A GUIDEBOOK TO FINANCIAL AID

Cathedral High SchoolCollege Advising Center

Special thanks to Kristine Butz from the Office of Financial Aid at Butler University for her assistance with this publication.

What is Financial Aid?

In theory, financial aid is intended to bridge the gap between the cost of attending college and what it is determined your family is able to pay. Over half of the students currently enrolled in college receive some type of financial aid. Financial aid is based on two principles:

Students and their families are first and foremost responsible for the educational expenses.

If a family is unable to contribute the entire cost, financial aid is available to help with the difference.

Who decides how much my family is able to contribute?

The Expected Family Contribution (EFC) is a factor used to determine how much financial aid a family is eligible. The EFC is calculated using a standardized formula and information provided on the financial aid applications. The federal formula (established as a standard by Congress) analyzes your family’s financial information (using factors such as income, assets, age of the older parent, family size and number in college) to determine how much of a family’s financial resources should be available to help pay for college. This factor will be the same at each school in which the student is applying.

The EFC is then compared against the Cost of Attendance, or the total amount it will cost a student to go to a specific college for one academic year. This amount includes tuition, room and board, books, supplies, other university-related fees, transportation and miscellaneous expenses. The remaining amount is the amount of need for which a student qualifies to receive or the amount of financial aid a student may receive.

Cost of Attendance- Expected Family Contribution (EFC)

= Need (Financial Aid Eligibility)

How does this affect colleges with higher costs?

Because of the EFC (Estimated Family Contribution), all schools you apply to will use the same information about your family’s ability to contribute when determining how much aid for which the student is eligible. Therefore, the cost of attendance at each school weighs heavily in how much financial aid you may qualify for. Thus, don’t rule out certain colleges based solely on annual tuition costs or overall cost of attendance.

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In the examples below, although the cost of attendance varies by $17,000, the cost for which the family may be asked to contribute remains the same. The remaining financial need amounts may be covered through various types of financial aid.

Example 1: Example 2:Cost of Attendance $15,000 Cost of Attendance $25,000EFC $10,000 EFC $10,000 Financial Need $5,000 Financial Need $15,000

How will my financial need be covered?

Financial aid is any type of assistance or resource used to pay college costs. There are three main sources of financial aid: gift aid, loans, and student employment (work-study).

Gift Aid: merit scholarships and need-based grants do not have to be repaid, and the student will not need to work to earn them. Gift aid comes from the federal and state governments, individual colleges and outside sources.

Loans: must be repaid after the student graduates or leaves school. Most educational loans are low-interest loans sponsored by the federal government. There are two types of loans: subsidized and unsubsidized. Subsidized is awarded based on need and means no interest accrues on the principal balance until the student begins repayment after he or she graduates. Unsubsidized loans are available to all students regardless of financial need; however interest will begin accruing immediately. There are several options available for repayment of these loans.

Student Employment: provides students with limited part-time employment requiring the student to work and earn money to help with the educational expenses. The most common student employment program is the Federal Work-Study Program.

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Go to your Guidance Office for a paper version of the FAFSA. You can also get the FAFSA from the financial aid office at a local college, your local

public library, or by calling 1-800-4-FED-AID. The online version of the form is available at

http://www.fafsa.ed.gov.

Although this is not a comprehensive list, some of the most common types of aid for our students are included in Table 1.

Table 1

Student Aid Program Type of Aid Program Details

Annual Maximum Award Limits

Federal Pell Grant

Grant – does not have to be paid back

Available exclusively to undergraduates pursuing their first bachelors degree; these grants are for students who demonstrate exceptional financial need

$4,050 for current academic year; subsequent year amount will depend on program funding

Federal Work-Study

Earned through work – does not have to be repaid

For undergrad and graduate students; jobs can be on or off campus; students are paid at least minimum wage No annual maximum

Federal Perkins Loan

Loan – must be repaid

Fixed five percent interest for both undergrad and graduate students; repayment begins nine months after student graduates or leaves school $4,000 for undergrad students

Federal Stafford Loan*

Loan – must be repaid1

Subsidized1: US Department of Education pays interest while the student is in school and during grace and deferment periods. Fixed interest rate of 6.8%.

