1	Financial Aid Myths and Realities Daniel T. Barkowitz Director, Student Financial Aid, MIT MITE²S Presentation, 2006
2	The top 10 myths You can only afford low-cost colleges. Need-blind and full-need mean the same thing. If you have academic / musical / athletic talent, you can get a free ride. All financial aid is money that does not have to be paid back. Your parents earn too much to qualify for aid. Applying for financial aid is a long and difficult process. You can’t start applying for aid until you do your taxes. Your parents have to sell their home / choose between retirement and paying for college. Savings in your name is treated the same as savings in your parent’s name. All loans are the same / All debt is bad debt.
3	#10. You can only afford low-cost colleges Your EFC should be the same (or nearly the same) across colleges so: Your net amount should be about the same Higher cost colleges tend to have more resources available for grants/scholarships
4	Some Vocabulary COA = Cost of Attendance - Includes tuition, room, board, fees, books, supplies, transportation, personal expenses EFC = Expected family contribution - Measure of what a family is expected to contribute over a year Financial Need = Difference between COA and EFC
5	How this Formula Works
6	The Financial Aid Barrel Cost of Attendance = $45,000 Unmet Need = $1,900 Work = $1,500 Work Study Loan = $2,600 Stafford Loan Gift Aid = $16,000 Grant + $15,000 Scholarship EFC = $8,000
7	#9. Need-blind and full-need mean the same thing First, understand the definitions: Need-blind – Does not use need in determination of Admissions decisions Need-based financial aid – Used Financial need (no merit) to award financial aid Full-need financial aid – Awards the entire need of the each student with financial aid
8	The “Step” Approach to Awarding Financial Aid
9	#8. If you have academic / musical / athletic talent, you can get a free ride There is money, but it usually doesn’t cover it all! You have to apply for this money separately (Sept. – Oct. of Senior Year) Best source(s): www.fastweb.com www.finaid.com/scholarships/other.phtml Understand the implications on other aid
10	#7. All financial aid is money that does not have to be paid back There is a lot of money out there In 2004-05 over $142 Billion given out for college aid But the majority of this money is loans 53% Loans 40% Grants 6% Tax Credits 1% Work The loan/grant %ge varies greatly by institution type
11	#6. Your parents earn too much to qualify for financial aid There is so “magic” cut-off for financial aid. There are two main formulae used to determine your EFC and each uses a large number of variables (income, assets, # in family, # in college). FM – Federal Methodology – used for all federal funds IM – Institutional Methodology – used by primarily private colleges and scholarship programs for their funds Good estimator at http://finaid.com/calculators/finaidestimate.phtml.
12	Federal Methodology (The method behind the madness) Used to award all federal aid Must file FAFSA Uses both parent and student information (for dependent students)
13	Federal Methodology (continued) Parent income - 22-44% after allowances Parent assets - 3-6% after protection for retirement Home equity excluded Looks at number in family and number in college Student income - 50% after taxes Student assets - 35% Divided by number in college Result is EFC
14	Institutional Methodology Some schools will use the Profile and/or their own application form Used by colleges to give out their own money Formula will vary school by school Often includes home equity Often has a minimum SC Generally more strict than Federal Methodology May include only birth parents in divorced/separated situations A word about Consensus Approach…
15	Let’s take a Quick Break from the Action... Everyone fold your arms… Look down at which wrist is in front Left - Visual Learner Right - Oral Learner Doesn’t work? - Kinesthetic Learner
16	#5. Applying for financial aid is a long and difficult process FAFSA - Free Application for Federal Student Aid Required by all colleges Free form www.fafsa.ed.gov PROFILE Some colleges need this Electronic only Paid form www.collegeboard.org Institutional Application One per school Usually part of admissions packet
17	#4. You can’t start applying for aid until you do your taxes January (or earlier for Profile): Complete forms (BEST GUESS IS OK FOR INCOME) February (or earlier for Profile): Many school’s deadlines for forms Late February - March: Schools may call you with questions End of March - Early April: Admissions and Financial Aid notification mailed
18	The Financial Aid Calendar (continued) April: Compare award letters from different schools May 1: DECISION DEADLINE - Tell all schools yes or no May: Pay deposits (tuition, room and board) - about $500 June: Bill for the Fall semester, due by 8/1 or so November - December: Bill for the Spring Semester
19	#3. Your parents have to sell their home / choose between retirement and paying for college How should your family pay the EFC? Past Income Savings Present Income Salary Payment Plans Future Income Loan Programs
20	#2. Savings in your name is treated the same as savings in your parent’s name Usually, no. Saving in your name is a BAAAAD idea (see the EFC formulae information above). However, Consensus Approach schools treat this differently…
21	#1. All loans are the same / All debt is bad debt Time Value of Money! Ability to defer Stafford / Perkins Financial Aid Packaged Loans vs. Alternative Loans For Alternative Loans, you pay for the bells and whistles Student borrower vs. parent borrower Deferred payment vs. immediate repayment Interest rate locked vs. variable rate
22	Questions? Thanks! Questions? Discussion?
23	And your last source... (Let this be the beginning of a beautiful friendship…) CONTACT ME! E-Mail: barkowit@mit.edu Phone: (617) 258-5612 Snail Mail: Daniel T. Barkowitz Director, Student Financial Aid Massachusetts Institute of Technology 77 Massachusetts Avenue Building 11-320 Cambridge, MA 02139