Author: moneyman

Expecting the Unexpected – in your PJs

moneyman4 Comments

Right now I’m going to guess that almost everyone who can is spending a lot more time in their “casual clothes”. So I’m not talking about those heroes of this new world we live in — the nurses, doctors, EMTs, grocery store workers, mail carriers, etc. — who still have to leave the house to go to work. But for many of us who can either stay at home to work, or for whom (unfortunately) work is not an option right now, I imagine our dressing patterns have changed.

In fact, the Washington Post recently featured a story they entitled “Business on top; pajamas underneath” all about the move to much more casual “work” attire.

Credit to @calebwallace_17 on Twitter

So maybe it isn’t PJs, but it counts.

Today what counts for this post is a financial aid PJ. And, no, I am not talking about money-themed bedwear, but rather what we call in financial aid a “Professional Judgment”.

When you apply for financial aid, you always use the income from the prior–prior year (so if you apply for the 2020-21 academic year, we use your income from 2018). Why is that, you ask? Well (I answer), remember that the FAFSA “goes live” as of October 1 the year prior to the start of the academic year (in this case, October 1, 2019) and we have to use the last completed income year as of the date the FAFSA goes live (which in this case would be the 2018 income tax year). [I wrote about the FAFSA in a previous post that will give you an overview of the form.]

So to visualize this, it might help to use the image below. You can see that the income you (and your parents?) earned from January to December 2018, for which you filed a tax return in April 2019, and then filed a FAFSA as early as October 1, 2019, is finally used to determine your financial aid for the 2020-21 academic year (with bills usually due in late Summer 2020 and early winter 2021).

The Application Cycle

So the income determining your financial aid earned as long ago as January 2018 can be used to determine the financial aid 20 months later (August 2020)? What? (insert screeching sound here) But what if your income has changed since then? What if you are unemployed or if (heaven forbid) a parent has passed away? What happens then?

Put on your pajamas, grab a snack, and let’s talk about PJs (Professional Judgments).

But first one more aside. There are lots of different kinds of Financial Aid Professional Judgments and we’ve reviewed one of them already here on the blog. When a student is otherwise dependent on their parent(s) for financial aid purposes (see the review of that here), there may be extenuating circumstances that convince a financial aid officer to declare the student independent (more on that process here). This is a kind of professional judgment (relying on the financial aid officer to determine if your circumstances warrant an override of the official definition of dependence) and financial aid officers have many other kinds of professional judgment they are granted.

Another kind of PJ (professional judgment) applies to the situation when a family has lost income (perhaps due to unemployment or to the death of a parent). While the FAFSA requires an analysis of 12 months of income, a financial aid officer is allowed to choose (in exceptional circumstances, and on a case by case basis) a different 12 months if the family’s situation calls for it.

So for example, if a family files the 2020-21 FAFSA using their 2018 income, but a parent loses a job in June 2019, the financial aid officer could use the 2019 income, the expected 2020 income, or the income from June 1, 2019 to May 31, 2020 (or indeed any other 12 month period they thought was appropriate). This flexibility is an option for financial aid officer (never a mandate) and each financial aid officer may make a different decision based on their professional judgment. But there are a few common attributes which, as a student or parent, you should know:

  1. The decision must be made on a case-by-case basis. For example, a financial aid officer cannot say that every one who lost a job due to the COVID-19 situation will be granted an override, but she could review each case one at a time and reach the same decision for each.
  2. The decision must be based on adequate documentation. The definition of adequate is left to the financial aid officer but almost always requires submission of information from a family documenting the condition which caused the request. This might include a notice of termination (job), unemployment compensation forms, a doctor’s note, or a death certificate. Again, the requirements can vary from officer to officer, although most will ask for a letter from the family explaining the situation and some type of third-party documentation.
  3. There is no mandate that a PJ be offered, but Federal Student Aid does encourage those of us in the financial aid offices across the country to take into account the situations many of our families are experiencing during difficult times.

