Financial Aid 101

This webinar provide information and clarity on the entire college financial aid application process. Learn about financial aid applications and types of financial aid, the factors that determine your aid eligibility, how colleges determine the amount of aid to offer, and the details of financial aid offers. 

Download the webinar slides to follow along.

Transcript

 Hello, my name is Julie Shields-Rutyna, and I'm the Director of College Planning, Education, and Training at MEFA. Let's talk all about financial aid. First, a few words about MEFA. If you don't know us, well, MEFA has been around since 1982, and we have the mission of helping families plan, save, and pay for college.

And we have the state's savings plans. We have low-cost loans for families if families need that type of financing to pay for college. And we also have free guidance for families at whatever age and stage their students are at throughout the whole process from the time a child was a baby, to middle school, high school, and right into college.

Today, we're going to talk about financial aid, and we're going to talk about the types and sources of financial aid, the application process, how financial aid decisions are made, paying for college, and throughout, we're going to talk about all the free resources that are available to you.

So let's answer the question. What is financial aid? So financial aid is any money that will help your student pay for college. We can categorize it into three categories, however. And the three main types are grants and scholarships. That's gift aid that is given to the student and the student does not need to repay. So that is the best type of financial aid.

But also, there are two other types. There's Federal Work Study, and that's a federal program where students can get a job while they're a student. It makes the availability of many jobs on college campuses available to students. And then the student gets paid, gets a paycheck every week, every two weeks, and usually uses that money to pay for miscellaneous expenses throughout the academic year.

So that's not something that you receive upfront to pay the bill, but it certainly makes it available to pay all of those incidental costs that happen while the student is enrolled. And lastly, federal student loans, and federal student loans are a very particular type of loan, and that's why they are also considered financial aid.

So here is some more information about the federal student loans and why they are different than most other loans that we know about. Number one, the student is the sole borrower and there is no credit check done. So student doesn't need a cosign or anything like that. The student is the borrower.

And these loans also have two parts, a subsidized portion and an unsubsidized portion. And the subsidized portion means that the federal government pays the interest on that portion while the student is enrolled. Unsubsidized means that the federal government does not pay the interest on that one while the student is enrolled.

But other than that, it's the same thing. Federal student loans usually have low fixed interest rates. Currently, the interest rate is 5.49%. And that's the fixed interest rate for the academic year 23-24. It usually changes every year around July 1st. One thing that's really special about these loans is all of the options the student will have when it comes time to repay.

So, no payments are due when the student is enrolled. But then they will have choices. If the student borrowed all of the federal loans that they are eligible for while a student, they would graduate with about $27,000 worth of federal student loans. So you can see the annual loan limits on the screen.

As a freshman, a student can take $5,500. As a sophomore, a student can take $6,500. And as a junior, or senior, they can take $7,500. So that totals $27,000. And if the student decided upon graduation that they would, they were going to choose the standard repayment plan, that would mean that their monthly payment after graduation would be about $300 a month for 10 years.

But there are many other options for students. So a student who is going to take a job that they need for their career but may not allow them to make that payment or maybe they have to move somewhere and live and their housing is going to be too expensive to allow them to make that payment on the standard plan.

They can choose one of the income-based repayment plans, and there are a number of them. And the newest of those is called the SAVE plan, and that allows a student to tie the payment to their income and pay a lot less. So at the time when the student is getting ready for repayment, they should take all of that into consideration and make a good choice that makes sense for them. Additionally, these loans have some other benefits too, like deferment, forbearance, and forgiveness opportunities.

Now, where does all this financial aid come from? Well, it comes from these sources. A lot comes from the federal government. Some comes from the state, and in this case, the state of Massachusetts, and the colleges and universities themselves have a lot of aid that they award to students. So you can see that big number at the bottom of the screen, 174 billion dollars is the total amount awarded to students in the 21-22 academic year.

So that's a lot of money. So students should definitely apply for financial aid to have access to all of that. Now, when a student goes through the financial aid process that I'm going to talk with you about in a minute, they are applying for all aid from the federal government, the state and the colleges and universities themselves.

