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.