Path: senator-bedfellow.mit.edu!dreaderd!not-for-mail Message-ID: Supersedes: Expires: 20 Jun 2000 18:20:11 GMT X-Last-Updated: 1997/02/21 Subject: FAQ: Financial Aid, Scholarships, and Fellowships [Monthly posting] Newsgroups: soc.college.financial-aid,soc.college,soc.college.grad,soc.college.gradinfo,misc.education,news.answers,misc.answers,soc.answers Summary: Information about financial aid, college funding, etc. Distribution: world Followup-To: poster From: mkant@finaid.org Reply-To: mkant@finaid.org Organization: FinAid Page, Inc. Approved: news-answers-request@MIT.Edu Originator: faqserv@penguin-lust.MIT.EDU Date: 07 May 2000 18:27:05 GMT Lines: 3243 NNTP-Posting-Host: penguin-lust.mit.edu X-Trace: dreaderd 957724025 10878 18.181.0.29 Xref: senator-bedfellow.mit.edu soc.college.financial-aid:7331 soc.college:66582 soc.college.grad:18318 soc.college.gradinfo:14116 misc.education:126145 news.answers:183142 misc.answers:11181 soc.answers:13632 Archive-name: college/financial-aid-faq Last-Modified: Thu Feb 20 14:27:09 1997 by Mark Kantrowitz Version: 1.15 URL: http://www.finaid.org/ Size: 157944 bytes, 3253 lines ;;; **************************************************************** ;;; Student Financial Aid FAQ ************************************** ;;; **************************************************************** ;;; Written by Mark Kantrowitz This post is a collection of useful information about financial aid for undergraduate and graduate education. The Financial Aid FAQ is compiled by Mark Kantrowitz, maintainer of the Financial Aid Information WWW page and author of the "Prentice Hall Guide to Scholarships and Fellowships for Math & Science Students". Please mail comments, corrections, additions, suggestions, criticisms and other information to mkant@finaid.org. *** Copyright: Copyright (c) 1995-96 by Mark Kantrowitz. All rights reserved. This FAQ may be freely redistributed in its entirety without modification provided that this copyright notice is not removed. It may not be sold for profit or incorporated in commercial documents (e.g., published for sale on CD-ROM, floppy disks, books, magazines, or other print form) without the prior written permission of the copyright holder. Permission is expressly granted for this document to be made available for file transfer from installations offering unrestricted anonymous file transfer on the Internet. Permission is expressly granted for university financial aid offices to distribute free copies of this FAQ to their students. If this FAQ is reproduced in commercial offline media (e.g., CD-ROM, books, magazines, etc.), a complimentary copy should be sent to Mark Kantrowitz, FinAid Page, Inc., 2010 Wendover Street #1, Pittsburgh, PA 15217-1942 USA. This article is provided AS IS without any express or implied warranty. *** Recent Changes: ;;; 1.00 ;;; 12-APR-95 mk Created. ;;; ;;; 1.01 ;;; 15-MAY-95 mk Numerous additions/changes to the glossary supplied by Ann ;;; White, and a few corrections to the rest of the FAQ. ;;; 15-MAY-95 mk Added new sections: "Types of Financial Aid". ;;; a section for people for whom "The Financial Aid ;;; Office Didn't Give Me Enough Aid!", and a section ;;; "Figuring Financial Need". ;;; 15-MAY-95 mk Thanks to Ted Malone for some comments on resources vs ;;; assets, prepaid tuition plans, and asset shifting games. ;;; 18-MAY-95 mk Modified comments on financial aid consultants slightly. ;;; 18-MAY-95 mk Added new sections: "Common Questions and Answers" and ;;; "Telephone Numbers". ;;; 1-JUN-95 mk Thanks to Ron Stamps for corrections to the comments about ;;; tax returns in [6]. ;;; 1-JUN-95 mk Added section on GATE loans. ;;; ;;; 1.02: ;;; 26-JUN-95 mk Added note to [9] about the taxability status of ROTC ;;; scholarships, based on information supplied by John ;;; Stafford. ;;; 29-JUN-95 mk Thanks to Michael Alexander for his copious comments on ;;; this FAQ and the correction of several errors. ;;; 2-MAY-96 mk Updated international student information in section [11] ;;; to match the information provided on the FinAid page. *** Topics Covered: [0] What is the purpose of this newsgroup? [1] The Financial Aid Information WWW Page [2] Sources and Types of Financial Aid [3] Determining Financial Need [4] Consequences of the Need Analysis Formula [5] Don't Get Taken [6] Be Wary of Scholarship Search Companies [7] Financial Aid Consultants [8] Don't Assume You Don't Qualify [9] General Advice [10] Financial Planning Tips [11] Financial Aid for Foreign Students [12] My School Didn't Award Me Enough Aid! [13] Taxability of Financial Aid Awards [14] Common Questions and Answers [15] Mailing Lists and Newsgroups [16] Recommended Books [17] Financial Aid Software [18] Scholarship Search Services [19] Glossary of Financial Aid Terminology [20] Telephone Numbers Search for \[#\] to get to question number # quickly. ---------------------------------------------------------------- Subject: [0] What is the purpose of this newsgroup? The newsgroup soc.college.financial-aid exists for the discussion of financial aid issues related to post-secondary education (both undergraduate and graduate). Topics may include, but are not limited to, grants, scholarships, fellowships, loan programs, work-study, international student aid, and updates on current changes to financial aid programs. The newsgroups soc.college and soc.college.grad are for discussion of undergraduate and graduate issues unrelated to financial aid. The newsgroup soc.college.gradinfo is for universities and departments to post information about their graduate programs. Discussion should NOT take place in soc.college.gradinfo. The newsgroup alt.grad-student.tenured is for discussions relevant to graduate students who are "tenured" (i.e., have passed their qualifying examinations). This FAQ is posted to the soc.college.financial-aid newsgroup and related newsgroups once a month. Between postings the FAQ may be obtained at the URL http://www.finaid.org/finaid/faqs/finaid.faq You can get a copy of the FAQ sent to you by email by sending a message to query@finaid.org with send faq The FAQ will be sent to the email address extracted from the header of your request message. If this address is incorrect, you can specify an alternate address using the command send faq to userid@host where userid@host is the correct reply address. The FAQ postings are also archived in the periodic posting archive on rtfm.mit.edu:/pub/usenet/news.answers/college/ [18.181.0.24] as the file financial-aid-faq. If you do not have anonymous ftp access, you can access the archive by mail server as well. Send an E-mail message to mail-server@rtfm.mit.edu with "help" and "index" in the body on separate lines for more information. You can also access the FAQ through Thomas Fine's Web-based FAQ archive, through the URL http://www.smartpages.com/faqs/college/financial-aid-faq/faq.html ---------------------------------------------------------------- Subject: [1] The Financial Aid Information WWW Page This FAQ posting does not include a list of URLs for financial aid resources on the World-Wide Web. Instead, we suggest that you take a look at FinAid, the Financial Aid Information web page described below. If you encounter an online financial aid resource that is not already included in this web page, please send email to mkant@finaid.org. The Financial Aid Information Page, also known as the FinAid Page, is the most comprehensive collection of student financial aid information on the Internet. The page includes a free online financial aid estimation service that provides an estimate of your expected family contribution and financial need. The page also includes links to + college and university financial aid Web and Gopher servers + information from the US Government and other sources + information about grants and loans + online scholarship and fellowship databases + a collection of financial aid calculators, including a loan repayment calculator and a savings plan designer. + a glossary of financial aid terms + a bibliography of financial aid resource materials In addition, the Financial Aid Information page is providing free access to fastWEB (Financial Aid Search Through the WEB), a searchable database of more than 180,000 private sector scholarships, fellowships, grants, and loans. Why pay a scholarship search service to use their database, when you can search one of the best databases for free? It also provides several free handouts and documents, such as "Funding for Graduate School", and links to the online versions of Octameron Associates' book "Don't Miss Out: The Ambitious Student's Guide to Financial Aid" and the US Department of Education's guide to federal financial aid programs. The page also runs an "Ask the Aid Advisor" service, in which 60 financial aid administrators and professionals have volunteered to answer questions submitted by students and parents. The Financial Aid Information page is accessible on the World-Wide Web through the URL http://www.finaid.org/ You can read this page using a Web browser such as Netscape, Microsoft Internet Explorer, Mosaic, or Lynx. If you do not have a Web browser, you can search the WWW by telnet to www.w3.org. There is also an email interface; to use it, send mail to listproc@www.w3.org, and use lines like www http://www.finaid.org/finaid.html to retrieve the text of a particular URL (in this case, the Financial Aid Information page's home page). ---------------------------------------------------------------- Subject: [2] Sources and Types of Financial Aid Sources of funding include federal, state, and local governments, businesses and foundations, community groups, and colleges and universities. There are two basic types of financial aid: 1. GIFT AID. Gift aid does not need to be paid back. There are three common forms of gift aid: + GRANTS are awarded based on the applicant's demonstrated financial need. + SCHOLARSHIPS are awarded to undergraduate students based on the applicant's academic merit, although financial need is sometimes taken into account in determining the award amount. Scholarships provide funds toward tuition, fees, and other required educational expenses. Most scholarships do not provide funds for living expenses. + FELLOWSHIPS are awarded to graduate students based on the applicant's academic merit. Financial need is rarely taken into account. Most fellowships provide a stipend for living expenses in addition to funds for tuition, fees, and other required educational expenses. Residential fellowships provide support for a student to use an institution's facilities, such as special library or museum collections. Dissertation fellowships support students while writing the thesis. Some forms of gift aid, such as ROTC scholarships and certain medical fellowships, require a few years of service in exchange for the financial aid. If one fails to complete the service requirement, then one must pay back the award. But most forms of gift aid do not need to be repaid and do not include a service requirement. 2. SELF-HELP AID + LOANS. Loans are normally repaid with interest. Some loans do not need to be repaid until the student has graduated or otherwise left school. Loans represent more than half of all financial aid. + STUDENT EMPLOYMENT. There are three common forms of student employment: o Federal and state work-study programs. Work-study programs provide employment during the academic year that should be "career oriented", although some students have received gopher-type jobs. The work is part-time, and often limited to under 10 hours per week. Part of the salary is paid for by the government. Most students who receive work-study jobs are undergraduate students, but graduate students sometimes meet the eligibility requirements. o Assistantships. Teaching Assistantships and Research Assistantships normally provide graduate students with a full or partial tuition waiver and a small stipend and require them to perform teaching and/or research duties. o Regular part-time employment during the academic year or the summer months. Loans and student employment are sometimes collectively refered to as Self Help. Most types of financial aid programs are "need-based". This means that the amount of aid you receive depends on your financial situation. Most government sources of aid are need-based. Other sources of financial aid are "merit-based", which usually depend on academic, artistic, or athletic talent, and may use your grades, test scores, hobbies, and special talents as awarding criteria. Most sources of financial aid require that you be enrolled at least half-time, though some awards are restricted to full-time students. There may be other restrictions as well. For example, most federal aid programs are restricted to US citizens, permanent residents, or eligible non-citizens. If you are a US citizen, male, and have reached age 18, you must be registered with Selective Service to receive federal aid. ---------------------------------------------------------------- Subject: [3] Determining Financial Need Your school's financial aid administrators calculate your financial need using information supplied by you. If you are classified as a dependent student, as are most undergraduate students, your parents will also be required to supply some information. Much of this information is contained on the Free Application for Federal Student Aid (FAFSA). The FAFSA must be submitted for you to be considered for virtually all need-based aid, including most federal and state sources of financial aid. Some schools may require the Financial Aid PROFILE (formerly known as the FAF or "Financial Aid Form"), or a supplemental application form for additional information. Most schools suggest you submit the FAFSA as soon as possible after January 1 of your senior year in high school (the year you'll be starting college) and no later than May 1. The FAFSA should normally be submitted by March 1 for you to be eligible for most state aid. (Do not submit the FAFSA before January 1, or it will be automatically rejected.) The FAFSA requires financial information for the previous tax year. For example, for the 1996-97 academic year, you must provide 1995 financial information. Even though you may not be able to complete your federal income tax return until March or April, you should not wait to file your FAFSA until your tax returns are filed with the IRS. Instead, use estimated income information and submit the FAFSA as soon as possible after January 1. This practice is completely acceptable and recommended, especially if you anticipate your family circumstances changing during the subsequent year. The following documents from both student and parents, as appropriate, will assist you in filling out the FAFSA: + US Income Tax Returns (IRS Form 1040, 1040A, or 1040EZ) for the fiscal year that just ended and W-2 and 1099 forms. + Records of untaxed income, such as Social Security benefits, AFDC or ADC, child support, welfare, pensions, military subsistence allowances, and veterans benefits. + Current bank statements and mortgage information. + Medical and dental expenses for the past year which weren't covered by health insurance. + Business and/or farm records. + Records of investments such as stocks, bonds, and mutual funds, as well as bank Certificates of Deposit (CDs) and recent statements from any money market accounts. + Social Security numbers. Four to six weeks after you file the FAFSA, you will receive a Student Aid Report (SAR). The SAR summarizes the information you provided on the FAFSA and indicates the amount of Pell Grant eligibility, if any. It also indicates the Expected Family Contribution (EFC). The determination of financial need depends on two numbers: + The Cost Of Attendance (COA) for your school. This may also be known as the school's "budget". + The Expected Family Contribution (EFC). This is the amount of money your family is expected to contribute to your education. Your financial need is the difference between the COA and EFC: Financial Need = COA - EFC The amount of financial aid for which the student is eligible will be based on this number. Your school will try to meet this demonstrated need through a financial aid "package", which combines aid from federal and state sources with loans, institutional grants, and student employment. Unfortunately, your school may not be able to provide you with financial aid to meet your entire demonstrated financial need. Many colleges and universities must create a "Unmet Need" or "Need Gap" between the cost of attendance and the amount you can afford to pay because of limited funds. Schools have limited funds available for financial aid, and they must determine how to best allocate the funds to their neediest students. Very few schools can afford to meet the demonstrated need of all their students, so most assume that all students and/or parents must pay a certain minimum amount, regardless of their need. Others give financial aid only to the neediest students. You're expected to obtain the funds for the unmet need or gap through summer or term-time employment earnings and educational loans, including the Federal Parent Loan for Undergraduate Students (PLUS). [Recently, a few schools have started using academic merit to adjust the size of the need gap. These schools sweeten the pot for the more academicly talented students in order to entice them into matriculating.] Moreover, your financial aid package may be reduced by any "outside resources" you receive. A resource is something that is available because the student is in school, and is normally counted after need is determined. For example, if your parents have contributed money to a prepaid tuition plan, the money received from that plan toward the student's education will be subtracted from the determination of financial need. Other resources include VA educational benefits and outside scholarships. Thus the determination of the school's financial aid package is actually based on Remaining Financial Need = Financial Need - Resources So even though resources do not affect the size of the Pell Grant the student will receive, they do affect the amount of Stafford or campus-based aid available. They are often counted 100% toward meeting need, and the university will reduce the size of the financial aid package to compensate. Resources represent a direct reduction of cost (e.g., a prepaid tuition plan cuts the amount of tuition the student will pay) and therefore less need. [A few schools will "reward" students for bringing in outside scholarships by using a portion of the outside funds to reduce the self help level, or by using them to reduce the loan portion of the financial aid package and not the institutional grants.] The school's "budget" or COA will include tuition, fees, room and board, books and supplies, travel, and personal