Unsubsidized2: The student is responsible for interest throughout the entire life of the loan. Interest rate is the same as the subsidized loan above.

Freshman $3,500 Sophomore $3,500 Junior $5,500 Senior $5,500Graduate $8,500

Federal PLUS LoanLoan – must be repaid

Available to parents of dependent undergraduate students. Fixed interest rate of 8.5%.

Cost of attendance minus other financial aid the student receives.

Frank O’Bannon Grant Program (formerly the Indiana Higher Education Grant Program)3

Grant – does not have to be paid back

Awarded to Indiana residents attending an eligible college

Tuition award amounts based on demonstrated financial need and high school curriculum completed

Indiana Twenty-first Century Scholars Program

Grant – does not have to be paid back

Income-eligible 7th and 8th graders who enroll in the program and fulfill a pledge of good citizenship to the state are eligible to apply. Students must graduate high school with a 2.0 cumulative GPA or higher and have abstained from drugs, alcohol, and illegal activities.

Students are guaranteed the cost of four years of college tuition at any participating public college or university in Indiana. If the student attends a private institution, the state will award an amount comparable to that of a public institution.

*There are two types of Federal Stafford loans: The Ford Federal Direct Program and the Federal Family Education Loan Program (FFELP). The only differences between the two programs are the source of the loan funds and certain repayment provisions. University financial aid offices will determine which loan disbursement program will be used.

How do I apply for these programs? 1

? In a subsidized loan, the government pays the interest on the student’s behalf while the student is in school, during the 6-month grace period a student receives upon termination of school, and during any authorized deferment periods. Students repay the subsidized Federal Stafford loan back on a monthly basis over a maximum period of 10 years.2 In an unsubsidized loan, interest begins shortly after funds are disbursed but can be added to the principal balance of the loan. Repayment of the balance begins 6 months after disbursement. Students repay the unsubsidized Federal Stafford Loan back on a monthly basis over a maximum period of 10 years.3 Includes both the Higher Education Award and the Freedom of Choice Award.

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The Free Application for Federal Student Aid (FAFSA) is the financial aid application form that must be completed to determine financial aid eligibility and to be considered for federal, state and school aid programs. The FAFSA comes in two versions—paper and electronic. Only one process should be chosen by each family.

The paper version is available in the Cathedral College Advising Center, the public library, and the financial aid offices of most universities. Each FAFSA contains a self-addressed envelope with mailing address and will be sent to the Department of Education’s Central Process System.

To access the FAFSA on the Web, go to www.fafsa.ed.gov. Submitting the online FAFSA version is highly recommended as the data is checked before it is transmitted to the processing center, thus limiting the opportunities for error. It can also reduce processing time by 4-6 weeks.

o If you or your child plans to complete and submit the FAFSA on the Web, we recommend obtaining a U.S. Department of Education PIN (Personal Identification Number). The PIN will serve as yours and the student’s electronic signatures and gives you or the student the fastest way to submit the application. Both the student and one parent need their own PIN. To get a PIN, you and your student should submit the PIN application at www.pin.ed.gov . Your PIN will be e-mailed to you in 1-3 business days. You can still use the FAFSA on the Web, however, without a PIN; you will simply have to print out and mail in a signature page.

o A PIN may also be used to: check on the status of your FAFSA view and print a copy of the Student Aid Report (SAR) make corrections to the FAFSA make corrections to a processed application

o A PIN never expires, but may be changed if the security of the PIN has been compromised. Another copy of the PIN may be requested if the PIN number is forgotten.

Are there additional forms to fill out?

The federal methodology no longer factors in home equity, medical expenses, or elementary and secondary tuition paid for students other than the aid applicant. However, some private schools still consider the value of those factors when disbursing campus dollars (any funds available directly from the school itself and not funded from the federal or state governments). Therefore, some schools may require families to register with the College Scholarship Service, or the financial aid division of the College Board, to complete the CSS Profile Form. Not all schools require this form, so please call the university’s financial aid office! CSS Profile registration

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forms are available through the College Board at www.college.board.com and in the Cathedral College Advising Center.Some universities may also require an institutional aid application, which will provide them with any additional information not available on the FAFSA. Please contact the school to obtain a form, if necessary.

When should I fill out the FAFSA form?

