Financial Aid and FAFSA
October 1st marks the beginning of a new financial aid cycle as the 2018-19 FAFSA goes online. One recurrent theme I get each year is when students should file their FAFSA, or Free Application for Federal Student Aid, and whether filing a FAFSA application will hurt their chances for admission or merit aid.
Do I need to file the FAFSA if I don’t have financial need?
At last count, less than a dozen schools required the FAFSA to be eligible for merit aid. This means that if you’re a full-pay student, you don’t need to file the FAFSA. However, if you or your family may need to borrow money during the school year, it is always helpful to have the FAFSA on file, or to file it after you’ve been admitted. FAFSA is required to borrow money from one of the two available federal loan programs – Stafford loans (students) and PLUS loans (parents). Think of it as a no-cost insurance policy against major changes in a family’s financial situation, like job loss or illness.
If I need to file the CSS Profile, do I need to file a FAFSA application to?
The CSS Profile provides an alternate view of a family’s financial situation. The Profile builds a picture of a family’s assets, income and debt in the same way the IRS 1040 does, while the FAFSA starts with gross income and builds a picture of available income with allowances and deductions. Because they offer colleges two views of student and family income and assets, all schools that require the CSS Profile will require both forms. While the vast majority of schools only require the FAFSA, all schools that offer 100% needs-met financial aid and several of the more selective schools require the CSS Profile.
Will filing the FAFSA hurt my chances of getting into college?
Almost all schools are “needs aware” these days. This means that while they don’t base admission on a student’s financial situation, it is possible that financial need may influence a school’s choice of admission for a student or two “on the bubble.”
I may file a FAFSA application. Should I check the “I’m planning to apply for financial aid” box on my application?
If you check this box, you need to file a FAFSA. Many schools will consider your application incomplete if you don’t. If you’re not sure you’re going to file – don’t check the box. You can file the FAFSA regardless. But if you discover that you do want to be considered for loans or other needs-based aid, you also need to call your schools and tell them that you want them to be aware of your changed status.
Except for the 60 or so colleges and universities that have "no loan" policies, most financial aid packages include student loans. Federal loans are call Stafford loans and can either be interest deferred, which means interest doesn't accrue until 6 months after a student graduates, or non-deferred, which means either students pay the interest each year or it is rolled back into principle until graduation.
The interest rate on Stafford loans are updated each July and reflect changes in 10-year Treasury Note interest rates. This year, the interest rates rose from 4.45% to 5.05% on Stafford loans. That's a 13% increase in a single year! According to the New York Times, this is expected to increase monthly payments by around 2.8%. For graduate students eligible for the Stafford loan, the interest rate rose from 6.0% to 6.6%, a 10% increase. The interest rates on PLUS and Direct Plus loans that parents and professional students pay rose from 7.0% to 7.7%, another 10% increase.
These loans are not cheap! In addition to hefty interest rates, there are loan fees to consider as well. For Stafford loans, the fee is 1.066% while for PLUS loans, the fee is a whopping 4.264%. That means when you borrow $1,000, you are really only getting $957.36 to pay tuition. These fees may rise when they are next adjusted October 1st.
Since interest rates are expected to rise over the next few years, it is very important to consider how much you can safely borrow without putting your future on hold after you graduate. I urge all of my students to strongly consider net (actual, after aid) cost when they make their decisions on which school to attend. If Drexel's net cost is $20,000 less than Penn each year, is the prestige of an Ivy League education really worth $80,000? For some, the answer may be "yes," if they believe that Penn can offer educational or employment opportunities not available at Drexel. For most students, the answer is most likely "no." And if parents have to borrow expensive PLUS loans to cover the additional cost, that difference isn't $80,000, it's a whole lot higher.
There’s been a lot in the news recently with the increasing burden that financial aid places on college graduates and their families. An article 6 months ago showcased an older gentleman working two jobs to pay for the loans he took out to finance his granddaughter’s education. Instead of a relaxing retirement, he’s working full time and probably will until the day he dies. An article in this week’s Courier Times talked about the impact that loans had on a few local families and how one student found a college that allowed her to get her bachelor’s degree without borrowing anything.
College Match Guru has always been a strong advocate of finding affordable colleges that offer great value. Often, students get “stuck on the Ivies;’ they believe that an Ivy-League or highly selective college education should be their goal, no matter the cost. But one of the disadvantages of attending an Ivy League school is the cost of attendance. Many Ivies are strictly Needs Based schools. They don’t give scholarships based on merit, athletics or talent – only on financial need. But there are many quality schools out there than can offer comparable educational opportunities that do offer merit and institutional grants to their top students. Want to be an engineer? I’ve seen many students apply to Drexel and Penn engineering programs. Drexel awarded some of these students large scholarships, on the order of $20,000 per year, while Penn offered none or very little aid.