and incidental expenses. In many cases there is a standard fixed budget amount for some of these categories. For example, the budget amount for travel may vary depending on the student's home state. Likewise room and board expenses may be reduced and travel expenses increased for commuter students. Budget allowances are used only for determining the estimated expenses that a student will experience during the enrollment period. Actual costs will vary depending on the your particular lifestyle. If special circumstances should warrant a higher budget amount, consult your financial aid administrator, who is permitted to increase your budget, if appropriate, with documentation. For example, students with child care expenses or expenses related to a disability may be able to get their budget increased to compensate. If your books and supplies cost more than the amount in your budget, save your receipts and show them to a financial aid administrator. The federal formula approved by Congress to calculate the EFC is called the Federal Methodology (FM). The federal methodology is used to determine eligibility for federal funds. If a college or university relies on a different formula for awarding its own funds, that formula is called the Institutional Methodology (IM). Different colleges and universities may use different institutional methodologies. The EFC is the sum of the student contribution and the parent contribution: EFC = Student Contribution + Parent Contribution An independent student is not expected to have a parent contribution. To be classified as independent for Federal aid purposes, a student must either be 24 years of age or meet one of the following exceptions 1. be married 2. have a dependent 3. be a graduate or professional student 4. be a ward of the court or an orphan 5. be a veteran Some schools (mostly private) expect both natural parents to contribute to their children's educational expenses, regardless of a divorce or any court orders to the contrary. In cases of divorce where the custodial parent remarries, the financial information for both the custodial parent and the step-parent must be included on the FAFSA as well as any child support and/or alimony received from the non-custodial parent. If a student is classified as independent because of marriage, the spouse's financial information must be included on the form. The calculation of the expected student contribution changes from school to school, but is generally 35% of the student's assets and 50% of the student's summer earnings. (The federal calculation is 50% of the summer earnings above $1,750 and 35% of the student's reported assets.) The parent contribution depends on the number of parents with earned income, their income and assets, the age of the older parent, the family size, and the number of family members enrolled in postsecondary education. Income is not just the adjusted gross income from the tax return, but also includes nontaxable income such as social security benefits and child support. The Higher Education Amendments of 1992 eliminated home equity from the EFC, but many private colleges and universities still use a parent's home equity as a way of rationing their school's own grant and scholarship funds. Money set aside for retirement in a pension plan such as a 401K, IRA, Keogh, or 403b is usually not counted as an asset. However, the funds contributed to a tax-deferred retirement program during the previous year must be included on the FAFSA as "other untaxed income". In addition, an asset protection allowance shelters a portion of the assets from the calculation of the parent contribution. The asset protection allowance increases with the age of the parents to allow for emergencies and retirement needs. The need analysis system assumes that the parents contribute 6% to 12% of their assets above a threshold, and 25% of the gross income above a threshold (the minimum living allowance, which depends on the number of family members living at home), less an allowance for family members in college. The following formula is meant to be illustrative -- the federal formula is a bit more complicated -- but gives a fairly good estimate of the parent contribution (PC). Let n be the number of family members in college. EPC = 12% of max(0, assets - $30,000) + 25% of (income - $18,000) - (n - 1) x $900 PC = EPC + (n - 1) x $500 -------------------- n ---------------------------------------------------------------- Subject: [4] Consequences of the Need Analysis Formula There are several consequences of the structure of the needs analysis formula that are worth noting. 1. The parent contribution is divided by the number of family members in college. Changes in the number of family members in college can significantly affect the amount of aid received. For example, even families that are well-off may become eligible for financial aid when two or more family members are enrolled in college at the same time. So parents should not assume that they are ineligible for aid just because they make too much money or own a house. [Thus the single greatest thing a parent can do to affect their children's eligibility for federal aid is to go back to school. Many private schools, however, exclude parents in college from their need analysis calculations.] Note that the family members must be enrolled at least half-time and working toward a degree at a Title IV institution to be counted as being in college. The service academies DO NOT count as Title IV institutions. 2. The assets and income of parents are "taxed" by the federal methodology need analysis formula at a much lower rate than those of the student. This means that it may not be to the advantage of the parents to shift income and assets to their children, despite the tax savings. Generally, no more than 6% of a parent's assets (excluding their home equity and retirement programs) are expected to be used for the child's educational costs. For virtually all parents, the first $30,000 to $40,000 of their assets (depending on their age and family size) will be ignored completely in the federal methodology need analysis formula. Since the student's assets are "taxed" at a much higher rate than the parents' assets, the family should spend down the student's assets before using any of the parents' assets to pay for the student's education. Otherwise the student's assets will again be subject to the high "tax" rate during the next year's need analysis. Just because the formula assumes that students contribute 35% of their assets and parents only 6%, doesn't mean you have to treat those percentages as targets. 3. The financial aid award or "package" is based on the assets and earnings for the year before the student matriculates in college. So parents should be careful about financial activity the year before their children enter college. For example, parents who avoid creating capital gains during the child's senior year in high school will be at an advantage in the federal methodology need analysis system. Likewise, they may wish to wait until after the child has entered college to withdraw money from pension plans to pay for college expenses. ---------------------------------------------------------------- Subject: [5] Don't Get Taken College costs a lot of money, and there are some companies that try to take advantage of students and parents. The lure of "FREE MONEY" can fool even skeptical people. Every year there are a few scams based on imitations of legitimate foundations and scholarship search companies. Be cautious if you must pay money to get money -- it might very well be a scam. If a foundation charges an application fee to apply for their scholarships, it could be a scam. A $10 or $20 application fee may seem rather innocuous, but if the "foundation" receives a few thousand applications, they can pay out a $1,000 scholarship or two and still pocket a hefty profit. If you have questions about financial aid or are suspicious about a program, go to your school's financial aid office. (You can ask them for advice even if you are still in high school.) They can provide you with the accurate and current information, and verify whether a foundation is legitimate. The amount of assistance they can give you varies from school to school. Some school financial aid offices have extensive financial aid book collections and run free or low cost scholarship search services. Others are limited to answering questions about filling in the financial aid forms. Nevertheless, they should be the first place you ask for help, not your last. You can also check the legitimacy of a business by calling the local Better Business Bureau, State Attorney General's Office, and State Bureau of Consumer Protection. If you've been the victim of a scholarship scam, you may wish to call the National Fraud Information Center at 1-800-876-7060 to report the problem. Send email to mkant+scams-l@cs.cmu.edu about a suspicious scholarship offer, and we'll do our best to check it out and let you know what we find. ---------------------------------------------------------------- Subject: [6] Be Wary of Scholarship Search Companies A scholarship search company will charge you a fee to compare your "profile" against a database of scholarship programs and report any matches. Although a well-designed database could save you some time, you should be cautious before spending money to use such a service. "Guarantees" of scholarships are usually worthless, and few students have won scholarships using such services. Many scholarship search companies promulgate the myth that "more than $6 billion in financial aid went unclaimed last year", suggesting that the money is there for the taking. In reality, most scholarship and fellowship programs grant awards to 5-10% of their applicants. If money is going unclaimed -- and it certainly isn't as much as $6 billion -- it's because it can't be claimed, not because the award is inadequately advertised. While you are encouraged to seek aid from all sources, including scholarships, it should be noted that of the $42 billion available from all sources of financial aid each year, scholarships represent less than 5% of the total. Most students who go to college do not receive a scholarship to finance their educational costs. If you are very talented, you may be able to win some scholarships to help pay for your education, but most students with run-of-the-mill qualifications will not. Even the handful of scholarships for C students are looking for people with potential and promise. It is still worth applying for scholarships for which you are eligible, but be realistic about your chances. Some scholarship search services offer a "guarantee" that you will receive at least one scholarship or they will refund your fee. Note that this is not a guarantee that you'll win a scholarship, but that their report will list at least one scholarship for which you are eligible to apply. In most cases it is very difficult or nearly impossible to meet their conditions for a refund. Sometimes the refund is in the form of a savings bond, which has a current redemption value that is half of the face value. A scholarship search service may also claim that their database contains more than 250,000 awards. In reality, there are no more than about 5,000 sources of financial aid when one excludes college-controlled aid and government aid. That is still a lot, but inflated numbers sound more impressive. Most search services are information franchises -- the operator sends your information to a central database and may have no real financial aid experience. Some of these databases are updated infrequently and may contain minimal information other than the contact address and a short description. The quality of the match may also be very loose. You may find that you are ineligible for most of the scholarships listed in your report, or that the deadline has already passed. There are several things you should do before using a scholarship search service: 1. Ask your friends if they know of anybody who used such a service and won an award. If nobody you know has used the service and won any money, perhaps it isn't as good as they claim. 2. Before using any scholarship search service, ask how many students actually won scholarships as a result of using their service, and how many didn't. Insist on real numbers, not vague hedges. Few users of scholarship search services are awarded a scholarship. 3. Spend an hour or two in your local library. You may find more helpful and detailed scholarship information from some of the books we recommend in [16] below. There are several hundred scholarship books available. You can find an annotated bibliography as part of the Financial Aid Information web page. Some of these books are outstanding, with carefully researched and verified information. Others are nothing more than a printout of the contents of one of the major scholarship search databases. When considering whether to use a book, look at its copyright date. You don't want to waste time with a book that is too old, since the information does change. If you are trying to conduct a comprehensive search, look not only at scholarship books, but at the encyclopedia of associations and similar resources. See [18] below for a word of warning from the Better Business Bureau about scholarship search services. [To help students avoid wasting money on scholarship search services, the Financial Aid Information page is providing free access to fastWEB (Financial Aid Search Through the WEB), a searchable database of more than 180,000 private sector scholarships, fellowships, grants, and loans.] ---------------------------------------------------------------- Subject: [7] Financial Aid Consultants Financial aid consultants help students and parents through the financial aid process by providing advice and assistance that supplements the services offered by the schools themselves. Just as some people seek out the services of tax preparer for their income tax returns, a competent financial aid consultant can help a family navigate through the sometimes confusing financial aid application process. Financial aid consultants may provide a variety of services, such as running scholarship searches, publishing newsletters and booklets, providing an estimate of the expected family contribution, and helping you through the process of applying for financial aid, including filling out the FAFSA, PROFILE, and other financial aid forms for you, and assisting you with any appeals. Some financial aid consultants may offer strategies for maximizing your eligibility for financial aid. As with any business, there are good consultants and there are bad consultants. Some consultants are reasonably priced, charging $50 to $100 for a comprehensive set of services, and others line their own pockets by charging hefty fees of $250 to $1,000. If you need just a little help filling out your financial aid forms, you may not necessarily require the services of a financial aid consultant. Many schools run free workshops and offer free help in filling out the financial aid forms accurately. On the other hand, a school may not tell you how to take advantage of the loopholes in the need analysis process to maximize your eligibility for aid (see sections [4] and [10], for example). Many financial aid administrators will warn you against using a financial aid consultant because 1. The financial aid administrator's job is to distribute limited funds fairly. They are often dedicated professionals, and strongly resent attempts to circumvent the need analysis process. 2. The financial aid administrator may have encountered an incompetent consultant who made errors on the financial aid forms and failed to submit the forms on time (and subsequently blamed it on the financial aid office). They may also have encountered an unscrupulous or unprofessional financial aid consultant who gave parents unethical advice. 3. Using a financial aid consultant will cause your FAFSA and school aid applications to be more heavily scrutinized. (Paid consultants are required to sign the FAFSA, even if they don't fill out the FAFSA on your behalf. Beware of any consultant who refuses to sign the FAFSA.) Probably every financial aid administrator has encountered a few horror stories. Financial aid administrators get particularly upset about consultants who hurt the family by giving financially unsound advice. Before deciding whether to use a financial aid consultant, ask them about their qualifications. A consultant who has worked in the financial aid office at a university, or who is a CPA (Certified Public Accountant) or CFP (Certified Financial Planner), will be more likely to be able to help you than one who has no experience as a practicing financial aid administrator. The only experience some consultants have had with financial aid has come from filling out their children's financial aid forms. An inexperienced consultant may make costly mistakes. Try calling your campus financial aid office before using a consultant. They may be able to recommend a consultant with experience as a financial aid administrator, or tell you about past problems they've had with particular consultants. ---------------------------------------------------------------- Subject: [8] Don't Assume You Don't Qualify Don't assume that you don't qualify for financial aid. Virtually all US citizens or eligible non-citizens enrolled at least half-time are now eligible for some form of financial aid, including the Federal unsubsidized Stafford Loan and the Federal Parent Loan for Undergraduate Students (PLUS). Even if you don't qualify for a grant, you may still be eligible for other forms of financial assistance. Many families don't apply for financial aid because they believe that they earn too much money or own a home, or because their friends and relatives have told them that they won't qualify. They then prevent themselves from getting any aid by failing to apply for it. You don't need to be poor to get financial aid. For example, some loans and scholarships are available regardless of need, and the number of family members in college can significantly affect your eligibility for aid. Also, as mentioned previously, a parents' home equity or retirement programs are no longer considered in the federal methodology need analysis formula. There are several factors in addition to income that are used to determine your eligibility for financial aid, and there is no simple cut-off based on income. Talk to the school's financial aid administrators if you have any questions. You can't get aid if you don't apply. So you should definitely fill out the FAFSA and apply for financial aid if you feel you may need assistance. It is important to apply for financial aid before admission, even if you think you won't qualify