Financial aid officers are not limited to just changing income information when they make a PJ on the FAFSA. Indeed they can override any data element on the FAFSA (and sometimes do) as a response to a family’s special circumstances (they cannot however change the EFC formula). Here are some examples I have seen:

  • Overriding a family’s cash/savings/checking amount when a family has sold a primary residence but hasn’t yet purchased a new one (remember that the value of a home is not reported on the FAFSA).
  • Adding to Federal Taxes paid to reflect a family’s additional medical expenses which were not covered by insurance.
  • Changing the number in family or adding to Federal Taxes paid to reflect expenses provided to support family members who do not reside with the family but for whom significant cash support is provided.

While these are just a few examples of Professional Judgment, the list of what a financial aid office can do is almost limitless. They can change any individual FAFSA element they want if you provide a documented rationale with the relevant third-party documentation. Remember, they can do it, but you have to prove your case. You have to explain what makes your circumstance unusual and unexpected.

Some colleges even have their policies written on their webpage with their requirements clearly laid out. Take a look at UCF’s PJ (Professional Judgment) web page or Pensacola State’s PJ Request Form.

Of course, you might want to put on your comfortable clothes before you read on!

See you next time!

Pound the Alarm (Coronavirus CARES Act)

moneyman11 Comments

Mad props to Nicki Minaj. That’s it. No other reason. Just love for her.

OK, well, I will say that if there is a big alarm bell for higher education, we pounded it these last few weeks! “Somebody call 911… shawty fire burning on the dance floor”. Never mind, that’s Sean Kingston.

Doesn’t matter what you call it; we’re in pretty urgent times. Can we all just hit snooze?

Regardless of the background music you have running in your head right now, it is pretty clear that we are in emergency times. Last week, the US Congress passed (and the President signed) the CARES Act (the “Coronavirus Aid, Relief and Economic Security Act”), also known as the $2 trillion relief package. There are some pretty important parts of this law and today’s post is going to review them (and what might have impact for you). If you want to read along in the final text of the law, feel free to do so — you can find the text here. Just keep in mind that the final bill is 335 pages long; I’ve picked out the important pieces for you and for higher education below.

First let’s talk about the individual taxpayer checks that are coming. Under Section 2201 of the Act (pages 55-60), a new program called “Recovery Rebates for Individuals” is created. Under this program, most taxpayers will be getting a stimulus check in the amount of up to $1200 per adult (with income caps) and $500 per child under the age of 17 in the household. CNN has a pretty handy calculator to determine how much you can expect in your stimulus check. Remember, this is based on your 2019 Adjusted Gross Income (if you already filed your 2019 Federal Income Tax Return) or your 2018 return. Since I know you read every blog entry with care, just a reminder that you can learn a lot more about Federal Taxes by visiting this section of the blog.

The next big item is the amount of Emergency Grant funds for colleges and universities. The Act sets aside about $12.5B in emergency funds for institutions to help students during this crisis; you can find the rules for this under Section 18004 (pages 287-288) of the Act. These funds can be used in the following manner: 1/2 MUST be used to help offset student expenses by providing direct grants to students, while the other 1/2 CAN be used to offset the institution’s expenses in moving to online education (including technology, payroll, etc). Individual colleges will see large amounts of money directed to them under this program; the American Council on Education ran an estimate of how much they think colleges will each receive (based on enrollment, Pell participation, and other data). These numbers are estimates only, but as an example USF (Main Campus) is expected to receive $29.5M, UCF to receive $47.6M, Miami-Dade College to receive $47.4M, Broward $27.5M, and so on. To be clear, these are only estimates and no final rules have yet been shared by the Department of Education (nor do we as colleges have this money yet since the law was just signed Friday) but we know that whatever comes this will be very helpful for you, our students.

And the bill goes on from there. Below I am going to highlight some sections of the bill, page numbers, and a brief description of the relief coming from this part of the Act. All of these are higher education changes:

