Monthly Archives: October 2011

Financial Aid Disclosure Form

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Cliché: Know before you owe.    
POCS Reality: There is no standard college financial aid award letter so students and families can find it confusing and difficult to calculate and compare out-of-pocket college costs.

 

The Department of Education is taking on the issue of standardizing college financial aid award letters so students and families can compare them before deciding where students should attend.

The Problem

College cost comparisons are misleading now because colleges can include different types of financial aid as reducing the college bill when in fact some can increase college costs. According to this article in Boston.com:

The practices are troubling because families often use these aid letters to help determine which school to attend. The lack of clarity has also played a role in driving up the debt loads shouldered by graduates to record levels, federal officials say.

Background Info

There are 3 types of financial aid:

  1. Scholarships/grants
  2. Federal Loans
  3. Federal Work/Study (FWS) 

Scholarships/grants are free money that does not get paid back. Loans must be repaid and have borrowing costs including fees and interest. FWS is a job, usually on campus, that receives a paycheck for work performed but is capped at the award amount.

This is an old POCSmom soapbox issue. I speak about it in my seminars, write about it this blog, and my other blog, and even made a chart on my website to help students and families better calculate college costs. 

It’s O.K.for colleges to reduce their bill with free money scholarships and grants that do not get paid back. It’s not O.K. when they also reduce the college bill by the amount of student loans and/or Federal Work Study (FWS) awards. Loans are a way to help pay the college bill but they also can hugely increase the overall cost of college because of borrowing costs. 

FWS awards can’t pay a college bill which is due way before students work and get their first paycheck from their FWS job.

When colleges include financial aid loans and FWS awards as a way to reduce the college bill, it is confusing at best for students and families trying to calculate their out-of-pocket college costs.

 A Solution

The Department of Education with the CFPB (Consumer Financial Protection Bureau) is creating a model format for colleges to use to explain financial aid offers to students. This “Financial Aid Shopping Sheet” may include the loan types and amounts, monthly repayment info, and itemized college costs. The public is invited to rate proposed content and provide comments:

http://consumerfinance.gov/students/knowbeforeyouowe

POCSmom’s College Prep DIY Insight: Only a single standardized college financial aid award letter form will enable students and parents to accurately compare college costs if it contains:

  • all college expenses
  • info about strings attached that may cause loss of free scholarships/grants
  • info about the borrowing costs of loans
  • info about how a FWS job is obtained, expected hours worked, amount of paycheck, when paid

Update: New Solution to Stop High Student Loan Debt

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Cliché: Take out a loan.    
POCS Reality: Federal student loans are a form of financial aid to help pay for college.

 

The student loan crisis goes on and President Obama announced some ways to reduce debt for 1.6 million student loan borrowers. This is an update from my prior blog.

First the existing help:

IBR

There is an Income-Based Repayment (IBR) Plan for federal Stafford student loans, student Grad PLUS, and Consolidation Loans not in default that caps monthly payment at an amount intended to be affordable based on income, family size, and state of residence.

The annual IBR repayment amount is 15 percent of the difference between your AGI and 150 percent of the Department of Health and Human Services Poverty Guideline for your family size and state. This amount is then divided by 12 to get the monthly IBR payment amount.

Use the IBR calculator to determine if your monthly payment would be lower than under the 10-year standard repayment plan. Note that borrowers may end up paying more interest because the longer the repayment period, usually the more interest is paid. However, after 25 years of repayment under IBR and meeting certain other requirements, any remaining loan balance will be canceled.

Perkins Loan Forgiveness Programs

All or a portion of Perkins Loans may be forgiven under certain circumstances for the following occupations: teachers, firefighters, librarians, speech pathologists, Vista or Peace Corps volunteers, veterans, totally and permanently disabled, attorneys, nurses and medical technicians. 