during your first year. For example, the Brown University Guidebook for Undergraduate Financial Aid says "... it is important that students who plan to apply for admission to Brown apply for financial aid as well if they have reason to believe that the costs of attendance exceed what they and their parents can reasonably be expected to contribute. Only under the most extraordinary circumstances is it possible to grant scholarship aid to first year students who failed to apply for aid before admission. Budget limitations may also preclude the granting of University scholarships to new upperclass applicants." Moreover, don't apply only to those schools you think you can afford. The more expensive schools may provide larger financial aid packages to compensate for the greater cost of attendance. Do not reject any school simply because of the high cost of tuition and room and board. Tuition and living expenses are like list prices; universities offer financial aid packages as discounts against the list price to bring the cost closer to what you can afford. Compare schools based on the bottom line, not the list price. You may find that the difference in the bottom line is not as significant a factor as you previously assumed. Do not limit your initial choice of schools by the high price tag. It is, however, a good idea to apply to several different types and costs of schools for insurance purposes. Just as you apply to one or two safety schools that you are sure will admit you, you should also apply to a few schools you are certain you can afford. Certainly college costs should be one of the factors you consider when deciding where to go to school, but it shouldn't be the *only* consideration. Many students and parents avoid the financial aid office, thinking of the financial aid office as "the enemy". Most financial aid office employees are dedicated (underpaid and overworked) professionals who want to help you as much as they can. Their job is to distribute limited funds fairly to all the students. Within their constraints, however, they will do their best to ensure that you can afford to graduate from their university. True, their estimate of what you can afford may not match your own assessment, but they aren't out to get you. They will try to help you if you ask. ---------------------------------------------------------------- Subject: [9] General Advice For information about college-controlled aid, talk to the financial aid administrators at the school. You will find out about any special merit scholarships when you apply for financial aid at the school. A recent trend is for many second tier schools (and even a few top rank schools) to offer non-need merit-based aid to attract top students. To find private sources of aid, spend a few hours in the library looking at scholarship and fellowship books or consider a reasonably priced (under $30) comprehensive scholarship search service. Some good books are recommended in section [16]. Always write away for up-to-date information, enclosing a self-addressed stamped envelope for the application materials. You should also think of any organizations to which you belong that might have aid funds available: religious organizations, fraternal organizations, clubs, athletics, veterans groups, ethnic groups, rotary clubs, unions, and your and your parents' employers. If you are presenting a paper at a technical conference, many conferences have travel funds available to enable students to attend the conference. Every high school student should consider checking the "yes" box on the ETS Student Search Service form or the ACT Student Profile Form, releasing your information to scholarship programs. Some scholarship programs, such as the National Merit Scholarship Corporation (NMSC), rely on this information for determining eligibility, and if you don't check the box you won't be considered for the award. High school students should also consider applying for the Pell Grant. Some sources of financial aid require you to have applied for the Pell Grant before you can be considered eligible for their program. Graduate students who applied for the National Science Foundation (NSF) or Hertz Foundation graduate fellowships as undergraduate seniors should know that they can apply a second time as first year graduate students. If you didn't win a NSF as a senior, ask for a copy of your evaluation forms. Often the evaluations will be rather explicit in identifying the weaknesses in your application, and you can address those areas the second time you apply. You are encouraged to mail your FAFSA and obtain a certificate of mailing to verify that you mailed it. The cost is only 55 cents. You do not need to send your FAFSA or PROFILE by registered, certified, or overnight mail. [I personally send important mail by certified mail, return receipt requested, but I tend to be paranoid about forms being lost in the mail.] Be very careful not to miss any deadlines. Ask the school's bursar office about the availability of installment payment plans. Many universities will let you spread the cost of tuition out over the full year, instead of requiring you to pay a lump sum up front. ---------------------------------------------------------------- Subject: [10] Financial Planning Tips Financial planning is the process of designing a plan to meet your financial goals. It involves identifying the goals (e.g., saving for your retirement, paying for your children's education, buying a house), your current position (net worth = assets - liabilities; net cash flow = income - expenses), and the steps you need to take in order to reach those goals. Just knowing how much you spend on monthly expenses can be an eye-opening experience. Given this information, you can then play "what if" games and make better decisions for your future. 1. It pays to save. Even though the federal methodology need analysis formula will take parent assets into account when calculating the family contribution, it is still worth saving money for college despite the "savings penalty". Your home equity and retirement savings aren't counted, and an age-dependent asset protection allowance shelters some of your assets from the need analysis. Moreover, parent assets are assessed at a very low percentage rate. Try saving at least $100 a month from the date of birth. This probably won't cover the full cost of the child's education, but it can make a difference between being able to pay for college and not. If you can afford it, $400 or more a month is a much better target. Education is one of the best financial investments you can make. A bachelor's degree yields an increase in lifetime earning potential of nearly half a million dollars according to Census Bureau data. This is equivalent to a 20% annual return on investment. 2. Don't play asset shifting games. The financial need of most families are assessed primarily on income, not assets. Remember, the value of your home and retirement plans will usually not be included in calculating the parent contribution. [Although the federal calculation of financial need does not include home equity, some private colleges and universities still consider it when awarding institutional grants.] Moreover, the federal methodology also ignores the first $30,000 to $40,000 in savings and investments, depending on the number of parents, their age, and the family size. Consult an accountant before shifting parent assets to your children. Although there can be a significant tax benefit, remember that the federal methodology need analysis system assumes that children contribute 35% of their assets to their education each year. The federal methodology assumes that parents contribute a MUCH lower percentage of their assets, so it is usually better to leave the assets with the parents. Saving a few dollars in taxes now may cost a lot more in aid eligibility later. Some people may advise shifting assets to grandparents, non-custodial parents (if parents are divorced) or other relatives. Even if such asset-shifting games are financially sound, they are at best unethical, if not fraudulent. You haven't lost control over the assets -- your relatives cannot spend the money as they wish. When you fail to report these assets on the FAFSA and PROFILE, you are providing false information. Such actions are as bad morally as stealing from your neighbors or cheating on your taxes. For most people parent assets are not really a factor in parent contributions. The asset protection allowance prevents a threshold amount of assets from being included in the calculation of the parent contribution. Student assets, on the other hand, do play a significant role in the calculation of the student contribution. 3. Prepaid Tuition Plans and Asset Shifting Although shifting assets to a prepaid tuition plan by making a lump sum payment will shelter the money from the financial need assessment, since it no longer counts as an asset, this technique is ultimately ineffective as a way of increasing the size of the student's financial aid package. Having fewer assets results in a smaller EFC, and hence makes you eligible for a larger Pell grant. However, most universities treat prepaid tuition plans as a resource. This means that before they decide how much financial aid to award from institutional funds, they will reduce the computed need by the money received from the prepaid tuition fund. This makes sense, because resources yield a reduction in cost (e.g., less tuition) and thus less need. So this may change the balance between grants and loans a little, but it will not increase the total amount of aid received. The financial aid administrator will normally adjust the rest of the student's financial aid package to compensate, reducing the amount of institutional aid. Moreover, instead of having the money which was paid into the prepaid tuition plan "taxed" at the usual low rate for parent assets, it is effectively "taxed" at 100%. So shifting the money from an asset to a resource will actually yield a reduction in financial aid. Thus the only reasons a parent should pursue a prepaid tuition plan include: + If a state ever designs a plan that is acceptable to the IRS, the earnings of funds invested in the plan will be tax-free, yielding extra buying power. [According to the 19-MAY-95 issue of the Chronicle of Higher Education, the IRS has dropped its attempt to tax the income of the Michigan Educational Trust.] + Some plans allow a parent to "lock in" the cost of tuition at current rates. Your investments in the plan may be used to pay a guaranteed portion of tuition at one of the participating schools, regardless of any future tuition increases. The percentage of tuition depends, of course, on the particular university. Given that tuition tends to increase at about twice the rate of inflation, this might be a good way of preserving buying power. + Help parents plan for the future as a kind of financial planning. For example, an installment plan would make automatic monthly deductions from one's salary and pay it into the prepaid tuition plan. On the other hand, using a prepaid tuition plan restricts you to a particular set of schools, limiting your options. You may be better off investing your money in mutual funds or other investments that outpace inflation. 4. Ask about the impact of a second income on aid eligibility. If the second income is low and introduces additional expenses (e.g., child care), sometimes it does not pay for the second parent to work. Examine the tradeoffs very carefully. 5. Don't try to finagle the financial aid regulations and policies. Many financial aid consultants suggest various ways of taking advantage of loopholes in the financial aid system. Some of these strategies are sound, but others have backfired on the families who follow them. For example, a few years ago some "consultants" advised parents to amend their previous year's tax returns to remove their child as a claimed exemption. The idea was to qualify the child as an independent student when applying for financial aid. Not only can this trigger an audit, but financial independence is not the only requirement for determining independent status. Parents who followed this advice lost a fair amount of money in lost tax savings, not to mention fees paid to high-priced consultants. If the advice you receive involves questionable ethics, think twice before following it. There is good advice and there is bad advice. Good tips include spending student assets before parent assets, keeping investments in the parent's name, and reducing family income below the $50,000 threshold that causes assets to be ignored. Any financial aid administrator will admit that these strategies take advantage of genuine loopholes in the need analysis formula. But there are also strategies that try to circumvent the system, instead of trying to work within the rules. Unethical tips include hiding assets, trying to qualify a truly dependent child as an independent, or providing false information on a financial aid form. 6. Try to bargain or appeal to the financial aid administrator only when the family financial situation has changed significantly or where a great disparity in aid offers suggests that an error has occurred. Some people may recommend trying to bargain with the school's financial aid officer to try to increase the aid offer. The only case in which this will definitely work is if there is a significant disparity in the net cost of attendance (e.g., more than $2,000) or if the family's financial picture has changed significantly (e.g., death or disability of a parent, fire, serious illness). Most financial aid administrators will review the award if there is a good reason for doing so, but all will refuse to get into a bidding war with other universities. This is especially true at the Ivy League schools and top research universities. If you really want to attend a school but are convinced that you cannot afford it, talk to a financial aid administrator at the school. They may be able to help, especially if it looks like they will lose an outstanding student because of a few thousand dollars difference in the aid package. They may, for example, be able to modify your financial aid package so that your outside scholarships reduce the loans and not the institutional grants, or suggest other sources of financial aid. 7. Don't lie or act in an unethical manner. If the financial aid administrator believes that false information was provided on the financial aid forms, they can require additional documentation or even disallow your claims. Many schools go through a process known as verification, in which a high percentage of their students are required to provide full documentation of every piece of information listed on the financial aid forms. Read the certification paragraph about providing false information that appears on the front of the FAFSA form. In particular, the FAFSA states that any person who intentionally makes false statements or misrepresentations on this form is subject to fine or imprisonment or both under provisions of the United States Criminal Code That includes the student and his or her parents. If you received funds as a result of providing false information, you will be required to repay those funds. 8. Start looking for aid early. Start planning for your children's education as soon as possible. Most parents wait until the beginning of their child's senior year to start worrying. This is often too late to make a difference. Encourage your children early on in academics and athletics, and start saving as early as possible. There are many sources of financial assistance, but you have to start searching for this aid early. It is never too early to start planning for your children's education. 9. Plan for the cost of education. College costs typically increase at about nearly twice the inflation rate. Plan accordingly. 10. Indicating the wrong tax return form on the FAFSA can negatively affect eligibility for some aid programs, such as the Pell Grant. Many parents choose to file the 1040 even though they are eligible to file the 1040A or 1040EZ. Likewise, companies like H&R Block often automatically file the 1040 form, regardless of the AGI or earnings. This can sometimes cause their children to not qualify for the Pell Grant. Parents should ask their tax preparers whether they would have been eligible to file a 1040A or 1040EZ. The question is NOT whether you would have gotten a bigger refund with the 1040, just whether you would have been eligible. If so, the answer to number 64 (or 53 for independent students) is A. 11. Loan repayment. When repaying your educational loans, try to make as large a payment as possible. The longer you take to repay the loan, the more interest you will pay. A shorter loan period will save you money in the long run. There is also never a prepayment penalty for paying off a loan early. If you are having trouble repaying your loan under the standard 10-year repayment plan for FFELP loans, consider consolidating the loan with a longer term. You may want to consolidate your loans anyway, to reduce the amount of paperwork associated with servicing several loans. Some graduates have found it necessary to consolidate their loans in order to qualify for a mortgage. There are other repayment options that may also help. If your loans are unsubsidized (i.e., the government does NOT pay the interest while you are in school), try to avoid capitalizing the interest. This can significantly increase the size of the loan, especially if you are in school for an extended period (e.g., for a graduate degree). Talk to your bank about setting up an automatic payment plan, where a fixed amount of money is withdrawn from your checking account each month to pay for your loan. This may help you manage the repayment, if you find it difficult to avoid spending money while it is in your checking account. Remember, your student loans will show up on your credit report. Defaulting on your student loans can have serious consequences for your ability to get credit for purchasing a home. 12. Divorce and prenuptual agreements do not shelter funds. Many universities require both natural parents to provide for their children's education. Only when the custodial parent (the parent with whom the child lived the most during the past 12 months) remarries does this obligation shift from the non-custodial parent to the step-parent. Thus, if your parents are divorced and the custodial parent has not remarried, the income and assets of both (natural) parents must be included on the university financial aid form. This rule holds even if the non-custodial parent refuses to supply the required information. (The financial aid administrator may make an exception in cases of documented spousal abuse or abandonment. In general, however, getting