January 1st of your child’s senior year is the first day that you are eligible to file the FAFSA. We recommend you file as early as possible with the most accurate information – completed tax returns for the requested year. Indiana’s state aid deadline to submit the FAFSA is on or before March 10th. The FAFSA must be received no later than March 10 to be eligible. Your child should also pay attention to each college’s priority financial aid deadlines, which may vary from the dates above.

What happens after you file the FAFSA?

Once you or your child submits the FAFSA on-line, it is transmitted directly to the Central Processing System, which processes about 9 million forms each year. Within 5 – 10 business days of filing the FAFSA, you may view the Student Aid Report (SAR) on line, which contains the data you or your child entered on the FAFSA. Review the information carefully for errors and follow directions for submitting corrections. Submit corrections promptly to avoid long delays in processing your application. Make sure to keep copies of your original application and any corrections submitted for your records.

The EFC is sent electronically to SSACI (State Student Assistance Commission of Indiana) as well as to the colleges the student listed on the FAFSA. State agencies and colleges will use the EFC to determine the aid programs available to the student for that academic year.

If the student’s aid application has been selected for a routine process called “verification” the college needing the information will request copies of signed tax returns or other information to verify the information provided on the FAFSA. It is possible not all schools will request this information. Be sure to furnish this information within the schools suggested timeframe.

Upon receipt of all documentation each college your student has been admitted to will develop an offer of financial aid or financial aid package based on the student’s eligibility at their school and the aid programs available. This package may include gift aid, student loans and student employment. Students are given a specific timeline in which to respond to each school’s offers, usually 10 to 15 business days. Colleges and universities will try to mail their offers to families as soon as possible, usually in March or April. When you have questions about your student’s financial aid package, the best contact is usually the Financial Aid Office at that particular college.

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TIPS ON COMPLETING THE FAFSA

1. Instructions for filing the FAFSA are contained in this packet. Documents you will need to complete the form(s) are:

Student’s Social Security NumberStudent’s driver’s license numberW-2 forms and other records of money earned in 2006Federal income tax return from 2006 (IRS 1040, 1040A, or 1040 EZ) for both parent(s) and studentCurrent bank statements and records of stocks, bonds, and other investmentsCurrent mortgage informationRecords of other untaxed income received, such as Social Security, Temporary Assistance to Needy Families (TANF), welfare, or veteran’s benefitsYour business or farm records, if applicableAlien registration number, if you are not a US citizenIf you are a dependent student, you will also need:o Your parent(s)’ Social Security Number(s)o Your parent(s)’ income and financial records as indicated above (if parents are

divorced, please see the financial definition of “parent” under the glossary of terms)

2. Read all directions before attempting to fill out the form! It is suggested that you complete the Pre-Application Worksheet before completing the FAFSA on the web.

3. While completing the FAFSA:Round figures to the nearest dollar (as one does with taxes)Do not use commas or decimal pointsFor dates, type numbers that correspond to the month, day, and year. For example, for November 7, 1974, enter 11071974.When using single digits (1-9), first write “0,” i.e. 01, 02, 03…“school year” indicates the school year from July 1, 2006-June 30, 2007

4. You do not need to file your federal income tax return with the IRS before you file the FAFSA. However, if you are filing a 2006 federal income tax return, we recommend you complete it before proceeding with the FAFSA.

If you have completed your return but not yet filed, the correct answer on the FAFSA is "I have already completed my return." If you intend to file but have not yet completed your return and are completing the FAFSA from an estimated return, the correct answer on the FAFSA is "I will file, but I have not yet completed my return."

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5. Electronically sign and date the FAFSA using the PIN for BOTH parent and student! See below.

6. After completing the form, print a copy for your records before submitting.

7. Print a copy of the confirmation page for your records.8. If your financial situation changes drastically after the time you file the form (i.e. death,

divorce, unemployment), call the Financial Aid Office of the college your child plans to attend to explain the situation.

9. International and non-citizen students should contact the Financial Aid Office of the college or university for specific information regarding financial aid. See page 2 of the FAFSA instructions for more information.

In addition to the above, when completing the paper FAFSA, be sure to

1. If completing the paper FAFSAYou should use a pen with black or dark ink to complete the paper FAFSA.While completing the FAFSA, remember to:

Print carefully in CAPITAL letters and skip a box in between words Do not write “N/A” or margin notes Do not include notes, tax forms, or letters.