The one type of process and aid that's a little bit different and that they do on the side on their own is there are other private scholarships out there, maybe through the student's high school, maybe through a parent's employer, or maybe through an online search for a large national scholarship. So that's the one piece that students do separate from the financial aid process.

And you can see on the screen, we list a couple of online searches. At mefapathway.org or at fastweb.com, they can use those sites to put in information about themselves and see if there are some private scholarships they can apply to. Also, check with your school counselor to see about the high school scholarships that are available or the town scholarships that are available.

And financial aid is awarded based on two criteria and sometimes a combination. But the first would be merit based aid. And what is that? Merit-based aid is awarded in recognition of a student's achievements, mostly academic, but also athletic, artistic. Sometimes we hear about sports scholarships. We know people who have received those and that's great. Wonderful. And that's a merit-based scholarship or grant.

But the truth is that most students when they're receiving merit-based aid, it's usually for academic achievements. That's where the largest amount of that money comes from. And it's just good to know if you receive a merit-based award, you want to check with the college to see if that will be renewable, or if there are any special requirements tied to that merit-based award.

For example, it might let you know in your award documents that a student needs to keep a 3.0 grade point average to be able to keep that merit scholarship or something like that. So check with the individual colleges to make sure you know all of what's needed to keep those merit awards.

Most of the time, your regular financial aid application will be enough to put you in line for the merit based scholarships and your admissions application, I should say. But definitely look on the college website to make sure that there's not some other form you need to complete. And application deadlines for these things can be as early as November in the student's senior year.

And then the other criteria is need-based aid. And need-based aid is awarded based on a family's financial aid eligibility. So that's determined by a standard formula. And that includes, you know, the aid that is need-based, includes grants, loans, and work study, and most financial aid is actually need-based. Be aware, though, students do need to be making satisfactory academic progress at a college to receive that.

So let's talk about the application process. So here's the timeline. When a student is a senior in high school, they're really getting ready to think about what colleges they're going to apply to. So you're on those admissions websites, then you're making note of deadlines and what's needed for each step, each application. Also make note of what the financial aid deadlines are and what's needed for the financial aid application. Those deadlines are usually close to the admissions deadlines, but sometimes not exactly.

They could be a week later, two weeks later, something like that. So, it's very important to meet all deadlines. MEFA has what's called a College Application Manager on our website that you can download if you want to use that to stay organized. Or you could just create a spreadsheet of your own where you keep track of the colleges you want to apply to and the admissions deadlines, the financial aid deadlines, and all of the materials that are needed for each.

So the main financial aid application form is called the FAFSA. It's the Free Application for Federal Student Aid, and it's required by all colleges to be able to receive any federal financial aid. And so most colleges use that as the main financial aid application. And you must complete the FAFSA every year.

It's an online form. There is a paper version, but it's so much easier online. You go to fafsa.gov. Normally it's available October 1st of students senior year. But this year there have been a number of changes being made to the FAFSA and the systems. And so because of all of that change, it's taking longer for the federal government to be all set and ready.

And so the FAFSA is not going to be available until December this year. We don't have an exact date, but it will be available in December. However, there are some things you can do in advance, and I highly advise that. So, in order to complete the FAFSA, you need what's called an FSA ID. And that is a username and password.

And you need that for everyone whose information is going to be on the FAFSA. So that's something that you could do now as a student and a parent. You need an email address to be able to set that up. So you can do that now, anytime, and that will make it nice and easy when the FAFSA is available for you to go right in and complete the form.

Now, in more detail, who needs an FSA ID? The student, always. The student's spouse, if the student is married and filed taxes separately or didn't file, every parent who's listed on the FAFSA, except if the parents filed jointly, only one parent needs an FSA ID. And another term you might start to hear is contributor.

That's anyone whose information appears on the FAFSA. And the best way to complete the FAFSA with this new FAFSA that's coming out in December, is that the student should start and then invite their contributors, and then the contributors, parents mostly, will then complete their section of the FAFSA. And so then the last contributor to submit information can then submit the FAFSA.