Stafford, Grad PLUS Forgiveness Programs

All or a portion of Stafford andGrad Plus Loans may be forgiven under certain circumstances for the following occupations:

For teachers

For public service

For totally and permanently disabled  

 

Then what’s coming:

2012

The following info comes from the White House blog, Fact Sheet, and Press Release: 

  • Originally slated to start in 2014 but now fast-tracked to begin next year, the “Pay As You Earn” proposal will reduce monthly student loan payments for more than 1.6 borrowers from 15 percent to 10 percent of their discretionary income. The period of  repayment years under IBR to achieve forgiveness of loan balances has been reduced from 25 to 20 years.
  • 6 million student borrowers have federal student loans under two different programs- the old Family Education Loans (FFEL) program and the Direct Loan program. They will be able to consolidate their split loans into the Direct Loans, make one combined monthly payment instead of 2 or more, and receive up to a ½ % interest rate reduction:

Borrowers who take advantage of this special, limited-time consolidation option would also receive up to a 0.5 percent reduction to their interest rate on some of their loans, which means lower monthly payments and saving hundreds in interest.  Borrowers would receive a 0.25 percent interest rate reduction on their consolidated FFEL loans and an additional 0.25 percent interest rate reduction on the entire consolidated FFEL and DL balance.

  • The Department of Education in conjunction with the Consumer Financial Protection Bureau (CFPB) will launch a new “Know Before You Owe” project. The goal is to help students and their families make an informed decision about where to attend college and the debt burden they may be left with. A model financial aid disclosure form for colleges to help students better understand the types and amounts of their aid and compare financial aid packages offered by different schools will be created.

This “Financial Aid Shopping Sheet” makes the costs and risks of student loans clear upfront – before students have enrolled – outlining their total estimated student loan debt, monthly loan payments after graduation and additional costs not covered by federal aid. 

College students and their families can provide input about the form to the CFPB on its website http://consumerfinance.gov/students/knowbeforeyouowe

Learn more:

www.studentaid.ed.gov or call 1-800-4-FED-AID

www.nslds.ed.gov federal loan information

POCSmom’s College Prep DIY Insight: There is info to help the college-bound prevent their own student debt crisis. Graduates with heavy debt that do not qualify for loan forgiveness/consolidation continue to struggle.

New Solution to Stop High Student Loan Debt

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Cliché: Take out a loan.    
POCS Reality: Federal student loans are a form of financial aid to help pay for college.

 

The student loan crisis is visible on Wall Street and Main Street as the Occupy Wall Street movement spreads from city to city.

The Chronicle of Higher Education October 23, 2011 Commentary The U.S. Should Adopt Income-Based Loans Now states the problem:

Decades of greed, inattention, and failed policy have created a growing class of young men and women with few prospects of landing jobs good enough to bear the weight of their crushing college loans.

and a possible solution:

Under an income-contingent loan system, like those in Australia and Britain, students pay a fixed percentage of their income toward their loans. Payments are automatically deducted from their paychecks by the IRS, just like income-tax withholding. Self-employed workers pay in quarterly installments, just as they do with their taxes. If borrowers earn a lot, their payments rise accordingly, and their loans are retired quickly. If their income falls below a certain level—say, the poverty line—they pay nothing. After an extended time period of 20 or 30 years, any remaining debt is forgiven.

In other words, nobody ever defaults on a federal student loan again.

POCSmom’s College Prep DIY Insight: Past bad decisions led to the present poor economy. The future depends on how today’s problems are solved.

Right now, there is an Income-Based Repayment (IBR) Plan for federal Stafford student loans and student Grad PLUS not in default that caps monthly payment at an amount intended to be affordable based on income, family size, and state of residence. Use the IBR calculator to determine if your monthly payment would be lower than under the 10-year standard repayment plan. Note that borrowers may end up paying more interest because the longer the repayment period, usually the more interest is paid. However, after 25 years of repayment under IBR and meeting certain other requirements, any remaining loan balance will be canceled.

Not all education loans are eligible for IBR such as federal parent PLUS loans and non-governmental private loans.

College Placement Tests-The Ugly Truth

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Cliché: Rest on your laurels.    
POCS Reality: Colleges can require admitted students to take college placement exams. Colleges can rescind offers of admission.

 

Sending in your college applications and getting ready to relax for the rest of your senior high school year? Don’t slack off because you’re not in a college classroom yet. Colleges may require students to take college placement tests (CPTs) before signing up for courses. Colleges can also rescind an offer of admission if your GPA takes a nosedive.

Many schools require students to take CPTs in core subjects like math and English before permitting them to sign up for courses.