When mailing a paper FAFSA, obtain a Certificate of Mailing from the post office to verify the date your application was sent to the processor. (Do not send the FAFSA by registered mail.) Keep your confirmation number or certificate of mailing with a copy of your application and PIN for future reference.You will receive your blue copy of the SAR (Student Aid Report) from the Central Processing System (CPS) approximately one month after filing.

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If filing online, be sure to…To apply for your PIN online, go to the Department of Education's PIN Site. Both students and parents can apply for PINs. If you are a dependent student, you and your parent will need to sign your application. Therefore, we recommend that you and your parents apply for a PIN now.

TIPS ON COMPLETING THE FAFSA: Item Explanations

Below are item-referenced explanations of key terms and factors used in computing your total family contribution. In the FAFSA directions, the word “you” refers to the student; the word “school” refers to any school beyond high school. Dependent students (99% of you) completing the paper FAFSA will be filling in the shaded areas of the form; parents will be filling in the purple shaded areas. Except where noted in the directions, do not leave any items blank.

Explanation

Name Please be sure to print your name exactly as it appears on your Social Security card. This is very important.

Social Security Number A student must have a SSN in order to receive aid. The name you list on the FAFSA must be the same name as on your SSN card.

Drivers’ License Number This provides a secondary identification source for the federal government

State of Legal Residence The state of residence of a dependent student is the state of residence of the parent(s). Listing Indiana is vital for you to be eligible for Indiana state financial aid programs.

Selective Service Registration If you mark “yes” here, male students will be registered for the draft automatically when they turn 18; male students must be registered with selective service in order to receive federal aid.

Degree This item is informational only, not rigid or immovable - indicating your plans to attend college for four years and obtain a Bachelor’s degree or attend a community college.

Grade level All high school seniors should select “1st year/never attended college.”

Types of Financial Aid This is simply a preferential question and is not binding. To see how much maximum aid you might receive, check the appropriate boxes. We encourage you to answer “yes” to both items.

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Drug Offense Conviction Do not leave this item blank. The government may limit the amount of financial aid awarded to anyone who has been convicted of an illegal drug offense.

Income Tax Paid This item asks for taxes actually paid, not withheld. (This is a key error many parents make!)

Dependent/Independent Student A student can only be classified if he/she meets at least one of the following requirements:

--born before January 1, of a specific year or--a veteran of the U.S. Armed Forces or--a masters/doctoral student or--married or--orphan or ward of the court or--legal dependents other than a spouse

Answering “no” to every part of the above questions (and 99.9% of high school students will answer “no”) means that you will fill out all sections of the application.

Parents’ Social Security Number This item is required as a database match with the Internal Revenue Service. Families should submit this data carefully and accurately because the government may be contacting the IRS for verification purposes.

Parents’ Household Includes student, parents, parents’ other children (if they live with the parents) and any other people living in the household receiving more than one half of their support from the parents.

College Students in Family Only you and other siblings going at least part time (usually 6 semester hours) to college count here. Family contribution is divided by the number of college students in the family. Parents enrolled in college are no longer included in this item.

Cash, Savings, & Checking Accounts The amount in each of these accounts on the date you sign the form.

Investments and Real Estate Net worth means current value minus debt. Don’t include information on your principal residence. This question pertains to: rental property, land, second or summer homes, trust funds, money market funds, mutual funds, CD’s stocks, bonds, other securities, installment and land sale contracts, commodities, etc.

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College Release and Certification Be sure to list an Indiana school first for state financial aid consideration; also, be sure to enter the proper code from the Federal School Code (formerly called the Title IV List) at the end of this pamphlet. A comprehensive list can be accessed on the Internet at www.ed.gov/offices/students/t4_codes.html

Certification, Signatures, and Date Be sure to have both student and parent sign using the PIN.