  • Section 3503 (page 116) – waivers of matching requirements for schools for Campus Based Fund (SEOG and FWS). This means that schools do not have to match Federal awards in these programs with their own dollars (it has been a 75/25 match) allowing schools to use this money in other ways to help students. This waiver is for two years (2019/20 and 2020/21).
  • Section 3504 (pages 116-117) – use of Supplemental Education Opportunity Grant (SEOG). This section allows colleges and universities to use the funds awarded to them by the Feds in SEOG to now help both undergrads and grad students and to ignore the previous rules about awarding order (reserving this money for those who have Pell Grants first).
  • Section 3505 (page 117) – paying Federal Work Study (FWS) students. This section specifically allows schools to pay their FWS students if the campus has to close (although online classes are still being offered) and students cannot work any longer on campus.
  • Section 3506 / 3507 (page 118) – for students who withdraw, ignoring usage limits. Pell Grants and Subsidized Loans have aggregate limits so that once you use your limits, you can’t have any more Pell (or Subsidized Loans). Under this section if you withdraw during the period of national emergency, the Pell or Subsidized Loan you received won’t count against your limits.
  • Section 3508 (pages 118-119) – Institutional refunds and loan flexibility. Again this section is for students who withdraw during this emergency. Under this section, neither institutions nor students would have to return unearned aid to the government (like we usually do if you don’t attend at least 60% of the term). In addition, if a student withdraws, the amount of any Federal loan borrowed for that period would be cancelled.
  • Section 3509 (page 119) – Satisfactory Academic Progress. This section says that for students who withdraw due to the emergency, colleges can ignore the courses that they have withdrawn from in determining their completion percentage (which has to be above 66.6%).
  • Sections 3510, 3511, 3512 (pages 119-124). These cover foreign institutions, emergency waivers, and HBCU capital financing. Important for these schools, but not relevant to many of you students.
  • Section 3513 (pages 124-125) – Federal student loan relief. Under this section, Federal student loan interest rates are set to 0% and no payments are required for 6 months (until September 30, 2020). In addition, all forms of collection (wage garnishment, reducing tax refunds or other federal benefits) are halted.

There are some other Higher Ed sections but they are mainly technical (pages 125-130). The only one that may interest some of you is the waiver of teaching service for those receiving the TEACH grant during this time.

Sooooo…… lots of changes. When does this all go into effect?? Well technically as of the day the law was signed but we usually get some guidance from Federal Student Aid at the Department of Education on how to implement changes. We have no guidance or announcements yet on the CARES Act so stay tuned. There is a lot more to come.

For now, ask your questions. I’m sure you have some. I can’t promise answers but I will sure try!!

Why the sudden interest in my interest? (Coronavirus Update 2)

moneyman

It has been quite a week. I’m sure you feel the same. I’m trying to balance my need to be updated constantly with the latest news with a desire not to be constantly inundated with what’s going on.

Last night I took a break and watched a great old movie. It was just the break I needed; light and comedic, and just fun. What are you doing to try to find time to balance? What tricks are you using if you are working out of the home (in a gas station, restaurant, grocery store) to relax, and if you aren’t able to work right now, what relaxation tip works for you? I’m interested!

Right now it may be hard to find balance. How are you doing it?

Speaking of interest, today’s update focuses on some interesting news: what is happening with student loan interest. As you may be aware, the President has put a temporary hold on interest for all Federally held educational loans (this includes Direct Subsidized Loans (in repayment), Direct Unsubsidized Loans, Direct PLUS Loans (both for parents and for graduate students) and Direct Consolidation Loans.

But what does this really mean for student (and parent) borrowers? And what do you need to do in order to make sure that your loans are taken care of during this crisis? Well, moneyman has you covered.

According to the announcement by Secretary of Education, Betsy DeVos, interest on education loans held by the Federal government will be set to 0% for a period of at least 60 days. This means that for students still in school, interest will not accrue for their Unsubsidized Loans. For students in repayment, their loans will still have the same monthly payment amount, but their regular monthly payment will be applied entirely to their principle.

For borrowers in repayment, there is an ability to suspend repayment by asking for a forbearance. This means that (especially if you are struggling right now or need some relief for payment) you can qualify for a suspension of payments and during the time of that suspension of payment no interest will accrue. You must request a forbearance from your servicer (the company that processes your payments); don’t simply stop making payments (although borrowers who are 31 days late or more will automatically be placed on forbearancee). If you are possibly going to qualify for Public Service Loan Forgiveness you also don’t want to stop making payments since you need to have 10 years of repayment (120 months) to qualify.