divorced is not an effective means of increasing eligibility for institutional funds.) If the custodial parent has remarried, the step-parent's income and assets must be included on any financial aid form, including the FAFSA. By step-parent, we mean the new spouse of the custodial parent, not the spouse of the non-custodial parent. There are no exceptions, even if the step-parent refuses to provide any money for the step-children's support or to supply the required financial information. It may seem cruel, but no information, no aid. If the parent and step-parent do not comply with the reporting requirements, the student is out of luck. It is the student's responsibility to get the parents to cooperate. Likewise, prenuptual agreements are ineffective at sheltering assets from the calculation of the parent contribution. If a step-parent is being counted in place of a natural parent, then all of that parent's assets should be considered subject to the determination of financial need. However, any child support and/or alimony received from the non-custodial parent must be included on the FAFSA. The federal need analysis system treats step-parents as though they were natural parents if + they are married to the custodial parent (the natural parent whose information is being reported on the FAFSA), or + they have legally adopted the student The step-parent's income must be reported for the entire base year, even if the marriage did not occur until the subsequent year. Likewise, the system does not recognize prenuptual agreements. ---------------------------------------------------------------- Subject: [11] Financial Aid for Foreign Students There is very little financial aid for foreign nationals, with the possible exception of citizens of Canada and Mexico. Most grants, scholarships, and loans from public and private sources are restricted to US citizens. Some countries provide financial aid for their citizens to study in the US, and there may be some aid available from the US government for students from specific countries. US government student loans, however, are not available to international students. Your best bet for finding out if there is any financial aid for students from your country is to contact your embassy, the US Department of State, and the US Information Agency. You should also write to the Agency for International Development, Office of International Training, Washington, DC 20523. Your own government may have financial aid available. Usually this support requires that you return home after your education is complete. There may also be private organizations in your home country that provide support for study in the US. Some US schools have direct exchange programs with their counterparts in foreign countries. Such exchange programs often include financial aid for the international student. To find out about these programs, ask your local university. Fulbright scholarships are awarded to approximately 4,700 students worldwide each year. For information about the Fulbright Program, contact the US embassy or consulate in your country. International students who are already enrolled in a US university should visit the + International Student Advisor + Financial Aid Office + Career Planning & Placement Office for information about financial aid for foreign students. The campus library may also have some relevant books. Foreign graduate students have significantly more opportunities for financial aid than foreign undergraduate students. The amount of financial aid for foreign graduate students is nevertheless quite limited. International students who intend to enroll in a graduate program at a US university should contact the schools that interest them. Ask both the relevant department(s) and the university's Financial Aid Office about financial aid for international students. Most support for graduate study in the US by international students is provided by the schools themselves in the form of teaching assistantships and research assistantships. These assistantships are based on academic merit, not financial need. There is very little financial aid for international students available from private sources. Another suggestion is to read some of the ethnic newspapers that are published in the US. Some sources of financial aid are publicized only in such foreign language newspapers. If there isn't anything listed, try calling the editor of the newspaper to see if they know of any possibilities, such as a member of the community who might be willing to sponsor your education. Scholarship search services offer to search a database of scholarships for awards that match your profile. Unfortunately, the vast majority of awards in these databases are restricted to US citizens and permanent residents. Don't waste your money on these services. According to NAFSA (Association of International Educators), two-thirds of international students in the US finance their education using their own resources and the resources of their family. Of the few private scholarships for international students, most require that you apply from your home country. If you are already in the US you might not be eligible. So you should search for financial aid before you arrive in the US. You may find some of the following publications helpful. Before you order a copy, check whether your library has a copy. The US Embassy in your country may have copies in their library. 1. IIE, Funding for US Study - A Guide for Foreign Nationals. This publication lists more than 600 sources of funding for international students (mostly for graduate and postdoctoral programs). It is published by the Institute for International Education, 809 United Nations Plaza, New York, NY 10017-3580. Their telephone numbers are 1-212-883-8200 and 1-212-984-5412, their fax number is 1-212-984-5452, and their email address is iiebooks@iie.org. 2. Octameron Associates publishes a book entitled Scholarships for International Students; the most recent edition I've seen has a copyright date of 1988, which is quite out-of-date. There may be more recent versions. 3. College Board, College Handbook: Foreign Student Supplement. This book provides information about college-specific financial aid for international students, among other topics. You can order the book for $16 plus $8.31 for overseas shipping from College Board Publications, Box 886, New York, NY 10101-0886, USA. If you are in the US, you can call 1-800-323-7155 to place an order. 4. Marguerite J. Dennis, Complete College Financing Guide, 3rd Edition, Barron's Educational Series, 1994. ISBN 0-81-201-635-1. One chapter is devoted to funding for international students wishing to study in the US. You can order the book for $17.50 plus $15.69 for overseas shipping from Barron's Educational Series, Inc., 250 Wireless Boulevard, Hauppauge, NY 11788. (The shipping charge is $2.32 for destinations in the US.) 5. Gregory A. Barnes, The International Student's Guide to the American University, National Textbook Company, Lincolnwood, IL, 1993. $12.95. 208 pages. Includes a chapter on financial aid. 6. Sidonia Dalby, Sally Rubenstone, and Emily H. Weir, The International Student's Guide to Going to College in America, Macmillan, New York, 1996. ISBN 0-02-860-587-0. 7. A Selected List of Fellowship Opportunities and Aids to Advanced Education for U.S. Citizens and Foreign Nationals, National Science Foundation, Washington, DC, 1994. 8. Carlotta R. Mills, Foundation Grants to Individuals, 9th edition, 1994. (Updated annually.) This book is published by the Foundation Center, and includes some scholarships and fellowships available to international students. You can order the book for $55 plus $11 for overseas shipping from Foundation Center, 79 5th Avenue, 8th Floor, New York, NY 10003. (The shipping charge is $4.50 for destinations in the US.) 9. W. Wickremasinghe, Scholarships and Grants for Study or Research in the USA, 2nd edition, American Collegiate Service, Houston, TX, 1989, 151 pages, ISBN 0-940937-01-8. This book contains a compilation of financial aid opportunities available from colleges, US foundations, and international organizations. You can order the book for $21.95 from American Collegiate Service, PO Box 442008, Houston, TX 77244. Call 1-714-493-9863 for more information. 10. Alan Wernick, The International Student Handbook, American Immigration Law Foundation, Washington, DC, 1992, ISBN 1-878677-42-X, $10.95. This book does not provide any information about financial aid, but does provide a lot of information that international students may find helpful. Copies may be ordered from the American Immigration Law Foundation, 1400 Eye Street, NW, Suite 1200, Washingotn, DC 20005. An organization that may be able to provide some information is NAFSA, the Association of International Educators, located in Washington, DC. Call 1-202-462-4811 and ask for the "Recording on Financial Aid". This recording provides information for foreign students interested on studying in the US and US students who are interested in studying abroad. NAFSA does not provide any grants to foreign students, with the exception of a small grant program for students from East Central Europe (1-202-462-4811 x3081), the Baltic States (1-202-462-4811 x3081), or the former states of the Soviet Union (1-202-462-4811 x3077). Your school's international student advisor should have information about these programs. The Rotary Foundation of Rotary International provides grants to university students and teachers to act as "goodwill ambassadors" around the world. The Rotary Foundation also sponsors international exchanges of business and professional people, and provides provides grants to improve the quality of life around the world. An example of this is their Ambassadorial Scholarship Program. For more information about their programs, write to Rotary Foundation, 1560 Sherman Avenue, Evanston, IL 60201. The AAUW Education Foundation provides graduate fellowships to women with the equivalent of a Bachelors degree who are not citizens or permanent residents of the United States. International Fellowships support graduate students writing doctoral dissertations and postdoctoral scholars conducting research in the United States. Upon completion of studies, fellowship recipients must return to their home countries to pursue a professional career; preference will be given to applicants who can verify that they have a definite position awaiting them. Applications become available from August 1 through November 15. The deadline is December 2 (Airmail), and the 1996 fellowship stipend is $15,065. For more information write to AAUW Educational Foundation, Department 60, 2201 N. Dodge St, Iowa City, IA 52243-4030, call 1-319-337-1716, or fax 1-319-337-1204, or write to American Association of University Women, 1111 Sixteenth Street N.W., Washington, DC 20036-4873 or call 1-202-728-7603. Two organizations that may have some information are: * Institute of International Education. The IIE administers the US Fulbright program and manages more than 250 international education programs. For more information, write to Institute for International Education, 809 United Nations Plaza, New York, NY 10017-3580, call 1-212-883-8200 or 1-212-984-5412, fax 1-212-984-5452, or send email to webmaster@www.iie.org. * Council for International Educational Exchange (CIEE), 205 E 42nd Street, New York, NY 10017. A few US banks will offer student loans to international students if the loan is co-signed by a creditworthy US citizen or permanent resident. There may also be restrictions on the type of visa (F1 or J1). These include: * The Education Resources Institute (TERI) (1-800-255-8374 x210 or 1-617-426-0681). The TERI Professional Education Plan (PEP) loan is available for graduate and professional study. Their lenders include Citibank (1-800-692-8200 x480), Bank of Boston (PO Box 312, Boston, MA 02117-0312), Baybank (1-800-332-8374 or 1-617-320-2422; PO Box 510, Dedham, MA 02026), and Nellie Mae (1-800-634-9308; 50 Braintree Hill Park, Braintree, MA 02184). * USA Funds (1-800-LOAN-USA). These loans include US residents with a green card, but do not include international students. For more information write to Option 4 Loan Program, USA Funds MC M372, PO Box 6180, Indianapolis, IN 46209-9303. * Norwest Bank (1-703-749-0131 or the financial aid department at 1-800-366-6227). These MBA loans are for graduate business and medical students who are international students. For more information write to Norwest Bank/HEMAR Insurance Corp., GMAC, 2400 Broadway Suite 320, Santa Monica, CA 90404-3064. International students should note that in addition to tuition, fees, room and board, and living expenses, they will have to pay for health insurance. US law requires universities to verify that foreign students have health insurance before allowing them to enroll. The I-20 form requires proof that you have enough funding for your first year of study. Do not count on being able to scrape up the funding after you arrive in the US. Getting a job is usually not an effective means of financing an education in the US. There are numerous restrictions on employment by foreign nationals, and some types of Visas prohibit it entirely. You should know where your money is coming from before you jump on a plane. Several schools require proof that you have enough money for the entire course of study, because too many international students are forced to return home after only a year of study. The bottom line is that there is very little financial aid available, and many foreign students do not study in the US because they cannot afford the expense. For a more in-depth treatment of these issues, as well as taxes, visas, the FAFSA form, and financial aid for Canadian students, please see the International Students area of the Financial Aid Information Page. ---------------------------------------------------------------- Subject: [12] My School Didn't Award Me Enough Aid! Most family complaints about insufficient financial aid derive from the practice of "need gapping" described in section [3]. There is little that can be done about this, other than applying for scholarships and fellowships, working during the school year and summer, and applying for educational loans. Howerver, if there is a significant discrepancy between the amount of aid awarded and your financial need, perhaps you didn't bring some special circumstances to the attention of the financial aid administrator. Make an appointment to review your financial situation with a counselor in the financial aid office, especially if your family circumstances have changed since the financial forms were filed. If the circumstances warrant, they may be able to adjust the amount of financial aid for which you qualify. This process is known as Professional Judgment (PJ). For most families, however, the increase will be limited to the amount of educational loans, with the institutional grants remaining unchanged. There are several special circumstances that families sometimes forget to mention: 1. Affecting the cost of attendance: + Unusually high supply costs (e.g., art students) + Child care expenses + Expenses related to a disability (e.g., braille machine and readers for blind students, transportation expenses for handicapped students) + Health insurance for students who are no longer covered by their parents' health plan. 2. Affecting the parent contribution: + Death of a parent + Unemployment of a parent for 10 weeks or more + Change in income due to a change of jobs, a reduction in the number of hours worked, or retirement + Loss or reduction of alimony and child support received (or an increase in alimony and child support payments) + Divorce or separation of parents after submission of the FAFSA + Loss or reduction of disability and unemployment benefits + Losses due to natural disasters, such as floods, tornados, hurricanes, and mine subsidence + Unusual medical/dental and nursing home expenses + Child care expenses + Casualty and theft losses If you encounter these circumstances, you may need to provide estimated income information on your financial aid form instead of relying on the past year's financial information. If there aren't any special circumstances, but the financial aid administrators awarded you less aid than you think you need, you're probably wondering how you will be able to afford your education. Here are a few suggestions: 1. Consider a home equity loan. A home equity loan lets you borrow against the equity in your home, and you can deduct the interest on your taxes. You can use the home equity loan to pay off your other debt such as credit cards -- a good idea, since the interest rate will be lower -- and also use some of the proceeds to pay for your education. 2. Obtain a Federal PLUS and Unsubsidized Stafford Loans. You do not need to demonstrate financial need in order to be eligible for these loans. Of course, if you are eligible for a Subsidized Stafford Loan, you should use it before you rely on unsubsidized of educational loans. 3. Part-time work. You can get part-time work during the academic year, and a summer job during summer vacation. 4. Save money by completing your education more quickly. If you can graduate in three years instead of four, you'll have saved 25% of the cost of your education. Advanced Placement (AP) tests, institutional advanced standing examinations, and taking an extra course every semester can shave a semester or a year off of your academic career. 