Monday, December 26, 2011

Vacation Break!

The world of financial aid never stops. There are changes that happen all the time and demand attention every day. However, The Financial Aid Blog will take a short break as all four of the Metro Business College campuses are on vacation this week.

Thanks for following the posts, and remember: if you have any questions you'd like answered, email me from the About Me page (or look for my email in the introduction section). I can't wait to see what you all are wondering!

I hope that this blog posting finds you healthy and happy in this holiday season. Take care of yourself, and we'll see you in 2012!

Monday, December 19, 2011

What if? Scenario 1

"What if I don't like the education or I can't find a job when I graduate? What happens with my loans? I don't feel as though they are my responsibility."

Well, the Dept of Ed's rules on this are very specific. The Master Promissory Note for your loans, your information that you receive when a loan disbursement is made, on your borrower rights and responsibilities, and in the entrance and exit counseling, it clearly states that you understand that you are still under obligation to repay your loans even if you are unsatisfied with the education you received or if you can't find a job.

These loans are federal student loans, meaning they come from the federal government. If you borrow from the government, then they will want their money back. They aren't concerned with your feelings or your outcome: they just want their money back. Since you filled out the loan, it is you that is responsible for it. Think of getting a Big Mac, eating it, then being unsatisfied with it. Will McDonald's not charge you? No, because then everyone would be unsatisfied with it, and no one would pay anything. That's just one of many examples.

Monday, December 12, 2011

I'm Verified

Verification is a process dealing with Pell grants. After you will out a FAFSA, you will be notified on your SAR (Student Aid Report) that you have been verified; your school will probably also notify you. This means that in order for your Pell grant to go through, the school has to document that the information on your FAFSA is correct. This means copies of taxes, a verification form, and any other copies of documents that are needed to support information that had been reported on the FAFSA.

Sometimes, you are verified because there is a mistake in the info that was reported in the FAFSA. Maybe your AGI was entered wrong or the tax wasn't right. Sometimes, you are verified even if the information is correct because the Dept of Ed wants the Financial Aid Dept to take a close look at your information to make sure it's all right. This has been mentioned at meetings before and the response was "there is something in the student's history that warrants a second look at their information". However, sometimes I really believe it is random.

Beginning in 2012, every student that is selected for verification has to be verified. Before, the rule was that 30% of those selected had to be verified. Our school always verifies everyone that is selected, so it's no big deal for us. If you are selected and you refuse to turn in the selected materials, then you cannot receive a Pell grant or have Stafford loans. It's best to take care of the verification as soon as you can to avoid unnecessary problems.

Monday, December 5, 2011

Full Pell vs. Full Pell

Pell grants can be confusing if you've never had them before. If you fill out a FAFSA, and you qualify for a full Pell grant, then for this year, you would be expecting $5550. However, the thing you must keep in mind is that this amount is the total for full-time attendance for an entire academic year. In a quarter-based school, this is 3 quarters; in a semester-based school, this is 2 semesters. So, in order for you to receive all $5550, then you have to be full-time for 3 quarters or 2 semesters during that academic year. What you are really qualifying for is the full amount of Pell per quarter/semester that can be disbursed, or $1850 per quarter or $2775 per semester.

Here's an example that applies at Metro Business College. Let's say you start in December/January. You fill out a FAFSA and qualify for a full Pell grant. You will receive $1850 for the December/January quarter, another $1850 for the March/April quarter. If you attend Cape, Jeff City, or Rolla, then your June quarter can be either the remaining $1850 or your following year's Pell (depending on quite a few things). If you are in Arnold, then your July quarter Pell will be from the following year's FAFSA. So, the other $1850 of the total $5550 will never come in because you didn't attend 3 quarters in that award year.

If that sounds confusing, it's because it is. Remember, you have to attend an academic year during an award year (which is the period between July 1 and the following June 30). If you only attend one part of the entire award year, then you will only have one part of the whole Pell grant.

Another example that applies at Metro Business College. Let's say you are enrolled in a three-quarter program, and you have 2 quarters in one award year and the last 1 in the following award year. Let's say both FAFSAs say you qualify for a full Pell grant. Does that mean you get $5550 for the first year and $5550 for the second? Not for that program, it doesn't. You will get 2 quarters of Pell from the first FAFSA, and you will get 1 quarter of Pell from the second FAFSA. The remaining 1/3 of the Pell from the first FAFSA will never come in because you didn't attend during a third quarter during that award year: you only attended 2 quarters. Your last FAFSA says you qualify for a full Pell grant, but if you only attend 1 quarter of that award year, then you will only receive 1 quarter of Pell. The other 2 disbursements of Pell are not sent until you attend past the 1 quarter. So, the total for the 3 quarters you attend is still $5550, but 2/3 of it is from the first award year, and the last 1/3 is from the second award year. But you won't receive $11,100 in Pell for only attending 3 quarters: you only receive Pell for the quarters you attend.