FINANCIAL AID RESOURCES

Phone Numbers:

Federal Student Aid Information Center 1-800-4-FED-AID (433-3243)Monday-Friday 8 am-midnight EST and Saturdays 9 am-6 pm EST

For questions on the FAFSA on the Web: 1-800-801-0576Monday-Friday 8 am-midnight EST and Saturdays 9 am-6 pm EST

For a copy of your tax return (Internal Revenue Service): 1-800-829-3676

For information on exemptions, adjusted gross income, taxable income, and taxes paid (Internal Revenue Service): 1-800-829-1040

Internet Websites:

The Internet can be a valuable resource for financial aid information. Listed below are several internet sites that provide the following information:

--types of aid available--expected family contribution estimators--loan repayment calculators--scholarship searches--the FAFSA on the Web for online filing, which could significantly speed up the processing time--and more!

http://www.prephq.com/ Cathedral High School’s My Footpath homepage (also available as a link from the Cathedral home page). In My Footpath under “Links and Resources” this website includes internet links to state and federal financial aid resources.

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http://www.in.gov/ssaci/ The State Student Assistance Commission of Indiana offers a variety of resources regarding Financial Aid. The site provides information ranging from general financial aid information, how to apply for aid, state and federal aid estimators, loan repayment calculators, financial aid sources and more.

http://www.finaid.org/ The Financial Aid Information Page is sponsored by the National Association of Student Financial Aid Administrators. This page provides links to many services of information about student financial aid. Also included is a “Scholarship Scam Alert,” providing information about scholarship scams and how to avoid them.

http://www.fafsa.ed.gov FAFSA on the Web

http://www.fastweb.com the internet’s largest FREE scholarship search

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Student Aid Report (SAR) Acronyms

EFC Expected Family ContributionTI Total IncomeATI Allowances Against Total IncomeSTX State and Other Tax AllowanceEA Employment AllowanceIPA Income Protection AllowanceCAI Contribution from Available Income (Independent

Student)DNW Discretionary Net WorthAPA Education Savings and Asset Protection AllowancePCA Parents' Contribution from AssetsAAI Adjusted Available IncomeTPC Total Parents' ContributionTSC Total Student's ContributionPC Parents' ContributionSIC Dependent Student's Income ContributionSCA Dependent Student's Contribution from Assets

GLOSSARY OF TERMS

Accrued Interest: The interest that accumulates on the unpaid principal balance of a loan.

Annual Percentage Rate (APR): The interest maintained on a loan for a one-year period.

Capitalization: The addition of unpaid accrued interest applied to the principal balance of a loan that increases the total debt outstanding.

College Scholarship Service: The financial aid division of the College Board. Certain universities may require that you complete the College Scholarship Service’s CSS form to qualify for additional financial aid.

Consolidation: Combining several education loans into a new loan with a new payment schedule and interest rate.

Cost of Attendance: The total amount it will cost a student to go to a specific college for one academic year. This amount includes tuition, room and board, books, supplies, and other university-related fees.

CSS Profile Form: A form offered through the College Scholarship Service that may be required by certain universities. This form allows parents to disclose additional information, not required by the FAFSA, such as home equity, medical expenses, or elementary and secondary tuition paid for student other than the aid applicant. This form is not required by all schools! A copy is available at www.college.board.com

Default: The failure to repay a loan in accordance with the terms of the promissory note. Default occurs after 270 days of non-payment on an account for Title IV loan programs.

Deferment: An approved temporary suspension of loan payments based on certain events and criteria.

Delinquency: The failure to make scheduled monthly loan payments when they are due.

Direct Loan (DL) Program: A student loan program administered by the U.S. Department of Education. Students attending participating schools borrow directly from the federal government instead of from a private lender.

Disbursement: A transaction that occurs when a lender releases loan funds.

Expected Family Contribution (EFC): A number that is calculated using the information provided by the family on the Free Application for Federal Student Aid (FAFSA) and a standardized formula. Each school will compare this amount against the school’s total cost of attendance in order to determine financial need. If the EFC is less than a school’s cost of attendance, the student demonstrates financial need and may be eligible for some sort of financial aid.

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FAFSA (Free Application for Federal Student Aid): An application that must be filled out and submitted in order to receive any form of student aid.

FFELP: Federal Family Education Loan Program. Private lenders provide federally supported loans to participating schools.

Federal PLUS Loans: Loans made to qualifying parents of dependent undergraduate students that are available through the Direct Loan Program and the Federal Family Education Loan Program (FFEL).