5. Cut costs: + Sell your car and buy a bicycle, or ride the bus and carpool. If you must keep your car, increase the deductible on your auto insurance policy to $1,000. + Share an apartment to cut housing costs, or live at home. + Make long-distance telephone calls only at night, or cut them out entirely. + Learn to cook and stop eating out. There are a lot of nutritious but inexpensive meals you can make. + Sell your TV and VCR. + Shopping tips: - Only buy what you absolutely need, and only when it is on sale. Consider buying in bulk. - Buy generic drugs and store brands. - Eat a full meal before going grocery shopping. Never go shopping on an empty stomach. - Buy used textbooks, or sell your books when you're done with them. - Buy your clothing and furniture at Goodwill, Dollar a Pound, discount stores, and garage sales. + Marry a wealthy spouse. If you're majoring in a lucrative field, such as business or computers, don't worry too much about the size of your loans. When you graduate and get a job, you'll probably be earning enough money to pay off your educational loans in a reasonable number of years. For other fields, you should consider how you will be able to repay your loans before getting too heavily into debt. Likewise, students who intend to go on to graduate or professional school should carefully consider how their finances will affect their future options. ---------------------------------------------------------------- Subject: [13] Taxability of Financial Aid Awards I'm not providing tax advice here. Use this information at your own risk. For real tax advice, consult the relevant IRS publications or a qualified accountant. Relevant IRS publications include: 520 Scholarships and Fellowships 901, 515 US Tax Treaties (foreign students should see pages 12-18) 508 Educational Expenses To order copies of these publications, call the IRS Forms Distribution Center at 1-800-TAX-FORM (1-800-829-3676). Questions may be directed to the IRS taxpayer's assistance center at 1-800-829-1040. If the student is not a degree candidate, the full amount of any financial aid is subject to federal income tax, even if it is spent on educational expenses. If the student is a degree candidate, then scholarship and fellowship amounts used for tuition and REQUIRED course-related expenses (e.g., fees, books, supplies, and equipment) are exempt from federal income tax and may be excluded from gross income. Amounts used for living expenses (room and board) and other non-required expenses (computers, travel, etc.) are not exempt. The scholarship or fellowship must NOT, however, be awarded in compensation for teaching and research services performed by the student. The portion of the award that represents payment for services is taxable. For example, a teaching assistantship or research assistantship is not necessarily exempt. If you are required to teach a class in exchange for your tuition waiver and stipend, it may be the case that the award is fully taxable. In such cases, for the tuition waiver portion of a TAship or RAship to be exempt, the rest of the stipend must represent fair compensation for the services rendered. Stipends paid for living expenses are, of course, always taxable. If the tuition waiver is exempt, then only the stipend portion of your award will be reported to you (and the IRS) as income on your W2 form. Some universities or departments work around the "payment for services" restriction by making teaching duties part of the educational program. For example, one department provides every graduate student in the department with a full fellowship, and requires each graduate student to TA two classes before they can graduate. Since the teaching and research duties are uniform for all students and are construed as educational requirements -- more for the benefit of the student than the university -- these duties do not represent payment for services. They are graduation requirements and not conditions for receiving the grant. These duties are an essential part of the students' graduate education; TAships provide the student with teaching experience necessary for their future careers as faculty, and RAships provide the student with the opportunity to conduct doctoral research and to work on their dissertation. After all, a PhD is a research degree, so it makes sense to require research experience as part of the degree program. [The IRS recently started challenging the validity of such arrangements. According to the May 5, 1995, issue of the Chronicle of Higher Education, the IRS has asked the University of Wisconsin at Madison for $81 million in back taxes, claiming that the work performed by research assistants is not part of their graduate education and hence subject to taxation like any other job. Note that the university was careful to distinguish between research assistantships intended to further the student's education and research assistantships aimed at assisting faculty with their own research. Federal income tax and Social Security tax was withheld from the latter but not the former. The university will be fighting the charges in US Tax Court.] ROTC scholarships and the service academies are specificly exempted from this requirement in the tax code, even though they could be considered payment for services. So the tuition, books, and the monthly stipend students receive from ROTC are exempt from tax. Pay for summer training, however, is taxable, and the student will receive a W2 for this work. (Veteran's educational benefits, however, may be taxable. Check with the VA.) Excludable expenses are eliminated from gross income before any deductions. Thus you can exclude the exempt amounts and still take advantage of the standard deduction. Note that if you itemize your deductions, you cannot both exclude the educational expenses from gross income and deduct them -- no double dipping. The full amount of a scholarship or fellowship is usually exempt from FICA (social security) whether or not the student is a degree candidate. Universities are not required to report scholarship or fellowship income for US students to the IRS via W2 or 1099 forms, nor do they have any responsibility for withholding estimated tax for these students. (The only exception being assistantships where the compensation represents pay for services and must be reported on a W2.) For foreign students, however, the university is required to withhold appropriate taxes. (Many universities are too conservative in the amount withheld, so foreign students should cite the terms of the appropriate tax treaty on their return to claim a refund of the excess taxes withheld.) If you received a taxable scholarship or fellowship which was not reported to the IRS on a W2 or 1099 form, you are required to include it on line 7 and write "SCH" to the left. If you report taxable scholarship or fellowship income in this fashion, it is wise to attach an explanatory letter to your return, especially if you exclude any required educational expenses. If your scholarship or fellowship was reported to the IRS on a W2 or 1099 and you wish to exclude additional required educational expenses (e.g., the university excluded tuition and fees but not required books), exclude the amount of the expenses from the amount reported on line 7, and attach an explanatory letter. It is very important to attach such a letter, since the IRS computers will notice the discrepancy between the amounts reported to the IRS and the wages you listed on your return. Failing to attach such a letter will likely cause your return to be audited. (Some people recommend reporting educational expenses as a negative amount on line 22, "Other Income", instead of subtracting the expenses from line 7. In either event, you should still attach an explanatory letter.) Many new graduate students ask whether their moving expenses are tax deductible. Unfortunately they aren't, according to the IRS, because graduate students aren't really employees. ---------------------------------------------------------------- Subject: [14] Common Questions and Answers This section contains a list of common questions with concise answers. General Questions: 1. I probably don't qualify for aid. Should I apply for aid anyway? Yes. Many families mistakenly think they don't qualify for aid, and prevent themselves from receiving financial aid by failing to apply for it. In addition, there are a few sources of aid such as unsubsidized Stafford and PLUS loans that are available regardless of need. The FAFSA form is free. There is no good excuse for not applying. 2. Do I need to be admitted before I can apply for financial aid at a particular university? No. You can apply for financial aid any time after January 1. To actually receive funds, however, you must be admitted and enrolled at the university. 3. Do I have to reapply for financial aid every year? Yes. Most financial aid offices require that you apply for financial aid every year. If your financial circumstances change, you may get more or less aid. After your first year you will receive a "Renewal Application" which contains preprinted information from the previous year's FAFSA. Note that your eligibility for financial aid may change significantly, especially if you have a different number of family members in college. Renewal of your financial aid package also depends on your making satisfactory academic progress toward a degree, such as earning a minimum number of credits and achieving a minimum GPA. 4. How do I apply for a Pell Grant and other types of need-based aid? Submit a FAFSA. For student employment, student loans, and parent loans, you should check the appropriate boxes. 5. Are my parents responsible for my educational loans? No. Parents are, however, responsible for the Federal PLUS loans. Parents will only be responsible for your educational loans if you are under 18 and they endorse your loan. In general you and you alone are responsible for repaying your educational loans. On the other hand, if your parents (or grandparents) want to help pay off your loan, you can have your billing statements sent to their address. Likewise, if your lender or loan servicer provides an electronic payment service, where the monthly payments are automatically deducted from a bank account, your parents can agree to have the payments deducted from their account. But your parents are under no obligation to repay your loans. If they forget to pay the bill on time or decide to cancel the electronic payment agreement, you will be held responsible for the payments, not them. 6. Why is the family contribution listed on the SAR different from the family contribution expected by the university? The federal formula for computing the expected family contribution is different from those used by many universities. In particular, the federal formula does not consider home equity as part of the assets. 7. If I take a leave of absense, do I have to start repaying my loans? Not immediately. The subsidized Stafford loan has a grace period of 6 months and the Perkins loan a grace period of 9 months before the student must begin repaying the loan. When you take a leave of absense you will not have to repay your loan until the grace period is used up. If you use up the grace period, however, when you graduate you will have to begin repaying your loan immediately. It is possible to request an extension to the grace period, but this must be done *before* the grace period is used up. If your grace period has run out in the middle of your leave, you will have to make a payment on your student loans. 8. I got an outside scholarship. Should I report it to the financial aid office? If you are receiving any kind of financial aid from university or government sources, you must report the scholarship to the financial aid office. Unfortunately, the university will adjust your financial aid package to compensate. Nevertheless, the outside scholarship will have some beneficial effects. At some universities outside scholarships are used to reduce the self-help level. For example, at MIT 40% of the scholarship amount is applied toward the self-help level, and the rest replaces institutional funds. At other universities outside scholarships are used to replace loans instead of grants. 9. What are GATE loans, and why doesn't my university participate? GATE loans is a nonprofit private loan program (Guaranteed Access to Education) offered through participating schools in conjunction with Bank of America, Bank of Boston, and the National Collegiate Trust (NCT). There is a minimal credit check and schools can recommend whatever loan amount they'd like the student to receive. The interest rate is also rather low. Students and parents should call 1-617-639-2000 for more information about the program (in New York, 1-212-551-3650). If this program is so wonderful -- no loan limit, no credit check, low interest rate -- why don't more schools participate? There are several reasons why a university might not want to participate in this program: + There is some risk-sharing by the schools. As a result, the program will be most attractive to schools with a low default rate. + The schools receive less than the full face value of the loans immediately, with the up-front amount depending on the school's default rate and the interest rate. In effect, the schools are providing part of the loan capital. + There are no federal guidelines or regulations governing this loan program. + Membership is not open to two-year colleges. Universities that are interested in participating in the GATE loan program should call 1-800-895-GATE (4283) and ask to speak to Kevin Walker or Thatcher Fields. 10. Where can I get information about Federal student financial aid? Call 1-800-4-FED-AID (1-800-433-3243) or 1-800-730-8913 (if hearing impaired) and ask for a free copy of "The Student Guide: Financial Aid from the US Department of Education". You can also write to Federal Student Aid Information Center PO Box 84 Washington, DC 20044 FAFSA Questions: 1. Are photocopies of the FAFSA acceptable? No. Only the original FAFSA form produced by the US Department of Education is acceptable. Photocopies, reproductions, facsimiles, and electronic versions are all not acceptable. (See DCL GEN-95-21.) 2. I sent in my FAFSA over four weeks ago, but haven't heard anything. What should I do? If you haven't received a Student Aid Report (SAR), call the Federal processor at 1-319-337-5665. You must provide them with your Social Security number and date of birth as verification. You can also write to Federal Student Aid Programs PO Box 4038 Washington, DC 52243-4038 to find out whether your FAFSA has been processed or to request a duplicate copy of your SAR. 3. My parents are separated or divorced. Which parent is responsible for filling out the FAFSA? If your parents are separated or divorced, the custodial parent is responsible for filling out the FAFSA. The custodial parent is the parent with whom you lived the most during the past 12 months. Note that this is not necessarily the same as the parent who has legal custody. If you did not live with one parent more than the other, the parent who provided you with the most financial support should fill out the FAFSA. This is probably the parent who claimed you as a dependent on their tax return. If you have not received any support from either parent during the past 12 months, use the most recent calendar year for which you received some support from a parent or lived with either parent. Note, however, that any child support and/or alimony received from the non-custodial parent must be included on the FAFSA. Financial aid applications can be somewhat confusing because there are several different criteria applied for different kinds of parenthood: 1. The parent with whom the child lived the most during the past 12 months. 2. The parent who provided the most financial support to the child during the past 12 months. 3. The parent who provided more than half the child's support (and will continue to do so). 4. The parent who has legal custody. 5. The parent who claimed the child as a dependent on their tax return. As noted above, criteria 1 and 2 are used for determining the custodial parent, with the first criteria being primary. For determining household size (the number of family members), criteria 3 is the most important. However, the student's custodial parent gets to list him or her even if the custodial parent does not provide more than half of the student's support. This leads to the anomalous situation where a student can be counted as belonging to two different households. For example, suppose the non-custodial parent remarries and has college-aged children of his own. If the non-custodial parent provides more than half of the student's support, he gets to list the student as a member of his household even though the custodial parent has also listed the student as a member of her household. (The IRS tax return instructions prevent this kind of double dipping on tax returns, but the FAFSA instructions apparently don't.) Criteria 3 is also used to determine whether the student has one or more dependents, in the rules for specifying whether the student is an independent student with dependents. Criteria 4 and 5 are not used in the financial aid formulas, but are sometimes used to give an indication of the right choice when the other criteria are insufficient. Criteria 5 is also sometimes used to substantiate claims made under criteria 3. For example, a financial aid administrator may ask a parent for a copy of their tax return, to see whether they claimed the child as a dependent. Criteria 5 usually implies criteria 3, because the IRS definition of a dependent includes a 50% support test. There IRS definition includes a few exceptions where the parent isn't required to provide more than half the child's support in order to claim the child as a dependent, but in almost every case, if the parent could not claim the child as a dependent (criteria 5), they did not provide more than half the child's support (criteria 3). 4. My parents are divorced, and the parent I'm living with has remarried. Does my step-parent have to report his or her income and assets on the FAFSA? Yes, provided that the parent you're living with is the one filling out the FAFSA (your custodial parent). If your step-parent is married to them at the time you fill out the FAFSA, they must report their income and assets even if they weren't married to them in the previous year. Myths About Financial Aid: 1. Won't the government take away our home if we apply for aid for our children's education? No. Absolutely not. This myth seems to be pervasive, and causes many families to avoid applying for financial aid. The government does NOT take away your home when you apply for financial aid. 2. All financial aid packages include term-time work, and working while trying to study is bad. First of all, numerous studies have shown that a small amount of term-time employement (10 hours per week) improves academic performance. Secondly, you can always refuse the work-study aid and pay for the expenses covered by that aid through other means, such as loans and summer employment. ---------------------------------------------------------------- Subject: [15] Mailing Lists and Newsgroups There are no student-oriented mailing lists for discussion of financial aid issues. Mailing lists like FINAID-L, MEDAID-L, FINNET-L, STUDEMP, and DIRLOAN2 are focussed on the issues facing financial aid and student employment offices, not students. Typical topics include financial aid administration job announcements, discussions of changes in federal aid regulations, EDE and SARs, and so on. Requests for advice or counseling on how to obtain financial aid are not welcome on these lists, and are usually ignored. Accordingly, I am not including instructions on how to subscribe to these mailing lists. There is one mailing list for announcements of grants and fellowships of interest to graduate and postdoctoral students. To subscribe to GRANTS-L, send mail to listproc@listproc.gsu.edu with subscribe grants-l YOUR NAME in the message body. To alleviate the lack of a financial aid discussion forum for students and parents, an unmoderated newsgroup for discussion of financial aid issues for higher education has been created. The soc.college.financial-aid newsgroup is open to the discussion of post-secondary educational financial aid. Topics may include, but will not be limited to, grants, scholarships, fellowships, loan programs, work-study, international student aid, and updates on current changes to aid programs. ---------------------------------------------------------------- Subject: [16] Recommended Books The following scholarship books are recommended as giving particularly good value for the money. [Yes, I recommend my own book, but I feel I am justified. The book has received testimonials from the heads of admission and/or financial aid at MIT, Harvard, Stanford, Wellesley, Moorehouse, and Purdue, and has received only positive reviews in the popular press. We are in the process of revising the book for a second edition, but the current edition is still rather up-to-date.] In addition to the books listed below, graduate students may want to take a look at the Chronicle of Higher Education. The Chronicle is a weekly newspaper for the higher education community, and most university libraries and career centers should have a subscription. Most new fellowship programs are announced in the Chronicle. 