Well interest keeps on building in student loan interest so here is some breaking news. As I was working on this post, some details are coming out about the $2 trillion stimulus package passed today by Congress. According to CNN, the law includes a provision suspending student loan payments without payments for 6 month (through September 30). Stay tuned for more details as we know them. Another article specifies a few other financial aid related items which are part of this bill: 0% interest during these 6 months, the ability to keep unspent Pell Grant or student loans due to withdrawals, and the waiver of any penalties for further financial aid due to these withdrawals.

More information will be coming I am sure. For now, though, let me know how you are finding balance in these days. I will be watching some silly old comedies.

This Corona (update) is for you…

moneyman

Hello all,

What a strange world we are all living in! Just a week and a day ago, I was writing you about credit history and how it impacts loans. I was on Spring Break (as I am assuming some of you were) and I was watching the news about the Coronavirus situation. I was looking forward to being back on campus and I had a few conference trips planned in the next few months

Our strange new world!

How quickly everything changes. I am now working from home, managing moving all our employees home and making sure they have access to work remotely, coordinating financial aid delivery to our students from our individual personal residences, supporting our students who were not prepared to move completely online with their coursework (and their faculty who were also not prepared), and doing it all with grace, patience, and love.

So, you might be wondering what does this all mean for you? Great question. This will be my first Coronavirus update post, but I am sure not my last. This is a time when I really mean it. I know you have lots of questions. Ask them. I want to help you, but I don’t know what your questions are until you ask them.

Here are some of the things I imagine you want to know right now.

  1. What’s happening with my financial aid? All of your financial aid offices are moving their operations off of their campuses and planning on working remotely. This means that there may be a delay for things to get “back to normal”. I know at my campus we had to institute a one-week hold on financial aid refunds because we needed the time to get people set up. If you are expecting a refund and it is delayed, give the office a week (extra) and then if you haven’t heard anything call or email them.
  2. What happens with my Federal Work Study (FWS) job? In situations like this, colleges and universities are given the option to pay their students for the hours they were scheduled to work if the campus is closed and no one can come in to work. This doesn’t mean that every college or university will choose this option, so you want to find out what your school plans to do. If you had a job which was paid for by institutional funds (and not FWS), then the school will decide if they want to pay you; there is no Federal guidance for this.
  3. What happens to my financial aid if I withdraw / if my study abroad trip is cancelled? All good questions. BE careful about withdrawing; if you leave all of your classes too early in the term you may owe some of your financial aid money back. In addition, remember the conversation we had about SAP; one things schools have to measure is the percentage of classes you earn of those you attempt. This means if you withdraw too many times you might put your future financial aid in jeopardy (of course you could appeal if this happens, but be careful!). If your study abroad program is cancelled you want to talk to your school to see if they are planning to refund your costs and not consider you enrolled or if they have some kind of distance learning program they are offering to make up the difference in credit hours for you.
  4. What if I need help with issues like getting Wifi, paying for food and housing, or other emergency situations? Your college or university likely has a list of emergency resources available to students. In central Florida, Valencia College has created a curated list of sources for emergency help.
  5. What if I lost my job / my parent(s) lost their job? If you have an emergency situation and need financial support, talk to your financial aid office. Many schools have emergency aid programs to help with small cash grants to help in urgent situations. Also a college may be able to perform a “professional judgment” and change your FAFSA information if appropriate to grant you more financial aid. Be prepared to document your situation (copies of your “lay off” notice or other information).

So if you have more questions, ask. I know there is a lot of moving pieces here, so I will try to update as I know more. Together we will get through all of this.

Puzzled about Student and Parent Loans

moneyman1 Comment

I am a logic puzzle fan. I enjoy solving puzzles like The Lady or the Tiger, or figuring out Nonograms. So when I logged into my browser this morning and this article popped up (“The Logic Puzzle You Can Only Solve with Your Brightest Friend”), I was happy to waste spend a few minutes playing my way through it. Go ahead; try it. I’ll be right here waiting for you when you get back.

Have fun figuring out the puzzle!

So, did you solve it? I admit, I needed a little help on that one. Just like you might need a little help with today’s blog post – all about Parent and Student loans and the impact of your credit history on them.

