college financial aid what's new what's changing

C. Claire Law, M.S. Certified Educational Planner

www.eduave.com

Financial Aid What’s New, What’s

Changing

Helping IECA Consultants help their client families

IECA Fall Conference Charlotte November 2009Financial Aid: What's New & What's Changing

Financial Aid: Past Present Future

Federal Methodology & Economics

How to Incorporate Financial Aid Services into Your Practice (forms)

Present and Future


2010 HCERA Enactment of the Student Aid Provisions of the Health Care and Education Reconciliation Act of 2010 (change from FFELP to Direct Lending)

2009 - The American Recovery and Reinvestment Act of 2009 was passed by the House and Senate on February 13, largely along party lines.

The Higher Education Opportunity Act of 2008Congress passed the Ensuring Continued Access

to Student Loans Act of 2008 to help avert a crisis in the FFEL program.

2005 Higher Education Reconciliation Act of 2005 (HERA 2005) cuts $12.7 billion from student aid: switches Stafford and PLUS interest rates to fixed rates

Federal Financial Aid: The Past


Senator Pell Pres Ronald Reagan – “loans are financial aid”Reauthorization – every 4 yrsUntil 1988 colleges could choose IM/FM – before

UFObama 2010 – HCERA – Feds lend directly to

students through Stafford loan and sometimes Perkins, to parents through the PLUS loan. Loan rates are fixed. Aggregate amounts increase for Stafford.


To extent they are able, parents have primary responsibility to pay for dependent child’s education

Students have a responsibility to contribute to educational costs

Families should be evaluated in their present financial condition

Family’s estimated ability to pay educational costs must be evaluated in equitable manner.

Principles of Needs Analysis* *from NAFSAA-National Association for Student Financial Aid Administrators

2 methodologies / myriad packages

Federal Methodology (FM)-

Institutional Methodology (

Enrollment Management – the college perspective

When Professional Judgment?


Definition of Need*


Cost of attendance (COA)

– Expected family contribution (EFC)

= Need

*from NAFSAA-National Association for Student Financial Aid Administrators

Need Varies Based on Cost* *from NAFSAA-National Association for Student Financial Aid Administrators


X

Y

Z

Cost of Expected Family NeedAttendance Contribution (Variable) (Variable) (Constant)

1

2

3

EFC EFC

Basic Economic Principles*


Looking at FAIRNESS Horizontal equity: the equal treatment

of people in similar situations.Vertical equity: treating people in

different circumstances in appropriately different ways.

ongoing debate about whether net price differentials should be based on ability to pay (need), on merit, or on willingness to pay.

Opportunity Cost (Source: Sandy Baum: Primer for Financial Aid Administrators) The College Board


DIFFERENT PRICES FOR DIFFERENT PEOPLE (Horizontal & Vertical Equity)

Sandy Baum’s Chart

Need Analysis Methodology


Defining necessitiesSnapshot versus long-term fin capacityDefining living standardsTreatment of multiple children in collegeDefining incomeWhose income is relevant?

Need Analysis Methodology


Allowances against incomeIncome protection allowanceTaxes paidEmployment allowance annual education

savings allowance & other allowances against income

Federal Methodology* *from NAFSAA-National Association for Student Financial Aid Administrators

Federal Methodology is a formula created by Congress

to determine the EFC.

EFC calculators:

http://www.finaid.org/calculators

www.collegeboard.com/parents/


What is Federal Financial Aid?


Self-Help: Loans: Stafford (sub & unsub), PLUS, Perkins, Alternative (Major component of financial aid packages)

Gifts: Grants: Pell, SEOG (need-based), SMART & ACG (merit-based)

Self-help employment : Federal Work Study (FAFSA form is required)

Parents need the facts


1. What are the family’s values?2. Where does the family fit in within the

financial aid formulas?3. Where does the students fit in within the

academic applicant pool?4. What is their actual ability to pay? Their

actual EFC?

Role of Educational Consultant who offers financial aid advising


Ideally, helps families understand their cost of college in Junior year.

Still based on college list, that has colleges that benefit their child academically, socially, affordable over the four years.

Be clear with families about what you as a consultant can/cannot do for them

Avoid this unhappy ending