1. Need a Lift?, The American Legion, Indianapolis, IN, 43rd edition, 1993. $3.00, 128 pages. Excellent coverage of programs for veterans and their dependents. For more information, write to The American Legion, National Emblem Sales, PO Box 1050, Indianapolis, IN 46206. 2. Huber William Hurt, Harriett-Jeanne Hurt, and Christian E. Burckel, The College Blue Book - Scholarships, Fellowships, Grants and Loans, Volume 5, Macmillan Publishing Company, New York, 24th edition, 1993. ISBN 0-02895-004-6 ($48.00) 855 pages. 3. Mark Kantrowitz and Joann P. DiGennaro, Prentice Hall Guide to Scholarships and Fellowships for Math and Science Students, Prentice Hall, Englewood Cliffs, NJ, 1993. ISBN 0-13045-345-5 paper ($19.95) 325 pages. Complete resource guide for science, math and engineering students, from high school through graduate school. 4. Debra M. Kirby and Christa Brelin, Fund Your Way Through College: Uncovering 1,700 great opportunities in undergraduate financial aid, Visible Ink Press, Detroit, MI, 1994. ISBN 0-81039-457-X ($19.95) 731 pages. Comprehensive list of undergraduate scholarships. 5. Deborah L. Wexler, The A's and B's of Academic Scholarships 1996-97, Octameron Associates, Alexandria, VA, 18th edition, 1995. ISBN 0-94598-197-X ($7.50) 139 pages. College-controlled merit aid. Revised annually. 6. Patricia McWade, Financing Graduate School, Peterson's Guides, Princeton, NJ, 1993. ISBN 1-56079-147-0 ($14.95) 191 pages. 7. Carlotta R. Mills, Foundation Grants to Individuals, Foundation Center, New York, 9th edition, 1994. ISBN 0-87954-493-7 ($55) 538 pages. Comprehensive and accurate list of scholarships and fellowships. Updated annually. ---------------------------------------------------------------- Subject: [17] Financial Aid Software John Hancock Financial Services is offering a free, no-obligation interactive computer program designed to help families plan for their children's college education as part of their College Savings Plus Program. There is no cost or obligation for obtaining the free software. The software shows an estimate of future tuition, room and board costs at more than 1,500 US public and private schools, based on the year the user's child expects to begin attending college. The program is available in IBM-compatible DOS and Apple Macintosh formats. Copies are available through calling 1-800-633-1809 x555 or by sending an email message with your name, address and diskette requirements to marstonpr@mcimail.com or jamlhorton@aol.com or 75410.1042@compuserve.com. ---------------------------------------------------------------- Subject: [18] Scholarship Search Services Tips for Consumers from your Better Business Bureau (R) July/August 1994 SOME SCHOLARSHIP OFFERS TAKE MONEY, NOT GIVE IT With the first day of classes only weeks away, offers for "guaranteed" scholarships, grants and loans may look very attractive to those college students who didn't qualify or apply for financial aid. But before signing up, the Better Business Bureau warns students to do their homework. BBBs report that unethical scholarship companies are "guaranteeing" to "match" students with sources of funding, regardless of their academic qualifications, scholastic credentials or family economic status. Some advertisements and sales pitches claim there are millions of dollars in unclaimed scholarship monies just waiting to be tapped. However, in BBBs' experience, few, if any, students receive funds. In exchange for an up-front fee, which can range from $50 to several hundred dollars, students receive lists of _possible_ scholarship sources. While the company making the offer may claim scholarships are "guaranteed," prospective students should understand that only the sources actually granting the funds can guarantee approval. These scholarship companies do not assist students in obtaining scholarships and they do not screen applicants. After purchasing the lists, it is the students' responsibility to research and contact each organization with a possible funding source. Although many ads offer "money back guarantees" or $200 savings bonds to students who don't receive any scholarship sources or funds, students who are unsuccessful, or not satisfied, may find that refunds are difficult, if not impossible, to obtain. The company may require students to prove, through documentation, that they were denied a scholarship by _every_ source on the list. Many of the scholarship sources that these companies provide for a fee, are available at no cost from high school guidance offices, in the reference sections of libraries or from the financial aid office of the college the student is planning to attend. For a reliability report on a scholarship company, consumers should call the Better Business Bureau where the firm is located. For a copy of the BBB's booklet, "Tips on College Financial Aid," send a self-addressed, business-sized envelope and $2 for postage and handling to Council of Better Business Bureaus, Dept. 023, Washington, DC 20042-0023. Copyright 1994 Council of Better Business Bureaus, Inc. May be reprinted in whole or part with attribution. Council of Better Business Bureaus, Public Affairs Dept., 4200 Wilson Blvd., Arlington, VA 22203 (703) 276-0100 Fax (703) 525-8277 The name Better Business Bureau is a registered servicemark of the Council of Better Business Bureaus, Inc. ---------------------------------------------------------------- Subject: [19] Glossary of Financial Aid Terminology *** ACRONYMS: ACT American College Testing Program AFDC Aid to Families with Dependent Children AP Advanced Placement BIA Bureau of Indian Affairs CLEP College-Level Examination Program COA Cost of Attendance CPS Central Processing System CSS College Scholarship Service CWS College Work-Study ED US Department of Education EFC Expected Family Contribution EFT Electronic Funds Transfer ELO Expanded Lending Option ESAR Electronic Student Aid Report FAA Financial Aid Administrator FAFSA Free Application for Federal Student Aid FAO Financial Aid Office FAT Financial Aid Transcript FFELP Federal Family Education Loan Program FM Federal Methodology FWS Federal Work-Study GSL Guaranteed Student Loan HEAL Health Education Assistance Loan HHS US Department of Health and Human Services HPSL Health Profession Student Loan IM Institutional Methodology IRA Individual Retirement Account IRS Internal Revenue Service ISIR Institutional Student Information Report MDE Multiple Data Entry NHSC National Health Corps Scholarship NSL Nursing Student Loan PC Parent Contribution PCL Primary Care Loan PHEAA Pennsylvania Higher Education Assistance Agency PJ Professional Judgement PLUS Parent Loan for Undergraduate Students RA Research Assistantship ROTC Reserve Officer Training Corps SAP Satisfactory Academic Progress SAR Student Aid Report SC Student Contribution SEOG Supplemental Educational Opportunity Grant SLMA Student Loan Marketing Association SLS Supplemental Loan for Students SSIG State Student Incentive Grants TA Teaching Assistantship VA Veterans Administration *** DEFINITIONS: 1040 Form, 1040A Form, 1040EZ Form The Federal Income Tax Return. Every person who has received income during the previous year must file a form 1040 with the IRS by April 15. 1090 Form IRS form 1090 is used by business to report income paid to a non-employee. Banks use this form to report interest income. Academic Year The period during which school is in session. The school year typically runs from the beginning of September through the end of May at most colleges and universities. Accrue To accumulate. Accrual Date The date on which interest charges begin to accrue. See also "Subsidized Loan" below. Adjusted Available Income In the Federal Methodology, the remaining income after the allowances (taxes and a basic living allowance) have been subtracted. Amortization Amortization is the process of spreading payments out in installments over an extended period of time. Appeal An appeal is a formal request to have a financial aid administrator review your aid eligibility and possibly use Professional Judgment to adjust the figures. For example, if you believe the financial information on your financial aid application does not reflect your family's current ability to pay (e.g., because of death of a parent, unemployment, or other unusual circumstances), you should definitely make an appeal. The financial aid administrator may require documentation of the special circumstances or of other information listed on your financial aid application. Asset An asset is an item of value, such as a family's home, business, and farm equity, real estate, stocks, bonds, mutual funds, cash, certificates of deposit (CDs), bank accounts, trust funds, and other property and investments. Asset Protection Allowance The asset protection allowance is a portion of your parents' assets that are not included in the calculation of the parent contribution, as calculated by the Federal Methodology need analysis formula. The asset protection allowance increases with the age of the parents. Associate Degree The degree granted by two-year colleges. Award Letter After you have submitted the appropriate financial aid forms and the university financial aid office has assembled a financial aid package, you will receive an award letter. This letter provides details on their analysis of your financial need and the breakdown of your financial aid package according to amount, source, and type of aid. The award letter will include the terms and conditions for the financial aid and information about the cost of attendance. You are required to sign a copy of the letter, indicating whether you accept or decline each source of aid, and return it to the financial aid office. Award Year The academic year for which financial aid is requested (or received). Bachelor's Degree The undergraduate degree granted by four-year colleges and universities. Base Year The tax year prior to the academic year (award year) for which financial aid is requested. The base year runs from January 1 of the junior year in high school through December 31 of the senior year. Financial information from this year is used to determine eligibility for financial aid. Borrower The person who receives the loan. Budget See Cost of Attendance. Bursar's Office The Bursar's Office or Student Accounts Office is the university office that is responsible for the billing and collection of university charges. Campus-based Aid Campus-based financial aid programs are administered by the university. The federal government provides the university with a fixed annual allocation, which is awarded by the financial aid administrator to deserving students. Such programs include the Perkins Loan, Supplement Educational Opportunity Grant, and Federal Work-Study. See also Direct Lending. Cancellation Some loan programs provide for cancellation of the loan under certain circumstances. For example, if the student becomes a teacher in certain national shortage areas, they may be eligible for cancellation of all or part of the balance of their educational loans. Capital Gain A capital gain is an increase in the value of an asset such as stocks, bonds, mutual funds, and real estate between the time the asset was purchased and the time the asset was sold. Capitalization The practice of adding unpaid interest charges to the principal, increasing the size of the loan. See Unsubsidized Stafford and Direct Loans. Capitalization is sometimes called compounding. Collateral Collateral is property that is used to secure a loan. If the borrower defaults on the loan, the lender can seize the collateral. For example, a mortgage is usually secured by the house purchased with the loan. Collection Agency A collection agency is often hired by the lender or guarantee agency to recover defaulted loans. College Work-Study College Work-Study is simply a part time job. Commuter Student A student who lives at home and commutes to school every day. Consolidation Loan A consolidation loan combines several loans into one bigger loan from a single lender. Consolidation loans offer the following benefits: + Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10 year repayment plan that is standard with FFELP loans. Of course, extending the term of a loan increases the total amount of interest paid. + Consolidation loans also simplify the repayment process by allowing a single payment to one lender instead of several payments to different lenders. Some graduate students have found it necessary to consolidate their educational loans when applying for a mortgage on a house. Consolidation loans can sometimes result in a lower interest rate, as when a consumer loan is used to pay off credit card balances. With educational loans, however, consolidation usually results in a higher interest rate. Aside from the simplification of the repayment process, consolidation is usually not in the student's best interest. Instead, students who are having trouble making their payments should consider some of the alternate repayment terms provided for FFELP loans by the Higher Education Act of 1992. Income contingent payments, for example, are adjusted to compensate for a lower monthly income. Cooperative Education In a cooperative education program, the student spends some time engaged in employment related to their major in addition to regular classroom study. For example, one semester might be spent working, and the other back at school. Cost of Attendance The cost of attendance (COA), also known as the cost of education or "budget", is the total cost of education for the student, including tuition, fees, room and board, books and supplies, transportation, and personal and incidental expenses. Child care and expenses for disabilities may also be included. Credit Rating A credit rating is an evaluation of the likelihood of a borrower to default on a loan. People who make all their payments on time are good credit risks. People who are frequently delinquent in making their payments are considered bad credit risks. A good credit rating is not required for most educational loans, with the exception of the PLUS Loan. However, students who have defaulted on previous educational loans may be required to agree to repay the loan and begin making payments before they can become eligible for further Federal aid. Custodial Parent If a student's parents are divorced or separated, the custodial parent is the one with whom the student lived the most during the past 12 months. The student's need analysis is based on financial information supplied by the custodial parent. Default A loan is in default when the borrower fails to pay several regular installments on time (i.e., payments overdue by 180 days) or otherwise fails to meet the terms and conditions of the loan. If you default on a loan, the university, the holder of the loan, and the government can take legal action to recover the money, including garnishing your wages. Defaulting on a government loan will make you ineligible for future federal financial aid, unless a satisfactory repayment schedule is arranged, and can affect your credit rating. Deferment Deferment occurs when a borrower is allowed to postpone repaying the loan. No interest accrues during the deferment period. Most federal loan programs allow students to defer their loans while they are in school at least half time. Other loan programs, such as the unsubsidized Stafford loan, allow students to defer repayment while they are in school at least half time, but interest still accrues during the deferment period. Students can defer the interest payments by capitalizing the interest. Delinquent If the borrower fails to make a payment on time, the borrower is considered delinquent and late fees may be charged. If the borrower misses several payments, the loan goes into default. Dependency Status A student's dependency status determines to what degree the student has access to parent financial resources. An independent student is one who is at least 24 years old as of January 1 (e.g., born before January 1, 1972 for academic year 1995-96), is married, is a graduate or professional student, has a legal dependent other than a spouse, is a veteran of the US Armed Forces, or is an orphan or ward of the court. All other students are considered dependent. If the financial aid administrator believes that you are not an independent student they can require you to provide proof of independent status to qualify, and their decision on your status is generally not subject to appeal. Note: ROTC students and cadets and midshipmen at one of the service academies are not considered veterans. To be a veteran you must have been engaged in active service in the US Army, Navy, Air Force, Marines, or Coast Guard and received an honorable or medical discharge. See your financial aid administrator if you have any special circumstances. The FAA may be able to do an override of your dependency status on the FAFSA, if warranted by involuntary dissolution of the family or other very unusual situations. Special circumstances that are sometimes sufficient for an override include: + a legal restraining order has been issued against your parents because of abusive behavior + both of your parents have been incarcerated + your parents live in another country and you have been being granted refugee status by the US Immigration Service. You do not qualify for independent status just because your parents have decided to not claim you as an exemption on their tax