Let’s start with some definitions. There are two main types of loans for education: parent loans and student loans. As you might guess, the main difference between them is who is defined as the borrower. For parent loans, the parent (or parents) borrow for the student (and sometimes, depending on the loan, the student may be a co-borrower). For student loans, the student borrows (although for many private loans, a parent or other “adult” must be a co-borrower). So you can see, often the main difference is simply who’s name is listed as the main borrower.

The second important piece to know is who is doing the lending: is this a Federal or Private loan? In the case of Federal loans, the Federal government is the lender; these are called Direct Loans (Direct Subsidized Loans, Direct Unsubsidized Loans and Federal PLUS Loans). For Private Loans, the lender could be a bank, a credit union, or a state financing agency; Private Loans come under various names and have lots of different terms and conditions.

Federal Direct Student Loans (Subsidized and Unsubsidized) have loan limits, depending on a students grade level (the farther along in your career, the more you can borrow per year). For Graduate Students, the only Federal Direct Student loan available is Unsubsidized. The main difference between Subsidized and Unsubsidized Loans is who pays the interest while the student is in school or in grace period: if Subsidized, the Federal government covers the interest payments during the in school, grace and deferment periods, while for Unsubsidized Loans, the student is charged the interest and can either pay the interest off each month while in school or can defer the interest until payments start, but the interest will be added to amount owed at that point. Students borrow these loans with no cosigner. In addition, note that to qualify for these loans you must complete the FAFSA,

The other kind of Federal Loan is the Direct PLUS Loan. There are two types of these: Undergraduate PLUS Loans for Parents, and Graduate PLUS Loans for Students in graduate degree programs. These loans are available up to Cost of Attendance minus other aid. The interest rate for these programs is higher than the rate for Direct Student Loans, and interest charges begin immediately; there is no interest subsidy.

So what about credit? Does your credit history matter when it comes to Federal Loans? There is no credit check for Direct Student Loans (Subsidized or Unsubsidized). As long as a student has not defaulted on a previous Direct Loan, and does not owe back an overpayment for a Federal grant, then she can receive a Federal Direct Loan. Even a student in default on a previous loan can make a limited number of payments to rehabilitate their loan and qualify for future loans.

For PLUS loans (both for parents of undergraduate students and for graduate students themselves), a credit check is run, but as long as the applicant does not have “adverse credit history” they will qualify for the loan. Adverse credit history basically means being 90 days or more past due on a current obligation, or having other more serious examples of repayment difficulty (see the link above). Note that nowhere above does the definition refer to credit scores; and any student who is approved gets the same interest rate and terms. There is no reward for better credit history from the Federal government, but neither is there any punishment for lower credit scores (as long as you do not meet any of the definitions above). If you do have an adverse credit history, you may be able to add a cosigner or explain the situation that caused your adverse credit history and still qualify.

Private loans on the other hand absolutely look at your credit score. The better your credit score, the better interest rate will be offered to you (and sometimes the rate could be better than the Federal government’s interest rate on their loans), the more flexibility you will have around length of repayment, and the less likely you will need a cosigner. Private loans may also look at your ability to repay (using a debt-to-income ratio) to ensure that you can afford your monthly obligations (and they will likely use your credit report to determine what loans and other obligations you currently have).

So, long story short, most Federal loans don’t require perfect credit, and if you have significant credit issues you can work through them; however interest rates can be higher than private loans, and terms aren’t generally as flexible. Private loans can be a better choice for student or parent borrowers with excellent credit, but these loans don’t have as many benefits as Federal Loans (more about these in a later post), and for student borrowers will generally require a cosigner.

So what did I miss? What questions do you have? Let me help you solve this puzzle!

Extra Credit

moneyman2 Comments

So let me be VERY clear from the beginning: nothing in the process of qualifying for financial aid (specifically grants, scholarships, or work awards) have anything to do with your or your parents’ credit history. When it comes to qualifying for these types of financial aid, we don’t care if your parents have declared bankruptcy, if there is a 90 day delinquency in payment in your past, or if you have a tax lien.

BUT… your credit history is really important for lots of other reasons (including some student and parent loans, qualifying for some jobs, renting an apartment, buying a car, or qualifying for a credit card…). So we are going to spend some time talking about credit.

Who wants extra credit?