One thing to note also is that you need to do that all within 45 days. So if a student starts a FAFSA, make sure it all moves along so that the form, you won't have to restart. I will also advise that you attend our Understanding the FAFSA webinar on the MEFA website. You can find that, and that's going to be on December 4th.

What's reported on the FAFSA? Well, some general information, student citizenship status, non-citizen parents will be able to complete this form, and there will be further guidance coming from Federal Student Aid before the FAFSA is available. You put the colleges where the student is applying. Each one will receive your FAFSA. And then parent information, such as are parents married, including same sex parents, include both, all parents who live together married or not.

Divorced or separated parents, the way that works is it's the parent who provides more financial support that needs to put information on the FAFSA, and if that person is remarried, that current spouse also puts information on the FAFSA. If parents provide perfectly equal support, then you should use the parent with the greater income and assets on the FAFSA. As you go through the FAFSA, there's a section that's called Who's My Parent Wizard that will help you figure that out. One thing to note though is that legal guardians are not a parent.

It will also collect the number in your household. That information is going to come directly from the IRS, but as a family, you can update that. And it will also ask you the number of children in college, but that won't factor into the calculation beginning this year.

And then some financial information will be on the FAFSA. What they're going to want is your, if you're applying for the FAFSA this year, for the 24-25 academic year, then they're going to be asking about your 2022 income tax return. So the way it works, and this makes it nice and easy, is that when you go to complete the FAFSA, you provide consent to have your federal tax data pulled in from the IRS.

And once you do that, that means you complete very few income questions, if any, on the form. So, both taxed and untaxed income that appears on your tax return will come right over into the FAFSA. And then assets. You'll also want to put in assets if asked. Some families won't have to complete assets. But if you're asked about them, you want to include the value of savings, checking, investments, and all businesses and farms and other property.

You also want to include your 529 accounts, but only those for the student whose FAFSA you're completing. And those will be counted as parent assets, which is very good because they're treated in a very lenient way. Do not include any value of your primary home or your retirement accounts, life insurance, or 529 accounts for other children. Do not include those on the FAFSA. And debt is not reported except for any debt on reported assets.

And then, while I mentioned that all colleges will require the FAFSA, some colleges require an additional form called the CSS Profile, and those are mostly private colleges and colleges that have a fair amount of scholarship and grant dollars to award to their students.

So because they want to be as accurate as possible with making those awards, they sometimes need a little more information than is asked about or reported on the FAFSA. So if the college that you're applying to requires the CSS Profile, then you need to complete that form, and you can find that information on the college website, or you can go to the College Board website and go to the CSS Profile participating institutions list, and you'll be able to find out if your college needs the CSS Profile. And if so, then you need to complete that. That is going to be available October 1st. So it would be a great idea to complete this form in October if you can, and then you'd be ahead of all of the financial aid deadlines.

It's important to note that it does cost a fee. $25 for the first college that you send this information to and $16 for each additional college. However, if your family income is $100,000 or less, or you meet other criteria, you can waive the cost of the CSS Profile. With the CSS Profile, sometimes a college will ask for the other parent if in a divorced or separated situation, they will ask for the other parent to also complete a profile so that they just have a wide range of information for the student as they're making a determination for a financial aid offer.

MEFA also has a What to Know About the CSS Profile webinar, so always, you can always go to mefa.org/events to look into any of the other webinars that MEFA holds. And once in a while, a college will have their own financial aid application, so it's a good idea when you're looking at the websites just to make sure you don't miss that if there is one available.

Then what happens after you apply? The colleges and the state receive your data electronically. And then the student will receive a FAFSA submission summary, an FSS, by mail. So also be aware that colleges may request mandatory federal verification documents. So there might be some back and forth as the colleges are reviewing your data, and they may ask you some questions.

And if they do, just make sure you stay on top of that and get what's needed to the financial aid office. And then the colleges will go through all of that material and make a financial aid offer based on the information. Know that this year, with the odd timing of the FAFSA not being available until December, if a student applies to one of the early application programs, like Early Decision or Early Action, that some schools may release some estimated awards ahead of time, and some may hold off and wait until the FAFSA is in.