This isn't even taking into account that you have to be full-time during those quarters also. The less credits you take, the less Pell grant you will receive. But we'll save that for another day.

Monday, November 28, 2011

What's EFA?

You may see EFA and think I made a typo, meaning to type EFC. But no, there is an EFA. I have mentioned it already in these postings.

EFA stands for Estimated Financial Aid. This is the total amount of financial aid that can be used to pay for tuition. This is used the most in determining your Unmet Need to see if you qualify for a Subsidized loan. The calculation for that is Cost of Attendance minus EFC minus EFA equals Unmet Need.

When determining your Unmet Need for a loan, your EFA will include any other FA you have during that loan period that can pay for tuition (not necessarily that it is paying your tuition, just that it can). Things like pell grant, stage agency funding, scholarships, etc. would be used. If you have a Sub and/or Unsub already during your loan period and you are adding to it/them, then you would have to include it/them also. So, for example, let's say you have a pell grant, and you are filling out a Sub and Unsub. Your EFA for that loan calculation would only be your pell grant. But let's say you have a pell grant, a scholarship, a Sub, and an Unsub, and you want to take out more Unsub. Your EFA would be the pell grant, the scholarship, the Sub, and the first Unsub.

EFA is a rather simple concept. But it is easy to get the acronym confused with EFC.

Sunday, November 20, 2011

Dude, Where's My Sub?

In an earlier post, I explained the difference between Subsidized and Unsubsidized Stafford loans. In it, I mentioned that you may not qualify for a Subsidized loan. So, where does it go?

It really goes nowhere. As long as your Cost of Attendance allows you to borrow the maximum in your firrst year, then you would be allowed to borrow up to a total of $9500 for independent students, and $5500 for dependent students. Typically this would be a combination of Sub and Unsub, with the usual being $3500 Sub and $6000 Unsub (for independent), and $3500 Sub and $2000 Unsub (for dependents). If you do not qualify for any Sub, you don't lose your eligibility for the total of $9500; you've just lost your Sub eligibility. Your $3500 Sub becomes Unsub. Even though the limits are $6000 and $2000, if you don't qualify for the Sub because of the Unmet Need being 0 or less, then you don't lose that amount of money. So your Unsub would be $9500 for independent and $5500 for dependent.

Since you must have an Unmet Need to be eligible for a Sub, then you have to have at least 3500 Unmet Need your first year to be eligible for a full Sub that year. So, what happens if you end up with something in between 0 and 3500 for your Unmet Need? All that means is that whatever amount your Unmet Need is, that's the amount of Sub you are eligible for. And just like before, whatever amount you are not eligible for will become Unsub. So, for example, if your Unmet Need is 2000, that means you are eligible for a $2000 Sub and the remaining $1500 would be added onto your Unsub.

This is a strange concept, and it is understable if you are confused. For our school, it doesn't happen often. The easiest way to know if this will affect you is to remember that your EFC plays a large role in deciding this. The higher your EFC is, the more likely this will affect you. Anything over 10,000 may or may not affect your Sub eligibility. Since this calculation is based on EFC, Cost of Attendance, and the Estimated Financial Assistance (everything that's used to pay tuition), each student's situation is a little different. You can have two students with the same high EFC, but one may have less Estimated Financial Assistance, and the other may have a much higher Cost of Attendance, these things factor greatly into the calculation and they may end up vastly different, or nearly the same.

As the old FA joke goes: it all just depends.

Sunday, November 13, 2011

Subsidized vs. Unsubsidized

So, what's the difference between a Subsidized and Unsubsidized loan?

In this case, I am referring to a Stafford loan from the Federal government. There are two types of loans you can qualify for: the Sub and the Unsub. There really is very little difference between the two. They are both loans through the same loan program, you have to fill out the same paperwork for both, and both have interest. There are a few differences though.

1.) The interest rates are different, for now. The Sub's interest rate is 3.4% and the Unsub's rate is 6.8%. If no new laws or rules are passed between now and July 1, 2012, then the interest rate of the Sub will change. As of that day, the interest rate of the Sub will go up to 6.8%, making the two loans have the same rate. This will be the first time since 2007 that the rates will be equal.

