COLLEGE WHAT S IT ALL ABOUT?

Transcription

1 COLLEGE WHAT S IT ALL ABOUT? College Financial Planning Night Ellington Middle School March 31, 2015

2 The Three-Step College Plan Find It. Get Into It. Pay for It.

3 On A Lighter Note

4 THE IMPORTANCE OF COLLEGE?

5 THE VALUE OF A COLLEGE EDUCATION

6 $ BENEFITS OF A COLLEGE EDUCATION

7 LEARN ABOUT COLLEGE AND COLLEGE FINANCING

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9 Middle School Is Not Too Early

10 WHY THIS PRESENTATION? 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

11 WHY THIS PRESENTATION?

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13 COLLEGE COSTS = $$$$ April 29, 1996 slowing since 1990, the total cost of attending private colleges and universities has grown 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.

14 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.

15 HOW AMERICANS PAY FOR COLLEGE

16 THERE IS A WAY TO PAY FOR COLLEGE FINANCIAL AID

17 HOW FINANCIAL AID WORKS

18 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

19 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

20 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 How Financial Aid Award Decisions are Made

21 What is Financial Aid? Scholarships Grants Loans Employment Opportunities

22 Two Categories of Aid Need-based Merit-based TUITION DISCOUNTING

23 DEFINITION OF NEED Determining Eligibility for Financial Aid Cost of Attendance - Expected Family Contribution = Student s Financial Need

24 DEFINITION OF NEED Cost of - Expected Family = Need Attendance Contribution (variable) (constant) (variable)

25 DEFINITION OF NEED Cost of Attendance - Expected Family Contribution (EFC) = Need (variable) (constant) (variable) $40,000 $35,000 Cost of Attendance $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 NEED NEED NEED EFC EFC EFC College A College B College C

26 Need Varies with College Costs College A Cost Family expected to pay Financial need $41,000 $12,000 $29,000 College B Cost Family expected to pay Financial need $23,000 $12,000 $11,000

27 Cost of Attendance Tuition and Fees Room and Board DIRECT Expenses Books and Supplies Transportation Miscellaneous Expenses INDIRECT Expenses

28 Need Analysis Evaluation of family s financial circumstances to determine family s ability to contribute toward the student s educational expenses = the Expected Family Contribution

29 Need Analysis Forms Free Application for Federal Student Aid (FAFSA) CSS/ Financial Aid PROFILE

30 NEED ANALYSIS FORMULAS Federal Methodology (FM) Eligibility for Federal/State Financial Aid Institutional Methodology (IM) Eligibility for College/University Financial Aid

31 Understanding the Formulas Federal and Institutional Methodologies Differ in both Theory and Calculations

32 Federal Methodology Parent s Income Taxable + Untaxed Income and Benefits - Taxes/FICA - Employment Allowance - Income Protection Allowance (IPA) = Available Income Adjusted Available Income x AAI Taxation Rate (max 47%) = Total Contribution Children in College = Parents Contribution Parent 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 = Expected Family Contribution (EFC)

33 Institutional Methodology 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 x # in College Adjustment = Parents Contribution for Student = Expected Family Contribution (EFC) = Student s Contribution

34 DEFINITION OF NEED Cost of Attendance - Expected Family Contribution = Financial Need

35 Need Equals Eligibility For Aid Need = Eligibility

36 Every postsecondary institution MUST post a net price calculator on its website that uses institutional data to provide estimated net price information to current and prospective students and their families based on a student s individual circumstances

37 PRIMARY SOURCES OF FINANCIAL AID Federal Government State Governments Postsecondary Institutions Private Organizations

38 STUDENT LOANS FEDERAL DIRECT LOANS FEDERAL STAFFORD STUDENT LOANS FEDERAL PLUS LOANS (PLUS) PARENT LOAN FOR UNDERGRADUATE STUDENTS CHESLA LOAN Connecticut Higher Education Supplemental Loan Authority (CHESLA) PRIVATE LOANS

39 ABC s of Loans! ALWAYS BORROW CONSERVATIVELY NEVER BORROW MORE THAN YOU NEED ALWAYS CHECK OTHER FINANCIAL AID AVAILABLE TO YOU BEFORE YOU BORROW BORROWING WILL IMPACT STUDENT S FUTURE LIFESTYLE BECAUSE LOANS MUST BE REPAID LOANS SHOULD BE CONSIDERED FINANCIAL AID OF LAST RESORT

40 STUDENT DEBT BURDEN

41 WHAT DO I DO? WHERE DO I START?

42 Admissions Consultants Financial Aid Consultants

43 APPLICATION PROCEDURES APPLICATION FOR ADMISSION SEPARATE INSTITUTIONAL APPLICATION FOR FINANCIAL AID NEED ANALYSIS FORM(S)-FAFSA and PROFILE STUDENT AID REPORT OTHER INFORMATION AS REQUESTED (IRS TAX RETURNS/TAX RETURN TRANSCRIPT ) DEADLINES!

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45 It s Never Too Early To Start Saving For College

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47 FEDERAL TAX ISSUES Go to: Publication 970 Tax Benefits for Education American Opportunity Tax Credit Lifetime Learning Tax Credit Tuition and Student Loan Interest Deductions Coverdell Education Savings Accounts (Education IRA s) IRS 529 College Savings Plans (QTP s)

48 COLLEGE FINANCIAL PLANNING CONSUMERISM ASK? s How do you treat outside scholarships? Do you meet full need? Do you have a financial aid appeals process?

49 REMEMBER: There is always HOPE!

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51 THANK YOU AND BEST OF LUCK!

52 Contact Information: Frank R. A. Resnick

53 PRINCIPLES OF NEED ANALYSIS Goal: a snapshot of family resources = a reasonable family contribution Philosophy: Paying for college is a partnership First responsibility of student and family Financial Aid is a supplement to family resources Family Responsibility: Need analysis measures ability to pay not willingness to pay Equity: Fairness in need analysis Horizontal Equity consistent treatment of people in similar circumstances Vertical Equity appropriately different treatment of people in different circumstances

54 STUDENT FINANCIAL AID WEBSITES Financial Aid Information Guide The College Board Scholarship Search Services USDE Student Financial Assistance Connecticut Office of Higher Ed IRS 529 College Savings Plans Student Loans