So make sure you also talk to the colleges this year about each school's timing and when they will be, you know, giving their financial aid offers and when they will be complete. Because you might want to wait, you might get a merit award at first and you have to wait a little bit further for your federal financial aid. So you want to know when you have your complete award.

But what's key to know is you will not have to commit to a college without a financial aid offer in hand. And I mentioned that there's a process called verification. So colleges do need to verify a certain number of applications. So just be aware of this and know that it's just part of the process. If a college reaches out to you and asks for a tax return transcript, a verification worksheet, asset account statements, make sure you follow up on any requests like that.

And the financial aid office, once you've applied to a college and applied for financial aid, the financial aid office becomes a great resource for you. So you can ask them questions about financial aid renewability criteria. You can ask how a private outside scholarship will affect your financial aid.

Also, if you have changing family circumstances from the time you first complete your FAFSA until the time you are accepting the offer or attending college. If things have changed in your financial situation, you should always call the financial aid office and let them know of any changes so that they can also look at your financial aid offer and make sure that it's the best that they can do.

And if you want to appeal, you can find out how to do that with the financial aid office. Financial aid offices will have different ways they want to be in touch with you. Some you can call, you can email, sometimes they have a chat feature. So on the college website, it should tell you the best way to get in touch with the financial aid office.

So once you've done your part, which will feel really great when you get these financial aid forms completed, then let's talk a little bit about how the college determines a financial aid offer for a student. The first thing they do is they have to come up with what's called the cost of attendance. And that's the amount that it's going to cost the student to attend the college for a year. And so, as you can see, there are a lot of elements to that cost tuition and fees, food and housing if they're on campus, books and supplies, transportation and personal expenses. So, while some of these expenses will be billed to you as a family, some may not. But they are definitely expenses that the student will have during the academic year.

So it's important to note that the cost of attendance is all of that. And then from the information that you will put on the financial aid forms, the FAFSA and potentially the CSS Profile as well, but from the FAFSA, there's a number that's going to be calculated, and it's called the Student Aid Index.

It used to be called the Expected Family Contribution, or EFC, but with the new FAFSA this year, it will be called the Student Aid Index, and that's the same federal formula used for each family, and then the colleges that use the CSS Profile will do their own institutional calculation. So just know that that number then affects how much financial aid you'll be eligible for because they'll take the cost of attendance, subtract the student aid index, and that will be your financial aid eligibility.

So, I'm going to take you through a quick exercise, and we're going to pretend that I am a financial aid administrator putting together a financial aid offer for your student. So in this example, the college cost $45,000, and your student aid index is $5,000. So as a college administrator, I'm going to try to come up with a financial aid offer for you, the student, that's close to $45,000.

So first, I'm going to say, well, your student aid index is $5,000, but I'm going to award a grant of $17,500 and a scholarship of $10,000, a student loan, the maximum student loan for a freshman of $5,500, and a work study allotment of $2,000. But that's all that I have in my budget for you, the student. So there is going to be some unmet need that I'm not able to cover with the financial aid offer.

So some colleges promise to meet the full unmet need of all students. And those colleges will tell you that right in the front on their website, on the financial aid page, because that's really terrific. But nationwide I think there are at this point only about 50 or 60 colleges that make that promise for all students to have their full need met.

Most other colleges do a good job of trying to get as close to meeting the full need for students. But again, as you see in this example, sometimes they can't. But what does this mean in this situation? In this example, it means that you as the family would need to come up with your $5,000 Student Aid Index and $5,000 of unmet need to make sure that your student had enough money, the $45,000, to be able to attend this college for the year. So that's how that works.

And I'll also share that a nice tool that colleges have on their financial aid websites is called a net price calculator, and this is especially helpful for families who may be, maybe even have a sophomore or junior and want to start looking at costs, because you can always type your financial information into a net price calculator at a college and then receive an estimated amount of financial aid that you might be able to receive as a family.