2.) The way interest accrues is different. The Sub's interest is subsidized by the government while you are in school (hence the name "subsidized loan"). Once you graduate, the interest will start to accrue. The Unsub's interest will begin to accrue while you are still in school. Because of this, it's always a good idea not to borrow an Unsub if you don't have to. If you have to, then it's a good idea to keep it as small as possible.

3.) The Sub is a need-based loan. By need-based, I don't mean "I need a loan." It's financial aid need-based. This is a little more strange of a concept for non-FA people. The easiest way to think about it is if you take your Cost of Attendance, then subtract your EFC from it, and then subtract everything you have at hand to be used to pay your tuition at that time (grants, scholarships, state agency funding, etc.), and what you are left with will be your unmet need. If it's more than 0, then you will qualify for a Sub loan, because you have demonstrated a financial need for it. Usually the EFC is the largest deciding factor in this. If you have a high EFC (over 15,000), it is very likely you won't qualify for a Sub, or part of a Sub.

4.) Loan limits are different. An Unsub's limit for a dependent student in 2011 is only $2000 and an independent's limit is $6000. A Sub's limit is $3500 for the first year, $4500 for the second year, and so on, without any difference between dependent or independent.

These are the main differences for Sub and Unsub loans. One good thing about them is that even though they are two separate loans, when you go into repayment, as long as they are both with the same servicer, then you can just make one payment for both (instead of one for each one). If the loans ended up at different places, then you would have to make two payments (unless you consolidate), but that's a whole other post.

Monday, November 7, 2011

What is Cost of Attendance?

Cost of Attendance (or COA) is a calculation that every school with federal student aid must do. The simplest answer as to what this is can be explained as being an estimation of how much a student's attendance for the award year will cost them. Some things that are included are: tuition and fees for the year, transportation, personal expenses, room/board, etc. Some special exceptions can be made by some schools; however, our COA is adequate so we don't make exceptions. If you use the COA as only a tool to figure out how much it costs to attend school, then you must keep in mind that this is only an estimate, and really only your own personal budget is the real answer.

The other use of the COA is for your total Financial Aid: all of your Financial Aid cannot go over your COA. If you add up anything can be used to pay for your tuition (grants, loans, scholarships, self-payments, state funding, etc.), then the maximum you can receive, at the most, will even out at your COA. The reason for this is simple: if your COA is how much it costs to attend school, and you get an amount to go over that, then you aren't using your FA to pay for school. If you aren't using the money for school/education-related expenses, then you are not entitled to it.

The purpose of this is to keep people from borrowing much more than needed for school. Stafford loans have loan limits on them, so even if your COA is 20,000, your first year maximum (Subsidized and Unsubsidized combined) would be 9500 for Independent students and 5500 for Dependent students. But a PLUS loans's limit is the lesser of how much the parent chooses to take out or the COA. If a student receives no other FA than a PLUS loan, and the COA is 20,000, then the parent can take out a 20,000 PLUS loan. But if a student receives 5,000 in Pell Grant, and the COA is 20,000, then the maximum PLUS loan can only be 15,000. If a student's Financial Aid goes over the COA, then a student is considered to be overawarded, and a refund has to be made by the school. If excess funds have already gone to a student when the school finds out that they have been overawarded, then the student will owe that money back.

So Cost of Attendance is a little more involved than just simply how much it costs to go to school. Usually COA issues don't happen very often; they usually occur if something has changed with the student (dropping classes, testing out of classes, etc.). If anything changes from how your enrollment was originally planned to be (you were supposed to be full-time for 4 quarters, but instead you are half-time for one of them, etc.), you really need to stop by the financial aid office and make sure they are aware of the change.

Monday, October 31, 2011

"Well, that depends."

When you ask a question to a financial aid administrator, what is the usual answer? “Well, that depends.” This is a common joke among the financial aid community, but there is a lot of truth in it. Your financial aid depends on many factors, which include: day or evening program, number of credits, academic status, grade level, and satisfactory academic progress. On top of all that, all of these are subject to state and federal regulations.

The regulations are what really make financial aid so difficult. Financial aid rules change every year, which means staying current on the rules is nearly a job by itself.

The government is so tough on financial aid because they want to keep track of tax payer dollars. The Pell Grants and Direct Stafford Loans come from the pockets of everyone in the form of our tax dollars.

