What You "Must Know" About Financial Aid

Arlina DeNardo director of financial aid at Lafayette College and Carolyn Lindley director at Northwestern University presented their list of "must know" information at a recent College Board Conference. This is what they say parents, counselors and students should know about financial aid:

1) Every student should apply for aid --- regardless of family income. The financial-aid office needs the Free Application for Federal Student Aid or FAFSA to process a loan, even for students who don't qualify for need-based aid. And, if a student's financial situation changes, the financial-aid office cannot offer aid without that form.

2) Deadlines matter. Students have to apply for aid each year, and they must do so on time. First-year students need to understand that different colleges may have different deadlines.

3) All aid applications are not the same. All colleges require the FAFSA. About 250 colleges require a CSS/Financial Aid Profile, a form that asks for more information than is included on the federal form. State grants (not CA) and outside scholarships may also require additional paperwork. (For information about the Profile go to www.collegelboard.com/parents/pay.)

4) Students should know what colleges mean by "family contribution" (EFC). This figure is what a college determines a family can contribute based on the FAFSA, sometimes combined with information for a CSS/Financial Aid Profile. The dollar amount is not necessarily what the family will pay, since students don't all spend the same amount of money on items like housing. It could also vary from college to college. For example, some financial-aid offices will add in an expected contribution from a student's summer earnings.

5) Students should be aware of what is included in the cost of attendance. This figure includes tuition, fees, housing, and indirect costs like books, supplies, and transportation. The actual cost paid for some of these items will vary from student to student.

6) Eligibility and need aren't always the same. If a student meets the criteria for a federal Pell Grant, the college has to award it. But the college may determine that a student who is eligible for a Pell Grant on paper doesn't demonstrate the level of need to get other institutional need-based aid.

7) There is a big difference between need-based aid and merit aid. Merit aid is almost always tied to academic performance, and some is tied to specific criteria like having a certain major or being from a certain part of the country. Need-based aid is determined solely from families' documented financial situations.

8) There are different forms of aid. Students can receive federal, state and institutional aid. Aid can come in the form of grants, loans, or work. And yes, financial-aid offices view loans as a form of aid.

9) Award letters vary. Be sure to note whether aid is in the form of grants or loans and whether it is renewable from year to year.

10) Award letters can be appealed. If a family knows or expects its financial situation will change, it should talk it over with the financial-aid office. Most offices can help a family with special circumstances --- an issue many expect to see happened more in a year like this one.

Chroncile of Higher Education

Government To Take Over Retirement Plans?

The three major risks of retirement plans are a stock market collapse, outliving money and steep inflation. A little common sense is all that is required to understand The College Plan approach to solving this problem. Think of your retirement as if its has three buckets to fill, one for home equity to fight inflation, a second for guaranteed income to soften the blow of a market collapse and insure monthly income for life and a third bucket to build your nest egg.

The Democratic led House Education and Labor Committee is considering a much more radical approach. Their plan takes over your retirement plan starting with your account balance as of August before the stock market crash. All workers would receive a $600 annual inflation-adjusted subsidy from the government but would be required to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested into special government bonds that would pay 3% a year adjusted for inflation.

This plan would build the guaranteed income bucket. The current proposal would however, eliminate other tax incentives which would make it more difficult to build your nest egg. Home equity is not included as part of the plan.

Homer Sweeney

Get Out of High School Two Years Early?

The state of New Hampshire is currently studying a proposal that would allow students to leave high school after completing their sophomore year. Students who pass a very vigorous set of exams would be allowed to move on to the Community College to complete their high school requirements and start college courses. College could be completed in a shorter period time potentially saving parents thousands of dollars.

Homer Sweeney

College Cost Shock!

College prices rose slightly faster than inflation during the 2008-09 school year. This is shocking news for those who have followed college costs for years. Normally the increase is double and many times triple the rate of inflation.

During the 2008-09 school year tuition and fees rose on average from 4.5% to 6.5% for various types of institutions. In California, Cal State East Bay rose 3.9%, Cal Poly SLO 7.5%, UCLA 7.3%, San Jose State 9.9%, UC Davis 6.5%, USC 5.8%, Stanford 3.5% and Santa Clara University 5.9%. These increases do not include room and board and other indirect costs.

Homer Sweeney

Sources of Student Aid

Student Financial Aid for the current 2008-09 school year came from following sources:

Federal Loans 41%
University Grants /Scholarships 21%
Pell Grants 14%
Private and Employer Grants 7%
State Grants 7%
Education Tax Credits and Deductions 3%
Miscellaneous federal grants 3%
Federal Work Study 1%

The Chronicle of Higher Education