returns or are refusing to provide support for your college education. You must provide documentation to the satisfaction of the financial aid administrator that you are truly self-supporting for them to override your dependency status. A few financial aid offices may require that you have a minimum annual income of $10,000 to establish self-sufficiency. [Several financial aid books suggest that all one needs to do for a student to become independent is for them to not be listed as a dependent on their parents' tax return for the past two years and for them to have earned at least $4,000 per year during the same period. This is the OLD definition of independence, and is no longer valid.] Dependent For a child or other person to be considered your dependent, they must live with you and you must provide them with more than half of their support. Spouses do not count as dependents in the Federal Methodology. You and your spouse cannot both claim the same child as a dependent. Direct Loans Direct Lending is a new federal program where the school becomes the lending agency and manages the funds directly, with the federal government providing the loan funds. Not all schools currently participate in this program. Benefits of the program include a faster turn-around time and less bureaucracy than the old "bank loan" program. The terms for Direct Loans are the same as for the Stafford Loan program. Disbursement The date on which the financial aid funds are released to the student or transferred to the student's account for payment. Doctorate One of several degrees granted by graduate schools. Electronic Funds Transfer Electronic Funds Transfer (EFT) is used by some schools and Stafford and Parent Loan lenders to wire funds for Stafford and PLUS loans directly to participating schools without requiring an intermediate check for the student to sign over. Electronic Student Aid Report An Electronic Student Aid Report (ESAR) is an electronic form of the Student Aid Report. Eligible Non-Citizen Someone who is not a US citizen but is nevertheless eligible for Federal student aid. Eligible non-citizens include US permanent residents who are holders of valid green cards, US nationals, holders of form I-94 who have been granted refugee or asylum status, and certain other non-citizens. Non-citizens who hold a student visa or an exchange visitor visa are not eligible for Federal student aid. Endowment Funds owned by an institution and invested to produce income to support the operation of the institution. Many educational institutions use a portion of their endowment income for financial aid. A school with a larger ratio of endowment per student is more likely to give larger financial aid packages. Enrollment Status An indication of whether you are a full-time or part-time student. Generally you must be enrolled at least half-time (and in some cases full-time) and working toward a degree to qualify for financial aid. Entitlement Entitlement programs award funds to ALL qualified applicants. The Pell Grant is an example of such a program. Entrance Interview See Loan Interviews. Equity Equity is the dollar value of your ownership in a piece of property. For example, your home equity is the current market value of the home less the mortgage's remaining unpaid principal. Exit Interview See Loan Interviews. Expanded Lending Option Under the Expanded Lending Option (ELO), some schools can offer higher annual and cumulative loan limits to students receiving the Perkins Loan. Expected Family Contribution The Estimated Family Contribution (EFC) is the amount of money that the family is expected to be able to contribute to the student's education, as determined by the Federal Methodology need analysis formula approved by Congress. The EFC includes the parent contribution and the student contribution. The difference between the COA and the EFC is the student's financial need. FAF The Financial Aid Form (FAF) is the old name for the Financial Aid PROFILE. The Financial Aid PROFILE is a supplemental financial aid form processed by the College Scholarship Service (CSS). Federal Family Education Loan Program The Federal Family Education Loan Program (FFELP) includes the Federal Stafford Loan (Subsidized and Unsubsidized) and the Parent Loan for Undergraduate Students (PLUS). Federal Methodology The Federal Methodology (FM) is the need analysis formula used to determine the EFC. Federal Work-Study The Federal Work-Study (FWS) program provides students with part-time employment during the school year. The federal government pays a portion of the student's salary, making it cheaper for departments and businesses to hire the student. For this reason, work-study students often find it easier to get a part-time job. Eligibility for FWS is based on need. Fellowship A form of financial aid given to graduate students to help support their education. Some fellowships include a tuition waiver or a payment to the university in lieu of tuition. Most fellowships include a stipend to cover reasonable living expenses (e.g., just above the poverty line). Fellowships are a form of gift aid and do not have to be repaid. Financial Aid Money provided to the student and the family to help them pay for the student's education. Major forms of financial aid include gift aid (grants and scholarships) and self help aid (loans and work). Financial Aid Package The financial aid package is the complete collection of grants, scholarships, loans, and work-study employment offered to a student to enable them to attend the college or university. Financial Aid Administrator A Financial Aid Administrator (FAA) is a college or university employee who is involved in the administration of financial aid. Financial Aid Office The Financial Aid Office is the college or university office that is responsible for the determination of financial need and the awarding of financial aid. Financial Aid Transcript The Financial Aid Transcript (FAT) is a record of all federal aid received by the student. If you have previously attended a university and are now applying for financial aid from the different university, the university will require a FAT from all schools previously attended, regardless of whether aid was received. They are required to do this by federal law. You have to submit a FAT even if you were in high school at the time. An electronic FAT process will be in place soon which will eliminate the need for the student to submit a FAT. Financial Need See Need below. Fixed Interest In a fixed interest loan, the interest rate stays the same for the life of the loan. Forbearance During a forbearance the lender allows the borrower to postpone repaying the principal, but the interest charges continue to accrue. Forbearances are usually granted in cases of extreme financial hardship or other unusual circumstances. Free Application for Federal Student Aid The Free Application for Federal Student Aid (FAFSA) is used to apply for Pell Grants and all other need-based aid. An electronic version of the FAFSA called FAFSA Express will be available by disk in the 1996-97 academic year. Gapping The practice of failing to meet a student's full demonstrated need. See also "Unmet Need" below. Garnishment Garnishment is the practice of withholding a portion of a defaulted borrower's wages to repay his or her loan, without their consent. Gift Aid Financial aid, such as grants and scholarships, which does not need to be repaid. Grace Period A short time period after graduation during which the borrower is not required to begin repayment. The typical grace period is six or nine months. Graduate Student A student who is enrolled in a Masters or PhD program. Graduated Repayment Under a graduated repayment schedule, the monthly payments are smaller at the start of the repayment period, and gradually become larger. Grant A grant is a type of financial aid based on financial need that the student does not have to repay. Gross Income This is income before taxes, deductions, and allowances have been subtracted. Guarantee Agency A guarantee agency agrees to pay back a loan if the borrower should default. There are 41 guarantee agencies for educational loans in the United States. Each state has a different guarantee agency that administers the Federal Stafford and Plus loans for students in that state. A guarantee fee is a small percentage of the loan that is paid to the guarantee agency as a form of insurance against default. For the name, address, and telephone number of your state's guarantee agency, call the Federal Student Aid Information Center at 1-800-433-3243 (1-800-4-FED-AID). Guaranteed Student Loan (GSL) The Guaranteed Student Loan (GSL) is the old name for the subsidized Stafford Loan. Half-Time Most financial aid programs require that the student be enrolled at least half-time to be eligible for aid. Some programs require the student to be enrolled full-time. Health Education Assistance Loan The Health Education Assistance Loan (HEAL) is a low interest loan administered by the US Department of Health and Human Services (HHS). It is available to medical school students pursuing medicine, osteopathy, dentistry, veterinary medicine, optometry, podiatry, clinical psychology, health administration, and public health. Undergraduate pharmacology students are also eligible. Health Professions Student Loan The Health Professions Student Loan (HPSL) is a low interest loan administered by the US Department of Health and Human Services (HHS). It is available to medical school students pursuing medicine, osteopathy, dentistry, veterinary medicine, optometry, and podiatry. Undergraduate pharmacology students are also eligible. Horizontal Equity The principle of horizontal equity is that families with similar financial circumstances should pay the same amount, regardless of how their assets, investments, and income are defined. In-State Student An in-state student has met the legal residency requirements for the state, and is eligible for reduced in-state student tuition at public colleges and universities in the state. Income Income is the amount of money received from employment (salary, wages, tips), profit from financial instruments (interest, dividends, capital gains), or other sources (welfare, disability, child support, Social Security, and pensions). Income Contingent Repayment Under an income contingent repayment schedule, the size of the monthly payments depends on the income earned by the borrower. As the borrower's income increases, so do the payments. Independent Student See Dependency Status. Institutional Methodology If a college or university uses its own formula to determine financial need for allocation of the school's own financial aid funds, the formula is referred to as the Institutional Methodology (IM). Institutional Student Information Report The Institutional Student Information Report (ISIR) is the electronic version of SARs delivered to schools by EDExpress. Insurance Fee The insurance fee is passed on by the lender to the federal government as insurance against default. The insurance fees are charged as the loan is disbursed, and typically run to 1% of the amount disbursed. Interest Interest is an amount charged to the borrower for the privilege of using the lender's money. Interest is usually calculated as a percentage of the principal. The percentage rate may be fixed for the life of the loan, or it may be variable, depending on the terms of the loan. All new federal loans use variable interest rates that are tied to the cost of US Treasury Bills. IRS The Internal Revenue Service (IRS) is the federal agency responsible for enforcing US tax laws and collecting taxes. Lender The bank or financial institution that provides funds to the student or parent for an educational loan. Note: Some schools now participate in the Federal Direct Loan program and no longer use a bank. Loan A loan is a type of financial aid which must be repaid, with interest. Repayment on some educational loans, such as Perkins and Stafford/Direct Loans, does not begin until the student has graduated or otherwise left school. Loan Forgiveness Under certain circumstances, such as practicing medicine in a national shortage area or teaching in a rural region, the federal government will cancel all or part of an educational loan. Loan Interviews Students with educational loans are required to meet with a financial aid administrator before they receive the first loan and before they graduate. During these interviews, called entrance and exit interviews, the FAA reviews the repayment terms of the loan and the repayment schedule with the student. Master's Degree One of several degrees granted by graduate schools. Multiple Data Entry Processor A Multiple Data Entry (MDE) Processor is a company that processes the FAFSA forms submitted by students. The College Scholarship Service (CSS) and PHEAA are both MDE Processors. Merit-based Financial aid that is merit-based depends on your academic, artistic, or athletic merit, or some other criteria, and does not depend on the existence of financial need. Merit-based awards use your grades, test scores, hobbies, and special talents to determine your eligibility for scholarships. Mortgage A mortgage is a loan of funds for purchasing a piece of property which uses that property as security for the loan. The lender has a lien on the property and will receive the property if the borrower fails to repay the loan. National Health Corps Scholarship The National Health Corps Scholarship (NHSC) is a scholarship program administered by the US Department of Health and Human Services (HHS). It is available to medical students studying allopathic and osteopathic medicine and to dental school students studying dentistry. Need The difference between the COA and the EFC is the student's financial need - the gap between the student's resources and the cost of attending the school. The financial aid package is based on the amount of financial need. The process of determining a student's need is known as "need analysis". Need Analysis Need analysis is the process of determining a student's financial need by analyzing the information provided by the student on his or her financial aid form and using it to compute the EFC. Need-based Financial aid that is need-based depends on your financial situation. Most government sources of financial aid are need-based. Net Income This is income after taxes, deductions, and allowances have been subtracted. Nursing Student Loan The Nursing Student Loan (NSL) is a low interest loan administered by the US Department of Health and Human Services (HHS) and available to students enrolled in nursing programs. Origination Fee The origination fee is paid to the bank to compensate them for the cost of administering the loan. The origination fees are charged as the loan is disbursed, and typically run to 3% of the amount disbursed. Outside Resource A resource is something that is available because a student is in school and is counted after need is determined. Outside scholarships, prepaid tuition plans and VA educational benefits are examples of other resources. Out-of-State Student An out-of-state student has not met the legal residency requirements for the state, and is often charged a higher tuition rate at public colleges and universities in the state. Overawards A student who receives federal support may not receive awards totaling more than $400 in excess of his or her financial need. Packaging Packaging is the process of assembling a financial aid package. Parent Contribution The Parent Contribution (PC) is an estimate of the portion of your educational expenses that the federal government believes your parents can afford. It is based on their income, the number of parents earning income, assets, family size, the number of family members currently attending a university, and other relevant factors. Students who qualify as independent are not expected to have a parent contribution. Pell Grant The Pell grant is a federal grant that provides funds of up to $2,340 based on the student's financial need. Perkins Loan Formerly the National Direct Student Loan Program, the Perkins Loan allows students to borrow up to $3,000/year (5 year max) for undergraduate school and $5,000/year for graduate school (6 year max). The Perkins Loan has one of the lowest interest rates and is awarded by the financial aid administrator to students with exceptional financial need. The student must have applied for a Pell Grant to be eligible. The interest on the Perkins Loan is subsidized while the student is in school. PhD One of several degrees granted by graduate schools. Prepayment Paying off all or part of a loan before it is due. Primary Care Loan The Primary Care Loan (PSL) is a loan administered by the US Department of Health and Human Services (HHS) and available to students enrolled in general and osteopathic medicine programs. Principal Principal is the amount of money borrowed under the loan. Interest is charged as a percentage of the principal. Professional Judgement For need-based federal aid programs, the financial aid administrator can adjust the EFC, adjust the COA, or change the dependency status (with documentation) when extenuating circumstances exist. This delegation of authority from the federal government to the financial aid administrator is called Professional Judgement (PJ). Professional Student A student pursuing advanced study in law or medicine. Promissory Note A promisory note is the binding legal document signed by the student borrower before loan funds are disbursed by the lender. The promisory note states the terms and conditions of the loan, including repayment schedule, interest rate, deferment policy, and cancellations. The student should keep this document until the loan has been repaid. PLUS Loans Parent Loans for Undergraduate Students (PLUS) are federal loans available to parents of undergraduate students to help finance the student's education. Parents may borrow up to the full cost of their children's education, less the amount of any other financial aid received. PLUS Loans may be used to pay the EFC. There is a minimal credit check required for the PLUS loan. Check with your local bank to see if they participate in the PLUS loan program. Research Assistantship (RA) A form of financial aid awarded to graduate students to help support their education. Research assistantships usually provide the graduate student with a waiver of all or part of tuition, plus a small stipend for living expenses. As the name implies, an RA is required to perform research duties. Sometimes these duties are strongly tied to the student's eventual thesis topic. Sallie Mae See Student Loan Marketing Association. Satisfactory Academic Progress A student must be making Satisfactory Academic Progress (SAP) in order to continue receiving federal aid. If