Since there are so many factors that must be considered in financial aid, things take a little bit of time to make sure there are no rules being broken. In life, we must get used to change. Unfortunately for you the student, financial aid can change as often as your socks.

(Originally published in the Metro Business College Arnold Newsletter - April 2011)

Friday, October 21, 2011

New Pell - 2011-12 Award Year

In April, a government shut-down was looming if a deal wasn’t reached on the Federal budget, and after numerous short-term extensions, a deal was finally reached. But what does this mean for you? Out of all the cuts in the new budget, the cut to the Pell Grant program is most significant for our students. The maximum Pell Grant a student can receive won’t change; the maximum will stay at $5550 for the year, so that does not change. So, what’s the big deal?

The award year (beginning July 1, 2011, and ending June 30, 2012) will eliminate the “year-round Pell.” I will use $3000 total in Pell as an example. To understand what this means, you must know that one third of your Pell Grant ($1000) comes to the school each quarter. So, if you attend school during the July, October, and January quarters, then your entire Pell Grant has come in. April is still in that award year, and with a year-round Pell, you can get another disbursement of Pell for April, even though all your Pell has come in already (which would be a total of $4000). The new rules get rid of this extra quarter.

The only good news is that this only affects students who are enrolled for all four quarters between July 1 and June 30 (July, October, January, and April quarters). Hopefully there will be enough done in the next year to allow the year-round Pell to return. If you have any questions about how this will affect you, stop in at the Financial Aid Office for more information.

(Originally published in the Metro Business College Arnold Newsletter - July 2011)

Monday, October 17, 2011

What is an EFC?

If you've filled out a FAFSA before, you might recall seeing an EFC number when your FAFSA was completed. When you submit your FAFSA online or in the FA Office, you will see an EFC. You will also see your EFC when your Student Aid Report gets mailed or emailed to you.

EFC stands for Expected Family Contribution, and this is what you are expected to contribute to your education. The most important thing for you to remember about the EFC is that depending on what your EFC is will determine how much Pell Grant you will receive. The lower the EFC, the more Pell you qualify for; and the higher your EFC, the less Pell Grant you will receive. Each year, the EFC's relation to the amount of Pell Grant changes, so even though your EFC doesn't change from year to year, the amount of Pell you qualify for may change.

Your EFC is also used in determining your need-based loans. Your need-based loans are figured using your Cost of Attendance and subtracting your EFC and any other FA. The resulting amount is the amount of need-based loans you can qualify for.

In case you're curious, your EFC is calculated based on several factors from your FAFSA: AGI, taxes, earned income, untaxed income, tax credits, exemptions, number in household, number attending college, etc. If you are an independent student, you and your spouse's information is used. If you are a dependent student, then your parent's information is used along with yours.

So, as you can see, the EFC is more than just a number!

Tuesday, October 11, 2011

The Financial Aid Corner

Welcome to the Financial Aid Corner! Financial Aid for college is incredibly difficult to understand and keep up to date. Every year there are changes made which may be completely different than the previous year's rules. Think of the Financial Aid rules like a model of a car and the Department of Education as the car manufacturer. Each year the manufacturer releases a new edition of an existing model, and when they do, sometimes they change very little and sometimes they change a lot. Some models are discontinued, just like some rules are discontinued.

It's difficult to keep up with the rules even if you are in the industry because there are so many rules, you would only want to focus on the rules that deal with your situation specifically. The goal of this blog is to inform you on some of the intricacies of Financial Aid and hopefully to inform you on a wide range of subjects. As mentioned above, Financial Aid can be very complicated: there are exceptions, exceptions to exceptions, and once in awhile exceptions to the exceptions of the exceptions.

And I have to include a few disclaimers:

This blog is meant to inform and educate; it is not meant to be the sole answer for any particular situation. Every person's Financial Aid is unique to them, and therefore may not be fully explained through any post that will be found here. No blog posting should be taken as a cited source for any particular situation. The best thing for you to do as a student is to check with your Financial Aid Office. Rules are unique sometimes from school to school, so the way one school might take care of a situation may not be how another school could. And if you're an FAO checking this blog out, then always go back to the FSA Handbook and the Dept. of Ed. for guidance. I personally always err on the side of caution, so don't quote me, since I don't know everything, but then again, in FA, who does? I should also add that no student names will be mentioned on this blog, although some real situations might be used as examples; however, these real situations will be interspersed with fictional situations. The purpose is to give examples so that you will better understand the topic.