The decision of which school to attend can be very difficult for astudent. After all, Drexel is a third-tier school, while Penn is rated at the very top of just about every ranking list. Still, $80,000 over four years is a lot of money. If you had to borrow that at 6% a year, you’d be paying an additional $6,876 a year for 20 years. And that’s assuming you could refinance your loans for 20 years, instead of the standard 10.
But why not take advantage of the hard work you put into high school? Many schools will offer significant merit aid to their top students. A Presidential scholarship often means that you’d pay only for room, board and miscellaneous fees. Even if your family had no money saved for your college education, you could still graduate with only the $31,000 maximum allowed by the Stafford loan program if you managed to work hard over the summers and had a work-study job during the school year. That’s less than the national average for private schools of $37,000.
Even without merit aid, there are often great alternatives to the high cost of the most selective schools. If you get an Associate’s Degree from a Pennsylvania or New Jersey community college, every one of your 60 credits will transfer to one of 4-year state institutions. In fact, you may not even need to leave the community college to get your bachelor’s degree. Bucks County Community College has developed programs with Delaware Valley University where students can get their degree from Del Val while studying at BCCC. Many other community colleges are developing similar programs.
It’s hard to separate emotions from the decision of which college to attend. Penn sounds better to a 17 year old than Drexel and Drexel may sound better than Temple. A community college? Come on! But the cost of a degree from Kutztown University is 30% less than Drexel and half of the cost at Penn. The decision should really be based on two factors: What is the economic or advantage of attending the expensive school, and what are your career goals that justify the additional cost.
Penn has a great nursing program. So does Bloomsburg University at a fraction of the cost. In fact, Bloomsburg was ranked by College Choice as the most affordable nursing program in Pennsylvania. Penn is associated with the Penn Medical School and hospital, but Bloomsburg has a Master’s program and is associated with Geisinger Hospital. Unless you’re planning to do research or you’re looking for an advantage in getting into Masters or advanced education program, why do you need the Penn program?
How about that engineering program we talked about earlier? If you just want a job in mechanical engineering, Drexel’s co-op program will give you the opportunity of actually working for two or three companies as a part of your undergraduate program. Many Drexel students get offers through these co-op programs. Penn doesn’t offer this opportunity. Students have to find their own summer jobs and often have to apply from scratch for jobs following graduation.
One thing is for certain. Mortgaging your future to attend an expensive college is never a good idea. Very few graduates can overcome a $100,00 debt without major financial sacrifices during most of their young lives. Do you really want to sacrifice a nice home, an annual vacation and nice car for a plaque on the wall?
Of the 2.1 million jobs added over the last year, more than 1.2 million, roughly 2/3 of them, went to college graduates. Indeed, according to an article in the Courier Times, it appears that since the middle of 2015, the hiring gap between college and high-school graduates has continued to expand. For the first quarter of 2017, the unemployment rate was 4.4%, one of the lowest rates in the last 20 years. Among college graduates, however, that rate dropped to only 2.4%, nearly half the overall rate.
Across the U.S., more than 60% of the workforce never graduated from college. The hiring numbers, however, suggest that employers seeking to fill new positions or re-hiring for established positions are preferentially seeking applicants who have a college diploma.
A college degree means a lot more than employability. According to a USA Today article in January, the average income of college graduates is 56% higher than high-school graduates. This is the largest gap between the two cohorts ever found, according to the Economic Policy Institute, which began compiling statistics in 1973. By comparison, as recently as 2009, the gap was 51%.
Not only do college graduates get hired, but the jobs they're offered are often better paying, too. In fact, since the Great Recession of 2009, the average income of college grads has rebounded and then increased, while the average income for non-college graduates has declined by 3%.
More proof that finding a college that can allow you to succeed and find your life's purpose will pay dividends from the time you join the workforce until the time you retire.
Just in time for upperclassmen filling out their FAFSA for the 2017-18 school year, the handiest tool was shut down March 10th. Students applying for financial aid or supplying schools with financial data for institutional grants are required by their colleges to fill out the Free Application for Federal Student Aid form, commonly known as FAFSA. One of the most convenient tools imbedded in the form is the DRT or Data Retrieval Tool. The DRT transfers the applicant to the IRS webserver and downloads 2015 tax information.
The DRT is more than convenient. It eliminates typographical errors and guarantees colleges that the information is accurate. Many schools routinely audit financial information for families that don’t make use of the DRT, requesting the full 1040s for the parents and students as well as any business form like the 1065 they may have filed. This makes the financial aid more time consuming for all involved.
Why did the DRT stop working? It seems that the government feared data breaches like one that occurred in 2015 on a related online IRS portal used to verify income data for income-based student loan repayments.