Colleges provide college placement tests to incoming freshmen to determine how ready they are for college level work at that school. The penalty for not doing well impacts both time and money. Students may first have to take costly remedial non-credit classes before taking courses that are credited towards their diploma.

Q: Why test?

A: To show the probability of college success.

However, whether or not this test assessment works is being questioned. Read more: The Unchecked Power of the College Placement Test. 

Colleges may want to monitor your senior year grades and can revoke an offer of admission for poor academic performance in stark contrast to your prior levels of achievements.

POCSmom’s College Prep DIY Insight: Take action against senioritis. The college-bound can ask colleges on their list what CPTs are given at that school and in what subjects. Whether or not standardized tests (SAT, ACT, CPT) measure the probability of college success, if colleges require them, college-bound students should be prepared to take them. Possible revocation of college admission offers and College Placement Tests are good reasons for students not to slack off in their senior year.

10 College Admission Trends

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Cliché: State of affairs.    
POCS Reality: There are trends in the college process. 

 

The National Association for College Admission Counseling (NACAC) State of College Admission report shows key trends in the transition from high school to college. The 2011 edition concerns the Fall 2010 admission cycle during the economic decline and demographic changes. How should the college-bound plan? NACAC worries about the future:

Prolonged economic decline and/or uncertainty could make it more difficult for both college transition professionals and students/families to adhere to fair practices in the admission decision.

Here are 10 of their findings:

1. Economics. Students are weighing colleges costs as a more important factor and colleges compete “for students who can afford to pay the full price of tuition, including high-income, international and/or out-of-state students, as demand for financial aid increases.”

2. College Enrollment. “Total college enrollment is expected to continue increasing” and “women have enrolled in college at a higher rate than men in almost every year.”

3. College Applications. Students are submitting more applications and colleges “are enrolling increasingly smaller proportions of their accepted student pool.” Students are submitting more online applications.

4. Early Admission Programs. Early Decision (ED) applications have decreased and Early Action (EA) applications have increased. The gap between ED and Regular Decision acceptance rates have narrowed.

5. Wait List. More colleges are using wait lists but fewer students are being admitted from wait lists. “Use of a wait list is one strategy that colleges may use to mitigate the uncertainty associated with the increase in average applications per student and declining yield. However, over-utilization of the wait list strategy may complicate students’ college choice process.”

6. Top Admission Factors:

  • grades in college preparatory courses
  • strength of curriculum
  • standardized admission test scores
  • overall high school grade point average
  • the essay
  • student’s demonstrated interest (include campus visits, contact with the admission office, applying through Early Decision or Early Action, and essay/recommendations)
  • class rank
  • counselor and teacher recommendations
  • extracurricular activities

7. Moderately Important Admission Factors: Between 25 and 31 percent of colleges rated:

  • race/ethnicity
  • first generation status
  • high school attended
  • alumni relations

8. School Counselors and College Counseling. College-bound high school students benefit from access to college information and counseling in high school. On average, there is 1 counselor per 272 students. 

9. Admission Officers. On average, there are 527 applications for each college admission officer. The average ratio at public institutions was 981:1, compared to 402:1 at private institutions.

10. Cost of Recruiting. Big bucks are spent on recruiting. “On average, colleges and universities spent about $585 to recruit each applicant for Fall 2010 admission, $806 to recruit each admitted student and $2,408 to recruit each enrolled student (when admission staff salaries and benefits were included in the admission office budget).”

POCSmom’s College Prep DIY Insight: The economy impacts the college process and affects both colleges and families. Wise college-bound students heed NACAC’s findings about college admission trends and plan accordingly.

Prepaid 529 College Plans and Risks

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Cliché: You get what you pay for.    
POCS Reality: Investments to help pay for college can be risky and impact financial aid eligibility. 

 

Investments can be risky- ask anyone on Wall Street or Main Street, but how much of a risk are prepaid 529 college savings plans?

The IRS describes a 529 plan, its 2 types, and advantages:

  • A plan operated by a state or educational institution, with tax advantages and potentially other incentives to make it easier to save for college and other post-secondary training for a designated beneficiary, such as a child or grandchild.
  • There are two basic types: prepaid tuition plans and savings plans. And each state has its own plan. Each is somewhat unique. States are permitted to offer both types. A qualified education institution can only offer a prepaid tuition type 529 plan.
  • Earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board. Contributions to a 529 plan, however, are not deductible.

