FINANCIAL AID 101

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FINANCIAL AID 101

• MSUSA
• OCTOBER 27, 2007
• Chris Halling
• MnSCU Office of the Chancellor
• System Director for Student Financial Aid

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TYPES OF FINANCIAL AID

• Grants and Scholarships
• Loans
• Student Employment and Work-Study

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Grants and Scholarships

• Grants are gifts funds that do not have to be
  repaid, and are most commonly awarded to students
  on the basis of financial need (a
  theoretically progressive basis for distribution
  that provides the most funds to those students
  who have the least ability to pay, and provides
  no funds to those students who can afford to pay
  the full cost of their education)
• Scholarships are also gifts, usually awarded to a
  student in recognition of a specific talent or
  accomplishment

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Loans

• Loans are funds that must be repaid, either by
  the student, or in some cases, by the students
  parents or a co-signer. Student loans are
  generally available without collateral or a
  credit history.
• Student Loans often offer rates of interest that
  are below market rates if the loan is being used
  to help meet a students financial need the
  loan may be interest-free while the student
  remains in school.

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Student Employment and Work-Study

• Student employment consists of funds that are
  paid to students in exchange for work performed
  (not class related school-work or homework, but
  other types of jobs that are available on and off
  campus)
• Work-Study funds are available to students to
  help them meet their financial need. The
  amount that students can earn is limited to the
  amount of their financial need minus any other
  financial aid that they are receiving.

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SOURCES OF FINANCIAL AID

• Almost all financial aid in Minnesota comes
• from
• The US Department of Education
• The State of Minnesota
• Higher Education Institutions
• Private Sources

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The US Department of Education

• The largest Federal financial aid programs are
• Pell Grants
• SEOG grants
• FFELP (Federal Family Educational Loans Program)
  loans
• Perkins loans
• Stafford Direct student loans
• College Work-Study
• Academic Competitive Grants
• SMART Grants

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The State of Minnesota

• The main MN programs of aid are
• Minnesota State Grants
• Student Education Loan Funds (SELF)
• Minnesota State Work-Study
• Minnesota Post-Secondary Child Care Grants
• MN GI Bill
• ACHIEVE

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Higher Education Institutions

• Can either raise funds from community or
  foundation sources, or dedicate a portion of
  their own budget to financial aid
• These funds are frequently given to students in
  the form of scholarships and non-work-study
  student employment.
• Institutions (usually private) often offer
  substantial tuition discounts, that can, in
  combination with financial aid grants, equal a
  students financial need. These are usually
  funded from tuition revenue. In other words,
  some students and families subsidize other
  students.

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Private Sources

• may contribute funds to institutions, or directly
  to students these are most commonly
  scholarships, but there is a large and growing
  body of private student loan programs.

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FINANCIAL AID TO MNSCU STUDENTS Comparison of
FY99 and FY05 end of year totals

• MnSCU Four-Year Institutions
• Y99 ( of total) FY05
  (of total)
• App. of students receiving some type of fin
  aid 40 over 60
• Total grants and scholarships (all sources)
  53,000,000 (31)
  78,000,000 (27)
• Total student and parent loans
  104,000,000 (61) 203,000,000 (70)
• Total student earnings
• from work-study and institutional jobs
  5,800,000 (7)
  7,000,000 (2)
• Total grants, scholarships, loans and earnings
  162,800,000 288,000,000

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DEFINITION OF NEED

• Cost of Attendance
• - Resources
• Need

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EFC Formula -- Parent Contribution

• Taxable Income
• Untaxed Income
• Total Income
• - US Income Tax
• - State Tax Allowance
• - Social Security Tax
• - Income Protection Allowance
• - Employment Expense Allowance
• Available Income

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EFC Formula -- Parent Contribution

• Cash, Savings, Checking
• Real Estate/Investments
• Net Business Value
• Net Farm Value
• Net Worth
• - Asset Protection Allowance
• Discretionary Net Worth
• x Asset Conversion Rate (12)
• Contribution from Assets

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EFC Formula -- Parent Contribution

• Available Income
• Asset Contribution
• Adjusted Available Income
• x Taxation Rate
• Parent Contribution

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EFC Formula -- Student Contribution

• Taxable Income
• Untaxed Income
• Total Income
• - US Income Tax
• - State Tax Allowance
• - Social Security Tax
• - Income Protection Allowance (2550 FY07)
• Available Income
• x Assessment Rate (.5)
• Contribution from Income

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EFC Formula -- Student Contribution

• Cash, Savings, Checking
• Real Estate/Investments
• Net Business Value
• Net Farm Value
• Net Worth
• x Assessment Rate (.35)
• Contribution from Assets

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EFC Formula -- Student Contribution

• Student Contribution from Income
• Student Contribution from Assets
• Parent Contribution
• Expected Family Contribution

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Computation of State Grant Award

• Cost of Attendance (COA)
• - (Student Share)
• - (PC)
• - (Pell Grant)
• State Grant
• COA (Public) Tuition and Fees LME
• COA (Private) Tuition and Fees (capped) LME
• Student Share 46 of COA
• Tuition Cap 9438 (4yr), 6436 (2yr)
• LME 6065

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KEY ISSUES RELATED TO FINANCIAL AID

• When the federal government has raised the amount
  of Pell grants for the financially most needy
  students, the MN State Grant formula has reduced
  those same students State Grants, dollar for
  dollar.
• Those dollars have then been re-distributed to
  students from wealthier families, thus denying
  the increase in benefits that the federal
  government intended to provide for the neediest
  students.

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KEY ISSUES RELATED TO FINANCIAL AID

• Many students who are actually financially
  independent of their parents and who are paying
  for all of their own educational and living
  expenses are nevertheless considered by the
  federal financial need formula to be dependent
  on their parents.
• These students do not have sufficient access to
  the financial aid resources that they need. The
  federal rules define students as independent
  for financial aid purposes only if they are 24
  years of age, a graduate or professional student,
  married, an orphan or ward of the court, a
  veteran of the US armed forces, or have legal
  dependents other than a spouse.

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KEY ISSUES RELATED TO FINANCIAL AID

• Students are borrowing more and more each year,
  in both real dollars and as a percentage of all
  financial aid received.
• The long-term (up to 25 years in some cases)
  repayment process for these loans can place a
  significant burden on these students as they
  enter the work force and become consumers and tax
  payers.

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KEY ISSUES RELATED TO FINANCIAL AID

• Because Federal borrowing limits have not been
  raised for many years, a greater percentage of
  student borrowing is from expensive private loan
  programs.

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KEY ISSUES RELATED TO FINANCIAL AID

• Independent students who work part-time and
  attend higher education part-time are not treated
  fairly by the Minnesota State grant programs
  Shared Responsibility formula for pro-rating
  awards.
• Because of the Shared Responsibility formula,
  increases in Public College and University
  tuition and fees are only partially offset by
  increased State Grants.
• More and more grant programs (Federal, State and
  Institutional) are based, at least partially) on
  merit instead of or in addition to financial
  need.