Again, it's an estimate, it's based on what you put into those, but it's just a good way to begin planning and understand different availability of aid from one college to another. So again, on any college website, if you type in net price calculator, that's where you would find that. So then after your student has applied and applied for financial aid and begins receiving admissions acceptances and financial aid offers, as a family, you'll probably find yourself sitting down at your kitchen table at some point with a lot of offers in front of you.

And this is a critical time because you want to compare your financial aid offers from the different colleges, because you definitely have to factor in the finances when you're helping your student choose a college. So, in this example, all three of these colleges have a cost of attendance of $45,000 to make it simple, and you have that Student Aid Index of $5,000.

So as a family, in this example, your eligibility for financial aid is $40,000, and you have awards from, you have financial aid offers from three colleges in front of you, College A, College B, and College C. So what did College A give you? They gave you a grant and a scholarship, some student loans ,work study, and that totals $40,000.

So College A met your full need as a family. College B also gave you grants and scholarships, student loans, work study, but a smaller scholarship of just $25,500. So they, the total of that offer is $33,000. So that leaves unmet need of $7,000. And College C gave an even smaller grant award. So leaving unmet need of $15,000.

So this is important because you want to be comparing apples to apples and you want to see what you are going to owe as a family and if that's doable. If it isn't, you could always go back to the first choice college and ask if there's anything else that you could share with them. Because it is your student's first choice, you know, you can ask those questions.

And if not, you might want to then be in touch with the second choice, the third choice college. So the student can really make sure that wow, it's more affordable and am I still going to be able to get the education that I want in the setting that I want? So this is the time where you really have to do some hard thinking about all of the criteria in making that college choice.

And another note, just to pay attention to when I said comparing apples to apples, pay attention to the different elements in the financial aid offers because they can vary. So in this example, you're seeing three colleges, and if you look at the total aid offer, it looks like they each gave you $35,000. But they didn't.

If you look more closely, you'll see that two of the colleges put something called a parent loan in that aid offer. That is not financial aid. And I probably don't have to tell you that, but that's something that's available to you if you would like to choose to do it, take a parent loan. But that should not be in the aid offer, that should be separated out.

Because you want to compare apples to apples here. Secondly, a couple of the colleges here gave a work study offer, which can be really great for students to have that job on campus to be able to, you know, pay for incidentals and one college didn't, maybe you want to go back to that college and see if there's a possibility of a work study offer. So just pay very close attention.

And I will also mention that MEFA has a College Cost Calculator online that helps you compare apples to apples. So take a look at that if you'd like some help with that when the time comes. And then paying for college. So let's say the student has decided on a college.

They have their first choice. You as a family have talked about it and you think you can afford it. But you've done these calculations and it appears that you have a balance due of $20,000. How are you going to pay that? How do families pay that? So I'm going to just show one example of how one family may choose to come up with that $20,000.

And I'll also share that I work with ten of thousands of families each year. Every family does this a little bit differently, but most families that, especially those that have multiple children that they're sending to college, usually piece this together in a variety of different ways each year.

So this one family in the example is going to look at past income. Do they have any savings they can put to this amount? And this family does, the student has had jobs over the last couple of summers and the student has $1,000 of savings to put toward college. And the parent in this example has a 529 account for this student.

So they're going to decide to use $4,000 of that to pay for college this year. And then out of present income. This family, maybe, but I always like to use this example, maybe they just finished a car payment and they have no more car payment on one of the cars in the family. So they have an extra $500 in their budget per month.

And so this family is going to say, I'm going to join the monthly payment plan at the college and I'm going to pay $500 for 10 months. And that's what I'm going to choose to do. Every college has a monthly payment plan where you can choose to spread out the cost and it's not a loan. Sometimes it costs a fee, but that allows you to pay a little bit as you go.

And lastly, this family says, well, we still don't have enough. We're going to borrow an education loan of $10,000. And that's how this family is going to come up with the $20,000. I'll say, what is this loan? This loan is above over and above the federal student loans that you saw in the aid offer. So this would be a loan that is either in the parent's name, like the federal parent plus loan, or it could be a loan that is in the student and the parent's name, like a MEFA Loan.