According to Douglas Belkin, reporting for Morningstar.com, the IRS stated the shutdown was “part of a wider, ongoing effort to protect the security of data as a precautionary step following concerns that information from the tool could potentially be misused by identity thieves.”
If you’re an upperclass college student getting ready to fill out the FAFSA for this year, keep the following tips in mind:
The budget President Trump presented to Congress last week calls for a "significant" reduction in the funding for federal work-study grants and a reallocation of work-study funds to "those students who would benefit the most" from the program. According to Inside Higher Education, the budget proposal does not say how much the President wants to reduce the $1 billion-dollar program nor does it stipulate how it will reallocate funds. But IHE believes that changes to the way the program currently works is definitely around the corner in the next fiscal year.
What does this mean to the average student receiving federal financial aid? For graduating high school seniors just receiving their acceptance letters and financial aid packages, it may mean the financial aid is overstated. Most students will receive a mix of student loans, work study and Pell grants as a part of their aid packages. Typically, the work study component will require students to earn between $2,000 and $3,000 during the school year. If the final 2017-18 budget cuts funding for work study, students may find they can't work the hours they need to match their aid package figures. If the work-study money is allocated differently, say only to the neediest 70% of current recipients, students above that income line may find they can't find a work study job at all and their families have to come up with the entire $2 or $3 grand.
The guru's advice -- don't assume that the work-study component of your financial aid package is set in stone. If you're a senior comparing financial aid packages, and one school seems like a better deal because it offers the opportunity for a work study job, talk to the school to see how they plan to handle a possible shortfall in federal funding.
For students considering Ivy League schools like Penn, Princeton or Columbia, the decision to apply early decision or restricted early action can be difficult. On the one hand, you can only apply to one school early acceptance. If you get in, you give up your choice to compare offers from a list of schools. If the financial aid package is lower than from a rolling-admissions school where you have already been accepted, that can create a lot of family tension. A full-tuition scholarship vs tens of thousands of dollars a year can lead to second thoughts about just how valuable that Ivy League education really will be in the long run. The comparison gets tougher if you're comparing offers from a school with an honors program, like Penn State's Schreyer College.
On the other hand, you greatly increase your chance of getting accepted into an Ivy if you apply early acceptance. For instance, Penn accepts more than half of its class ED and the acceptance rate for the class of 2020 was 22%, more than double their regular decision acceptance rate of 9.9%. Unless you feel you are so ahead of the curve that you're likely to get accepted anywhere you apply, you should probably play the odds and select one school to apply for early admission.
What were the odds of getting accepted to an Ivy League school for the class of 2020? Here are some statistics:
Luther College (Decorah, IA) is a great example of what a liberal arts college is all about. At 2,300 students, all undergraduates, it’s small enough for the school to work with every student on an individual basis. The process starts even before students begin their studies, with admissions reviewing each application, looking beyond GPA and test scores to identify deserving students.
Because Luther is not divided into separate colleges, like many bigger universities, general education requirements are school-wide. This means if a student enters school with the goal of becoming a nurse, and decides to be a teacher instead, it can still be done within 4 years because the gen ed requirements are the same.
In many schools, students pursuing duel majors find they need a fifth year to complete their studies. At an average cost of more than $43,000 a year, that can be pretty expensive. But at Luther, most students with double majors (any many go-getters with triple majors) graduate within 4 years.
Still, the most important feature at Luther, the thing that makes it a great example of the best that liberal art colleges have to offer, is their commitment to education. I had the chance last week to visit the school and talk with several professors. Every one of them knew their students by name and had plenty of anecdotes about how they were able to guide and inspire them to reach their potentials. I also was able to talk with Dean Kevin Kraus, who said that between 90 and 95% of students either entered the workforce or started graduate school within 6 months of graduating, a very high number when compared to most colleges.
Education comes first, even in the athletics department. Luther hosts 19 varsity sports including football; around 20% of all students are varsity athletes. But Alex Smith, an Associate Athletics Director, says that if a student has a test or project that may interfere with practice, coaches will excuse the student from practice and try to make up the time with one-on-one drills later.
Like most liberal arts colleges, Luther has a strong commitment to prepare their students for the workforce and life in general. The key to their success is teaching students to think, to investigate and to bring their knowledge of the world to everything they do. A dedicated and active alumni network appears to wholeheartedly agree that they’ve accomplished their goal.
As if writing the Common App essay wasn't hard enough. Now you have to guess which browser will actually transmit your entire essay. Recent reports indicate that students using the Safari browser are discovering that their essays have been "splinched." Random sentences or parts have been deleted from their essays.
Don't be caught with incomplete essays -- use the Chrome browser when submitting the Common App to your schools. Worried that your essays got splinched? You can view your essay after submission. Click on the college name from the Common App Dashboard, then click on Status. You'll see a PDF icon. Click on that to view your essay.
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