = Available Income
x PC Taxation Rate (max 46%) _______________________ = Parents’ Contribution
from Income
Parent’s Assets
Cash, Savings, & Checking Accounts
Home Equity
Investments + Other Real Estate Equity Business/Farm Equity
Assets in Siblings’ Names
- Asset Protection Allowances: Emergency Reserve Allowance Cumulative Education Savings Allowance (CESA)
Low Income Asset Allowance _________________________________ = Discretionary Net Worth
x Asset Conversion Rate
________________________________ = Parents’ Contribution from Assets
Student’s Income &
Assets
Taxable+ Untaxed Income - Taxes/FICA ________________________ = Available Income x [formula] or min. $1,800 <=Contribution Cap ________________________ = Contribution from Income
+
Student’s Assets x
25%
_________________________ = Contribution from Assets
=
Student’s
Contribution
x
# in College Adjustment
=
Parents’ Contribution
for Student
= Expected Family
Contribution (EFC)
DEFINITION OF NEED
Cost of Attendance
-
Expected Family Contribution