Federal Perkins Loans: Loans offered by some schools to provide the neediest students with low-interest loans.

Federal Stafford Loans: Loans made available to students through the Direct Loan Program and the Federal Family Education Loan Program (FFEL).

Federal Work study: Money for education expenses paid by the school in return for on-campus or community-based work.

Financial Aid: Any type of assistance used to pay college costs whether it is based on merit, talent or financial need. There are three main sources of financial aid: gift aid, student loans, and student employment.

Financial Aid Package: The collection of financial aid options (scholarships, grants, student loans, student employment) for which the student would qualify at a particular university.

Financial Need: The difference between the college’s educational costs and the expected family contribution.

Forbearance: The approved temporary suspension or reduction of loan payments due to a financial hardship during which interest continues to accrue.

Grace Period: The period after a student either graduates, leaves school (unofficially or officially), or drops below half-time before loan payments must begin.

Grant: A type of financial aid that does not have to be repaid. Generally, grants are for undergraduate students and the grant amount is based on need, school cost, and enrollment status.

Guarantor: The agency or institution that repays lenders in the event of a default in the FFELP.

Independent Student: A student who was born before a specified date; is a veteran of the U.S. Armed Forces; a masters/doctoral student; is married; is an orphan (both parents dead); a ward of the court, or has legal dependents other than a spouse.

Institutional Form: A financial aid form, written by an individual university, that provides financial aid information not requested in the FAFSA. Not all colleges require an institutional form!

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Interest: The dollar amount charged to borrow money.

Lender: The institution that provides the money borrowed through the student loan program.

Loan: Borrowed money that must be repaid with interest. Both undergraduate and graduate students may borrow money. Parents may also borrow to pay education expenses for dependent undergraduate students who are enrolled at least half-time. Maximum loan amounts increase with each year of completed study.

National Student Loan Data System (NSLDS): A database of federal student loan borrowers. If you are a borrower and would like to find out information about your student loans, use the NSLDS Financial Aid Review service, operated by the U.S. Department of Education. By entering your social security number, date of birth, and PIN, you will be able to access your current loan information online.

Parent: If the parents are both living and married to each other, answer questions about them. If the parent is widowed or single, answer the questions about that parent. If parents are divorced or separated, “parent” is the one with whom the student lived with more during the past 12 months. (If the student did not live with one parent more than the other give answers about the parent who provided more financial support during the past 12 months, or during the most recent year that the student actually received support from a parent.) If the parent is remarried, then income information of the stepparent must be included on the form.

PIN: Personal Identification Number. Your PIN serves as your electronic signature and gives you access to your personal records with the Department of Education.

Promissory Note: The legal and binding contract signed between the lender and the borrower which states that the borrower will repay the loan as agreed upon in the terms of the contract.

Scholarships: Awards that do not have to be paid back. They are given to students who demonstrate or show promise of high achievement in areas such as academics, athletics, music, art or other disciplines.

Servicer: An organization that acts on behalf of the lender to administer their student loan portfolio and is paid a fee to do so.

State Grant Program: State funding coordinated by the state agency that provides grants to needy state residents who meet the eligibility criteria and are pursuing postsecondary education.

Student Aid Report (SAR): The SAR summarizes the information you report on your paper FAFSA. The schools you list on the application receive electronic copies of your SAR and use the information to determine a student's eligibility for federal financial aid.

Student Contribution: The amount a student is expected to contribute based on past history of earnings and accumulated assets.

Student Employment: See Federal Work Study.

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Subsidized Loans: Loans for which the federal government pays the interest until the student enters repayment. The government will also pay the interest during any deferment periods. Undergraduate: A student who is pursuing a bachelor's degree.

Unsubsidized Loans: Loans on which the student is responsible for paying from the date of disbursement until the loan is paid in full, regardless of enrollment status.

Verification: The process of matching information on financial aid form with other documentation to determine accuracy of information supplied on financial aid form. An asterisk (*) on the SAR after the “EFC” at the top right corner flags you for verification. (Note: verification is not an IRS audit! Because of federal legislation, you may be selected for verification simply because the college must verify 30% of its financial aid applications. Many small schools verify 100% of all financial aid applications.) If you are chosen for verification, a Verification Worksheet will be mailed by the college or university.

Reprinted 8/06

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