For 529 plans in general, investment performance is down but how does this amplify the risk?

According to Larry M. Elkin, CPA, CFP®, President of Palisades Hudson Financial Group LLC and Palisades Hudson Asset Management, L.P:

Prepaid 529 plans across the country have promised more in tuition benefits than they have the funds to deliver. In some cases, taxpayers are obliged to take up the slack, while in others the colleges themselves may be required to offer discounts to make good on the promised benefits. In still other cases, however, parents and grandparents who thought they bought the right for their offspring to attend college at a prepaid rate are likely to find themselves stuck with a broken pledge and a tuition bill, with no better recourse than to ask state legislators to bail them out.

Here are 2 questions about 2 risks:

  1. Isn’t “bail” as in bailout now considered another 4-letter word? Only a few states pledged to make up the difference if the investment does not keep up with rising college tuition costs.
  2. What if your student doesn’t want to attend a participating college – one that accepts the prepaid credits? A refund is available but, depending on the plan, may be limited to the original contribution, not any gains.

POCSmom’s College Prep DIY Insight: 529 plans are included as an asset on the FAFSA (Free Application for Federal Student Aid) in determining federal financial aid eligibility:

Investments also include qualified educational benefits or education savings accounts (e.g., Coverdell savings accounts, 529 college savings plans and the refund value of 529 prepaid tuition plans). For a student who does not report parental information, the accounts owned by the student (and/or the student’s spouse) are reported as student investments in question 41. For a student who must report parental information, the accounts are reported as parental investments in question 89, including all accounts owned by the student and all accounts owned by the parents for any member of the household.

 Parents should carefully research options before investing to save for college. Prepaid College 529 plans impact college financial aid eligibility, tax advantages, and risks.

College and the Economy

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Cliché: Come to the rescue.    
POCS Reality: Colleges are knowledge power houses that can offer solutions to public problems. 

 

We have seen what happens to towns when businesses (largest local employers) downsize or go out-of-business. It may be that colleges will play the role of heroes rescuing local economies. New York State is determined to find out according to this DemocratandChronicle.com article:

How institutions of higher learning can better fit into the New York economy should become more apparent through the 10 regional economic development councils that Gov. Andrew Cuomo established this past summer. 

POCSmom’s College Prep DIY Insight: Colleges are both think tanks and businesses. They are a “natural resource” so why not tap into all that professorial knowledge and experience? Add in brainstorming from eager to learn and creative students and let the ideas flow. Meanwhile, colleges will continue as an employer of people with diverse skills. They hire professors to teach in the classrooms, food service workers to cook in the cafeterias, counselors and medical personnel to care for students in the health centers. Landscaping, sanitation, security, administrative, secretarial, library, information technology, athletic, research, laboratory, arts, music, are some additional fields requiring staff and managers. I’m looking forward to the plans showing how colleges can help rescue the economy.

The Dark Side of the SATs-Update

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Cliché: Cheaters never prosper.    
POCS Reality: Colleges can use standardized test scores to offer admission and college scholarships.

 

The SAT cheating scandal is not just a criminal investigation anymore. A New York State Senate committee hearing will examine the Long Island cheating scandal that started with the arrest of a 19 year-old-college student for allegedly taking the tests for high school students.

According to this Wall Street Journal article, invited to testify/be a witness before NY Senate’s Higher Education Committee hearing scheduled for October 25 at Farmingdale State College include:

  • Kurt M. Landgraf, president and CEO of Princeton, N.J.-based Educational Testing Service
  • Gaston Caperton, president of The College Board
  • NassauCounty District Attorney Kathleen Rice
  • Bernard Kaplan, principal at Great Neck North High School
  • Robert Schaeffer, who runs FairTest, a longtime critic of the SAT.

POCSmom’s College Prep DIY Insight: Stakes are high because opportunities for college admission and money to pay for attending are involved. Colleges may use the SAT scores as part of their admission criteria and their institutional aid calculations to award money from their own funds. SAT cheating has an impact locally, state-wide, and nationally so safeguards and penalties should be appropriate.