a student fails to maintain an academic standing consistent with the school's SAP policy, they are unlikely to meet the school's graduation requirements. Scholarship A form of financial aid given to undergraduate students to help pay for their education. Most scholarships are restricted to paying all or part of tuition expenses, though some scholarships also cover room and board. Scholarships are a form of gift aid and do not have to be repaid. Many scholarships are restricted to students in specific courses of study or with academic, athletic, or artistic talent. Scholarship Search Service A scholarship search service charges a fee to compare the student's profile against a database of scholarship programs. Few students who use a scholarship search service actually win a scholarship. Secondary Market Loans are often bought and sold to secondary markets. Thus the bank you make your payments to may change during the life of the loan. The terms of your loan do not change when it is sold to another holder. The Student Loan Marketing Association (SLMA), also known as Sallie Mae, is the nation's largest secondary market and holds approximately one third of all educational loans. Selective Service Registration for the military draft. Male students who are US citizens and have reached the age of 18 and were born after December 31, 1959 must be registered with Selective Service to be eligible for federal financial aid. Self Help Aid Financial aid in the form of loans and student employment. If every financial aid package is required to include a minimum amount of self-help aid before any gift aid is granted, that level is known as the self-help level. For example, the self-help level will be $8,150 at MIT in 1995-96 (The Tech, March 7, 1995, Vol. 115, No. 9, Page 1). MIT has one of the highest self-help levels of private colleges and universities, with an average self-help level of around $5,500 at the more expensive schools. Service Academy The US Air Force Academy, US Coast Guard Academy, US Merchant Marine Academy, US Military Academy, and US Naval Academy. Admissions is highly selective, as students must be nominated by their Congressional Representative in order to apply. Simplified Needs Test If the parents have an adjusted gross income of less than $50,000 and every family member was eligible to file an IRS Form 1040A or 1040EZ (or wasn't required to file a Federal income tax return), the Federal Methodology ignores assets when computing the EFC. Stafford Loans Stafford Loans are federal loans that come in two forms, subsidized and unsubsidized. Subsidized loans are based on need; unsubsidized loans aren't. The Subsidized Stafford Loan was formerly known as the Guaranteed Student Loan (GSL). Undergraduates may borrow up to $23,000 ($2,625 during the freshman year, $3,500 during the sophomore year, and $5,500 during each subsequent year) and graduate students up to $65,500 including any undergraduate Stafford loans ($8,500 per year). The Unsubsidized Stafford Loan may be used to pay the EFC. State Student Incentive Grants The State Student Incentive Grants (SSIG) program is a state-run financial aid program for state residents. The states receive matching funds from the Federal government to help them fund the program. Statement of Educational Purpose The Statement of Educational Purpose is a legal document in which the student agrees to use the financial aid for educational expenses only. The student must sign this document before receiving federal need-based aid. Student Accounts Office See Bursar's Office. Student Aid Report The Student Aid Report (SAR) summarizes the information included in the FAFSA and must be provided to your school's FAO. The SAR will also indicate the amount of Pell Grant eligibility, if any, and the EFC. You should receive a copy of your SAR four to six weeks after you file your FAFSA. Student Contribution The Student Contribution (SC) is the amount of money the federal government expects the student to contribute to his or her education and is included as part of the EFC. The SC depends on the student's income and assets, but can vary from school to school. Usually a student is expected to contribute about 35% of his or her savings and approximately one-half of his summer earnings above $1,750. Student Loan Marketing Association The Student Loan Marketing Association (SLMA), also known as Sallie Mae, is the nation's largest secondary market and holds approximately one third of all educational loans. Subsidized Loan With a subsidized Stafford loan, the government pays the interest on the loan while the student is in school and during the six-month grace period. Subsidized loans are awarded based on financial need and may not be used to finance the family contribution. Undergraduate students who qualify for the maximum amount of unsubsidized Stafford loans may borrow up to $2,625 during the first year, up to $3,500 during the second year, and up to $5,500 per year during the third, fourth, and fifth years, for a maximum total of up to $23,000. Graduate and professional students may borrow up to $8,500 per year, for a maximum total of $65,500 for undergraduate and graduate subsidized loans. Supplemental Educational Opportunity Grant The Supplemental Educational Opportunity Grant (SEOG) is a federal grant program for undergraduate students with exceptional need. SEOG grants are awarded by the school's financial aid office, and provide up to $4,000 per year. To qualify, a student must also be a recipient of a Pell Grant. Supplemental Loan for Students Supplemental Loan for Students (SLS) are federal loans for financially independent students. This program was eliminated in 1994 with the creation of the unsubsidized Stafford Loan program. Teaching Assistantship (TA) A form of financial aid awarded to graduate students to help support their education. Teaching assistantships usually provide the graduate student with a waiver of all or part of tuition, plus a small stipend for living expenses. As the name implies, a TA is required to perform teaching-related duties. Term The term of a loan is the number of years (or months) during which the loan is to be repaid. Undergraduate Student A student who is enrolled in a Bachelors program. Unearned Income Interest income, dividend income, and capital gains. Unmet Need In an ideal world, the FAO would be able to provide each student with the full difference between their ability to pay and the cost of education. Due to budget constraints the FAO may provide the student with less than the student's need (as determined by the FAO). This gap is known as the unmet need. Unsubsidized Loan An unsubsidized loan is a loan for which the government does not pay the interest. The borrower is responsible for the interest on an unsubsidized loan from the date the loan is disbursed. Unsubsidized loans are NOT based on financial need and may be used to finance the family contribution. See also "Subsidized Loan" above. Dependent undergraduate students may borrow up to $2,625 during the first year, up to $3,500 during the second year, and up to $5,500 per year during the third, fourth, and fifth years, less any subsidized loan amounts, for a maximum total of $23,000 for their subsidized and unsubsidized loans. Independent students and students whose parents are ineligible for the PLUS are limited to $4,000 per year during the first two years and $5,000 per year during third, fourth, and fifth years, for a maximum total of $23,000, in addition to any subsidized loan amounts. Graduate and professional students may borrow up to $10,000 per year, in addition to any subsidized loan amounts. This yields a maximum total of $73,000 for their undergraduate and graduate education combined, in addition any subsidized loan amounts. Untaxed Income Contributions to IRAs, Keoghs, tax-sheltered annuities, and 401k plans, as well as worker's compensation and welfare benefits. Variable Interest In a variable interest loan, the interest rate changes periodically. For example, the interest rate might be pegged to the cost of US Treasury Bills (e.g., T-Bill rate plus 3.1%) and be updated monthly, quarterly, semi-annually, or annually. Verification Verification is a review process in which the FAO determines the accuracy of the information provided on the student's financial aid application. During the verification process the student and parent will be required to submit documentation for the amounts listed (or not listed) on the financial aid application. Such documentation may include signed copies of the most recent Federal and State income tax returns, proof of citizenship, proof of registration with Selective Service, and copies of Social Security benefit statements and W2 and 1099 forms, among other things. Financial aid applications are randomly selected for verification, with most schools verifying at least 1/3 of all applications. Some schools undergo 100% verification. Veteran For the purpose of determining dependency status, a veteran is a former member of the US Armed Forces (Army, Navy, Air Force, Marines, or Coast Guard) who served on active duty and received an honorable or medical discharge. ROTC students, members of the National Guard, and cadets and midshipmen at one of the service academies are not considered veterans. W2 Form Employers are required by the IRS to issue a W2 form for each employee before February 28. The W2 form lists the employee's wages and tax withheld. Work Study See Federal Work-Study. ---------------------------------------------------------------- Subject: [20] Telephone Numbers This section contains a list of useful financial aid telephone numbers. ** Financial Aid Applications: College Scholarship Service (CSS) Questions about Financial Aid PROFILE ................... 1-609-771-7725 TDD Number for the Hearing-Impaired ..................... 1-609-883-7051 Need Access Need Analysis Service .......................... 1-800-282-1550 Federal Student Aid Information Center (US Dept of Education) Hotline ................................................ 1-800-4-FED-AID 1-800-433-3243 TDD Number for Hearing-Impaired ........................ 1-800-730-8913 Missing Student Aid Report (SAR) ....................... 1-319-337-5665 To Request Duplicate SARs .............................. 1-319-337-5665 Fraud/Waste/Abuse of Federal Student Aid Funds ............. 1-800-MIS-USED Fraud/Waste/Abuse of Federal Student Aid Funds ............. 1-800-647-8733 Selective Service .......................................... 1-847-688-6888 Immigration and Naturalization Services (INS) .............. 1-415-705-4205 Internal Revenue Service (IRS) ............................. 1-800-829-1040 Social Security Administration ............................. 1-800-772-1213 California Student Aid Commission (Cal Grants) ............. 1-916-445-0880 California Student Aid Commission (Cal Grants - TDD) ....... 1-916-323-0437 PA Higher Education Assistance Agency (PHEAA) .............. 1-800-692-9435 PA Higher Education Assistance Agency (PHEAA) .............. 1-717-257-2800 State Student Assistance Commission of Indiana (SSACI) ..... 1-317-232-2350 National and Community Service Program (AmeriCorps) ........ 1-800-94-ACORPS National and Community Service Program (AmeriCorps) ........ 1-800-942-2677 ** Information Hotlines: Federal Student Aid Hotline (US Dept of Education) ......... 1-800-4-FED-AID Federal Student Aid Hotline (US Dept of Education) ......... 1-800-433-3243 Federal Student Aid Hotline (US Dept of Education - TDD) ... 1-800-730-8913 Career and Learning Line (CALL) ............................ 1-800-442-1171 Operated by the Higher Education Information Center at the Boston Public Library for Massachusetts students only. CALL offers free information about financial aid, college, and careers. The following telephone lines are answered by representatives of the indicated educational financing organizations: KapLoan (Educational Funding Company) .................... 1-888-KAP-LOAN College Answer[sm] Service (Sallie Mae) .................. 1-800-239-4211 ** Direct Loan Programs: Direct Loans are serviced by the U.S. Department of Education. Direct Loan Servicing Center ............................... 1-800-848-0979 Direct Loan Servicing Center (TDD) ......................... 1-800-848-0983 Direct Loan Servicing Center Consolidation Department ...... 1-800-848-0982 ** Loan Programs: Access Group ............................................... 1-800-282-1550 Bank of America ............................................ 1-800-344-8382 Bank of America (in Texas) ................................. 1-800-442-0567 Bank of America (in Idaho and Washington) .................. 1-800-535-4671 Bank of America (in Seattle) ............................... 1-206-358-7943 Bank of Boston (Alliance) .................................. 1-800-637-6007 Bank of Boston (Alliance) .................................. 1-617-434-8970 Bank One ................................................... 1-800-288-6150 Bank One ................................................... 1-304-526-4226 BayBanks Education Financing Programs ...................... 1-800-332-8374 Chase Manhattan Bank Educational Loans ..................... 1-800-645-8246 Chemical Bank Educational Loans ............................ 1-800-243-6226 Citibank ................................................... 1-800-692-8200 x144 Citibank ................................................... 1-800-846-1298 TDD Commerce Bank (LC 813979) .................................. 1-800-666-3910 Connecticut Student Loan Foundation (CSLF) ................. 1-860-257-4001 ConSern Loans .............................................. 1-800-767-5626 Crestar Bank's Student Lending Division .................... 1-800-552-3006 EduServ Technologies ....................................... 1-800-445-4236 Extra Credit ............................................... 1-800-874-9390 First Union National Bank .................................. 1-800-955-8805 Fleet Bank Student Loan Programs ........................... 1-800-235-3385 Higher Education Services Corporation (HESC) ............... 1-800-642-6234 KeyBank USA ................................................ 1-800-KEY-LEND KeyBank USA ................................................ 1-800-539-5363 Massachusetts Educational Loan Authority ................... 1-800-842-1531 Mellon Bank EduCheck ....................................... 1-800-323-7105 Nellie Mae (Excel and Share Loan Programs) ................. 1-617-849-3447 Nellie Mae (Excel and Share Loan Programs) ................. 1-800-634-9308 Norwest (Collegiate) ....................................... 1-800-658-3567 Sallie Mae (College Answer[sm]) ............................ 1-800-239-4211 Signet Bank ................................................ 1-800-434-1988 TERI Supplemental (The Educational Resources Institute) .... 1-800-255-8374 TERI Supplemental (The Educational Resources Institute) .... 1-800-255-TERI Texas Guaranteed Student Loan Corporation (TGSLC) .......... 1-800-TG-LOANS United Student Aid Funds (Option 4) ........................ 1-800-635-3785 ** Loan Consolidation: Manufacturers Hanover Trust ................................ 1-800-MHT-7722 Nellie Mae ................................................. 1-617-849-7708 Nellie Mae ................................................. 1-800-852-0603 PHEAA ...................................................... 1-800-692-7392 Sallie Mae ................................................. 1-800-524-9100 ** Tuition Payment Plans: Academic Management Services (AMS) ......................... 1-800-635-0120 EduServ Tuition Installment Plan (TIP) ..................... 1-800-445-4236 FACTS Tuition Management System ............................ 1-800-624-7092 Knight Insured Tuition Payment Plan ........................ 1-800-225-6783 The Tuition Plan, Inc. ..................................... 1-800-822-8764 ** College Saving Programs: CollegeSave CDs (College Board) ............................ 1-212-713-8000 CollegeSure CD (College Savings Bank) ...................... 1-800-888-2723 ** State Prepaid Tuition Plans: Alabama .................................................... 1-800-ALA-PACT Alabama .................................................... 1-800-252-7228 Alaska ..................................................... 1-800-478-0003 Alaska ..................................................... 1-907-474-7469 Colorado ................................................... 1-800-478-5651 Connecticut ................................................ 1-860-566-2982 Florida .................................................... 1-800-552-GRAD (4723) Florida .................................................... 1-904-488-8514 Indiana .................................................... 1-317-232-6386 Kentucky ................................................... 1-800-928-8926 Louisiana .................................................. 1-800-259-5626 x1012 Massachusetts .............................................. 1-617-261-9760 Massachusetts .............................................. 1-800-449-MEFA (6332) Michigan ................................................... 1-800-MET-4KID Mississippi ................................................ 1-601-359-2995 Mississippi ................................................ 1-601-359-3600 Mississippi ................................................ 1-888-308-1997 Ohio ....................................................... 1-800-589-OTTA (6882) Ohio ....................................................... 1-800-AFFORD-IT (233-6734) Pennsylvania ............................................... 1-800-440-4000 Tennessee .................................................. 1-888-486-BEST Tennessee .................................................. 1-888-486-2378 Texas ...................................................... 1-512-483-6340 Texas ...................................................... 1-800-252-5555 Texas ...................................................... 1-800-445-GRAD Texas ...................................................... 1-800-735-2988 Utah ....................................................... 1-800-418-2551 Virginia ................................................... 1-800-253-0737 TDD Virginia ................................................... 1-888-567-0540 Wisconsin .................................................. 1-888-338-3789 Wyoming .................................................... 1-307-766-3214 ** Miscellaneous: National Merit Scholarship Corporation ..................... 1-708-866-5100 National and Community Service Program ..................... 1-800-942-2677 Better Business Bureau ..................................... 1-703-276-0100 ---------------------------------------------------------------- ;;; *EOF* .