Tuesday, February 25, 2014

Deciphering Your FinAid Offers-CAVEAT EMPTOR!

Students will be receiving their financial aid packages soon from schools to which they submitted a FAFSA (and possibly the CSS Profile, depending on the school's requirements). Comparing the dollar value of your package requires a close examination and comparison of several factors.

Cost of Attendance (COA): this number is what it will cost including tuition, room, board, transportation, books and miscellaneous student fees for one year.
EFC: this is the amount your family will be expected to contribute based on the FAFSA figure calculated from your family income and assets.
Pell Grant: a federal grant to extremely low income families. It is a grant and need not be payed back.
Institutional grant: Money from the college's coffers that need not be repaid. It is not a scholarship, which is based on other factors, like merit or athletic talent.
Work/Study: a federal program that requires students to work on-campus for the college and payments are typically sent directly to a student's account to fulfill a component of the package.
Federal Student Loans: Provided by the Federal government to the student, these loans are available to everyone who files a FAFSA, even if they do not qualify for aid.  Currently both subsidized for students with demonstrated need and unsubsidized loans for students with no demonstrated need carry an interest rate of 3.86% when disbursed between 7/1/13 and 7/1/14. There are maximum and yearly limits. A good source of info is available here: Federal Student Aid

PLUS Loans: These loans are also provided by the Federal Government but are made to parents, not the student. They are also available to students in graduate school. The current interest rate is 6.41% and there are also maximums and limits. Parents must also have a good credit rating as these loans consider credit history when evaluating applications, unlike loans made to students which do not consider credit history.
Perkins Loans: These are for students with significant financial need only. These loans are made by the institution, not the federal government. The interest rate is currently 5%.
Scholarships: This money, which need not be repaid, is made from the school's coffers and standards are different at every school. Some schools require students maintain a certain GPA, or expect participation in an activity. The NCAA oversees the requirements and rules for athletic scholarships. Many schools will offer merit scholarships to attract the best students and those with test scores and GPAs above the typical admitted student's. Merit money can make attending a certain school a more attractive choice.
State Aid: Some states offer loans or scholarships for students and require attendance within their home state. For New York State residents, more info is here: NYS Higher Ed Services Corp

While many expect that public colleges and universities will be cheaper than privates, if there is significant demonstrated need as evidenced by FAFSA and CSS, a student may find a private a better deal. Why? Private schools with more competitive admissions often have large endowments from which they draw money for grants for students with need. This money which does not have to be repaid can replace loans in an aid packages and often allow students to graduate with no debt. Unfortunately the list of schools that can meet all need without loans is shrinking every year. That list is here: Princeton, Davidson, Amherst, Harvard, Pomona, Swarthmore, Haverford, University of Pennsylvania, Bowdoin, Stanford, Wellesley, Columbia, Claremont McKenna and Vanderbilt.
Williams, Dartmouth, Yale, Cornell, MIT and Carleton have recently modified their no loans policy to include modest loans in packages for students with household incomes over $75k or so.

In order to compare the real cost of attendance including debt incurred, be sure to consider the money you may have to borrow to meet the cost of attendance. While your aid package may show a number that matches the COA, be sure to read closely how much of the package is student loans, PLUS loans and private loans which can be very costly and should be a last resort. Incurring debt over what a student might expect to make his or her first year out of college can be a costly mistake so borrow judiciously. Student loans are not dismissed in bankruptcy either. Be wary of private education loans too as many begin accruing interest when they are disbursed, not upon graduation. And lastly, if your package is not generous enough to attend but a small increase would make it so, call the financial aid office and ask if you can discuss the package. Many schools will find the additional dollars to make up for a shortfall, especially if you call as soon as you are admitted. Do this earlier rather than later as most schools have finite resources for financial aid and you want to appeal before they exhaust their budgeted amount. Any questions? Drop me a note at athenaadvisors@optimum.net.