*POCSmom’s College Prep DIY Insight: 10 Financial Aid Forms

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Cliché: True to form.      
POCS Reality: Colleges determine which financial aid applications they require to calculate financial aid awards.

 

There are billions of dollars in financial aid available for college from federal and state governments, college institutional funds, and outside scholarships. Awards are based on applications and colleges determine which forms they require. Here are 10 financial aid applications:

FAFSA (Free Application for Federal Student Aid) is a federal financial aid application form required by all colleges for federal financial aid including grants, loans, and work/study. In addition, some colleges use the FAFSA to award money from its own endowment funds and others require additional forms.

State financial aid may be available. Contact your state for info and an application about state-sponsored financial aid programs for state residents

Institution contact colleges on your list for additional institutional forms that the school may require before awarding money from its own endowment funds for financial aid.

CSS/Financial Aid PROFILE® is an additional form required by a few hundred colleges before they award money from their own endowment funds.

CSS Business/Farm Supplement is an additional form for business/farm owners required by many colleges before they award money from their own endowment funds.

CSS NonCustodial Profile is an additional form for divorced/separated families required by many colleges before they award money from their own endowment funds.

Outside Scholarships sponsored by businesses, employers, individuals, high schools, fraternal organizations and other private groups have their own application forms to determine award winners.

College Scholarships from a schools’ special endowment funds may be awarded in addition to a college’s financial aid programs. Some colleges use their admission application for their scholarship programs and others require additional forms.

Verification Worksheet is to be completed if a student’s FAFSA was selected for review by the college.

Appeal institutional forms may be required by the college from students seeking a reconsideration of their financial aid awards.

POCSmom’s College Prep DIY Insight: To maximize financial aid awards, submit all financial aid applications required by colleges and outside scholarships. If you believe the award is inadequate, appeal and include supporting documentation. Submit all applications before deadlines because, even if qualified, you can lose money if your application is rejected because it was submitted too late.

*POCSmom’s DIY College Prep Insight: College Students and Energy Drinks

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Cliché: Pick and choose.
POCS Reality: College students like other adults, have choices and should choose wisely.

 

Two college students on campus are tired and thirsty and one asks the other, “How about getting a Red Bull?” For a day, that question couldn’t happen. On September 26th the University of New Hampshire (UNH) announced it would no longer sell energy drinks as of January 2012.

The next day UNH announced its decision to delay its prior decision. Then the initial decision was abandoned altogether.

UNH has successfully eliminated trans fat and reduced sodium in campus food options so why the brouhaha about energy drinks, like Full Throttle, Red Bull and NOS?

Rationale for Ban

UNH’s goal is to be the number #1 rated healthiest campus and it has concerns about students mixing energy drinks with alcohol:  

In an effort to further its mission to be the healthiest campus community in the country by 2020 and keep its students safe, the University of New Hampshire will no longer sell energy drinks in its retail and vending locations beginning in January 2012.

…Research found that energy drinks can contain up to 300 times the amount of caffeine that the FDA allows for soft drinks, which is especially dangerous because caffeine increases the risk of alcohol poisoning by making people feel “less drunk.” In addition, students who mixed alcohol and energy drinks reported double the incidence rates of injuring themselves, requiring medical attention, and being taken advantage of sexually than those who drank only alcohol, according to a recent report by College Student Educators International.

Rationale for Repeal

No one else was on board. Students wanted to continue buying and drinking energy drinks and energy drink companies wanted to continue selling to satisfy this demand. In addition, there was a campus history of Red Bull sponsored campus events, product donations, and samples.

In delaying the ban decision, UNH President Mark W. Huddleston:

cited conflicting evidence about the health effects of consuming the beverages, as well as student reactions to the just-announced ban… I want to be sure we respect our students’ ability to make informed choices about what they consume.

POCSmom’s DIY College Prep Insight

Does this college energy drink ban/abandoned ban remind anyone else of Prohibition/repeal? Lesson learned-again.

In addition to college students and energy drinks, read about college students and flash mobs. Hmmm…all that youthful college student enthusiasm. I can’t help but wonder is it all natural or aided by some sips of an energy drink?

*POCS: Parent Of a College Student