Or it could be a loan that the student takes, and the parent is a cosigner. And they're, you know, maybe your bank has a loan like that, or the college recommends some other lenders that have loans like that. So you would want to research and take the best loan for you and your family. And that's what this is.

So this again is a time for important kitchen table conversations. So make sure you know what the cost is to you for all of these different colleges where your student has been admitted. Also, a good question is, could your students start at a community college and save significant money? Because that is definitely true.

And I'm going to talk about a program called MassTransfer here in Massachusetts. You want to consider the number of students that you're going to be sending to college, so that has to factor in, and students should really think about, do they have an idea of what program they're going to go through, do they have an idea of what their career might be, what their job might be. Many won't.

But if a student does, then that's something to factor in as well. Is the student thinking, I'm going to need to go to graduate school, then I want to factor that in when I'm thinking about how much debt I might owe. Take off and one thing also, as you saw the family put together that plan for the year, but it's good to think about for two years or four years or however long the program is.

And this is just to show you that Massachusetts state aid is available, and students access that by completing the FAFSA. So just know that, and the first time a student completes the FAFSA you'll receive an email from The Office of Student Financial Assistance in Massachusetts, and you can log into the MassAid portal and create an account so you can keep on top of your Massachusetts financial aid.

And two programs I want you to be aware of. One is called MassTransfer, and that's the program here in Massachusetts where a student can start at a community college and then transfer to a four year institution. And it can be much more affordable because there are benefits like guaranteed credit transfer, tuition credits, freezes on tuition.

So, look into mass.edu/masstransfer to just research that program. And another one called Tuition Break from the New England Board of Higher Education. And that's if a student wants to go to certain programs at public institutions in other New England States, makes the student eligible for being able to pay in-state Massachusetts tuition at that out of state school.

So there is a long list of programs that you can review, and if the student is interested in any of those, then Tuition Break might be a program to take advantage of. Lastly, a few free resources. There's something in Massachusetts called FAFSA Day. So if you need free assistance completing the FAFSA, FAFSA Day will hold events once the FAFSA is available in December, and you can sign up for those events and talk to an expert and get help completing the FAFSA.

Also, Massachusetts Educational Opportunity Centers are places where you can go and get help completing the FAFSA, as well as other help learning about career readiness. You can schedule an appointment with an education advisor, either in person or on the phone.

And this is a quick timeline that you can see. So spring and summer of junior year, students are researching colleges, hopefully visiting some campuses, attending college fairs, asking teachers for letters of recommendation. Maybe taking the SAT or ACT and starting to write their college essay. And then fall of senior year, student may retake the SAT or ACT, secure those letters of recommendations from teachers, finalize their college essay, attend one of MEFA’s webinars on financial aid or multiple webinars on financial aid, complete your admissions applications, and then get that FSA ID so you'll be ready for the FAFSA, and submit the CSS Profile form if required.

In the winter, students will continue to submit admissions applications, submit the FAFSA, apply for private scholarships, and send in any mid-year grade reports to colleges where they've applied. And in the spring, you'll be receiving your admissions and financial aid offers. You can always attend one of MEFA's great webinars, Understanding Financial Aid Offers and Paying the College Bill.

And then you can attend any college open house programs to find out more information about the colleges where you were admitted. And then you'll probably choose your college by May 1st, which is the national college decision deadline. So what can you do now? You can get an FSA ID for the student and the parent or parents. Research those deadlines so that you don't miss one and understand all of the required applications. Register for other events that MEFA will hold on mefa.org/events.

And on our website, we have a wealth of information, and we have a blog, so read any appropriate blog posts and reference that timeline so you stay on track. Here are MEFA's social media handles. I will also mention that MEFA posts a lot of scholarship information here. So keep in touch with MEFA in whatever way makes the most sense for you.

And you can always call MEFA with your questions, small or large, or email us at collegeplanning@mefa.org. So good luck, and please stay in touch. We're happy to help.



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