College Planning Guide

Financial Aid

Financial aid is a complex matter. Colleges costs are increasing faster than inflation rates, sources of financial aid are not increasing in proportion to the need, and every college is faced with creating policies that best meet the needs of their institutions (fund a few students fully? more partially? etc.). Families who plan to seek financial aid should work closely with the college advisor in order to be up-to-date and to know details that are too numerous for this guide. Your intent to file papers for financial aid will, of course, be kept in strict confidence, as is every part of the college process.

The vast majority of financial assistance remains need-based. An analysis of family resources results in a "family contribution" figure that determines what a family can pay in a given year toward the cost of education. A family's "need" is the difference between the total cost for the year and the family's contribution. In theory, the college's financial aid offer will meet the family's demonstrated need. The college's financial aid offer will usually consist of a grant, one or more loans, and the opportunity for the student to participate in a work-study program. A student with a financial need of $7,000, for example, might be offered $3500 in grants, a student loan of $2625, and $875 in work-study. It is important to note that there is a growing trend commonly referred to as “gapping” in the financial aid world. In the example above, if that same family had a demonstrated need of $7000, a college might decide to only offer $6000 (and therefore “gap” the family $1000). Colleges do this for a variety of reasons, but the most common reason is to stretch their financial aid budget in order to give more money to other families.

Financial assistance that is not need-based is often called "merit money." In general, the more competitive the college, the less likely it offers merit scholarships—these institutions believe that available monies should go to needy students. Other colleges still set aside a portion of their resources to attract high-quality students, even if the student does not need financial assistance. Bearing names such as Trustee Scholarships or Presidential Scholarships, these awards are granted to students who have the highest grades and the highest SAT scores in the applicant pool.

Colleges use a number of resources to create a financial aid package:

Institutional monies: most of this money is used for grants.

Institutional Loan: many institutions have loan programs favorable to the consumer.

Government monies: Most of the financial assistance awarded to college and university students originates from federal monies, supplemented by state monies. Information about the kinds of financial assistance likely to be included in a financial aid package from a college or university can be found at a number of web sites. A recommended site is www.finaid.org

Parents have the PLUS loan as an available resource. The Parents Loan for Undergraduate Students is non-need based, and bank approval hinges on an examination of the family's credit history. The upper limit of $4000 per year has been eliminated, and parents may now borrow the entire cost of the student's education, less any financial aid the student receives from a college or university.

The financial aid community has not yet realized its goal of requiring a single form per family for assessing need. Some families will find themselves completing three different forms:

• FAFSA. F ree Application for Federal Student Aid. Everyone applying for financial assistance must complete this form, and it is used to determine eligibility for any federal funds. FAFSA information is shared electronically with PHEAA to determine your eligibility for state funds. FAFSA information is used to determine your family contribution toward the cost of education for the subsequent academic year – this number is actually determined by the Federal Government, not individual colleges (however, how much a college decides to award you is up to them). The FAFSA may not be filed before January 1 of a student's senior year in high school, but should be filed as soon as possible after parents receive their W-2 forms in January. Parents are advised to complete this form on-line at www.fafsa.ed.gov

• CSS PROFILE. A need-assessment form created by the College Scholarship Service to supply colleges with a family contribution figure that is different from the one computed by FAFSA methodology. For example, home equity is considered an asset for the CSS Profile. Some colleges are no longer requiring this form and are relying solely on the FAFSA; others are going to continue to use both because they feel the combination more effectively determines family need. A list of colleges requiring the form is included with the registration booklet. Using the Financial Aid Profile is a two-step process: (1) register with CSS (cost $5, $7 by telephone), and then (2) fillout and return the Profilethat will be mailed to you. The cost percollege to have the profilesubmitted is $18.00. For more information, please see profileonline.collegeboard.com/index.jsp

• College form. Some colleges have their own form as well, ranging from simple to complex.

Financial aid deadlines are extremely important ones. Failure to meet deadlines may eliminate a family from consideration for funds. Follow the procedures outlined in the materials provided to you by the colleges to which you are applying.

The financial aid picture changes yearly, so it is important to work closely with the college advisor. Working with the college advisor does not require sharing details about your finances, so do not hesitate to seek information