I am going to begin this week with an assumption that you may know nothing about credit or your credit history. What is a credit history? And where does it come from?

Your credit history shows a record of your payment of loan or debt obligations. Whenever you take on a debt, an entry is made in your credit history showing how much you borrowed, your current balance, and your history of payments. There are three main credit bureaus (organizations that track your credit history). Each company has a slightly different way of reporting your history, and while generally banks and lenders report your information to all three of the bureaus, they may have different reporting schedules (and some lenders may not report to all three companies).

The three major credit bureaus in the US are Equifax, Experian, and TransUnion. While there are not worldwide credit bureaus, other countries around the world have their own companies providing credit history.

Every consumer is allowed for free – once a year – to obtain a copy of their credit history from the three bureaus. This site allows you to receive them. You can also obtain a copy for free if you are declined credit, or you can pay the three bureaus to have regular access to your credit history.

While you can get a copy of your history for free from the bureaus, you are never able to get a copy of your credit score for free. What is a credit score? In 1989, the credit score was introduced as a way to provide an easy way to measure an individual’s creditworthiness. The credit score is a three digit number (usually from 300 to 850) with the higher the number representing a more creditworthy individual.

Whether or not you qualify for a loan can be based on your credit score. Your interest rate, how many months you are allowed to repay your loan, any fees you are charged, all can be based on your credit score. Your credit score is an important indicator of how much you will spend on credit.

You can pay to get access to your credit score, or (better yet) you can get a copy of your free annual credit bureau report (CBR) and make sure the information is correct. You can dispute information that is wrong on your CBR, and the credit bureaus are required to correct any errors.

So we are going to spend a lot more time this month talking about credit — how credit impacts loans, how to improve your credit score, and how credit cards work (among other personal loans).

But for now I have an extra credit assignment for you! Was this information helpful? What didn’t we cover about credit that you want to know? What questions do you have about credit that I can answer?

Prepay Way (Pre-“Pei Wei”)

moneyman

So I like Asian food. Specifically, I think my umami taste buds are well-developed and there are times I just crave a sushi roll dipped in soy sauce, or a teriyaki flavored dish, or just some good pan-Asian cuisine.

Which makes the current restaurant environment in Florida very interesting.

I’m getting hungry!

In Florida, we tend to have a few distinct types of Asian restaurants — the American style upscale (like P.F. Changs), the all-you-can eat buffets, the sushi restaurants, and a few hole-in-the-wall take-out places.

Which makes Pei Wei an interesting choice. Billed as “fast casual” but customizable, it offers fresh cooked-to-order food at a reasonable (?) price. So why haven’t I tried it? Good question, guess I am stuck in a pre-Pei Wei world. Have you been? What am I missing? It is worth my trying it?

Now while I haven’t been to Pei Wei, I have used a prepay tuition plan (see what I did there?) for my children’s education expense, and these are great programs!

Really referred to as 529 Plans, these tax-advantaged plans come in two flavors: College Savings Plans and Prepaid Tuition Plans. Let’s talk about the differences between them:

  1. College Savings Plans are tax-protected ways to save for college. You make an investment and the money you put into the program is used to purchase stock or other investments (depending upon your risk tolerance and timeframe). The money you earn from your investment is not subject to Federal or State tax as long as you use the amount of your total program to pay for college expenses. This can be a great way to save money if you aren’t sure where a student will go to college as these programs tend to be generic and allow enrollment anywhere.
  2. Prepaid Tuition Plans are programs where you can pre-purchase a fixed percentage of tuition amounts using today’s cost. These programs usually then guarantee that you will then receive whatever that percentage is of tuition when you attend college, no matter how much tuition has grown in the meantime. These programs tend to be limited to a set of colleges (maybe by state or by type), so if you choose to go to some other school not in the list you can get your money back, but it may not be at the same investment rate that you might have had under another program.

Essentially the choice between these two types of programs boils down to two factors: do you think costs of tuition will rise faster than the amount you can get if you invest, and do you know where you will be going to college (or are you willing to limit your choice to a specific list).

College tuition rates historically have increased higher than inflation (and certainly higher than investment rates). There are some exceptions to this. Most public institutions of higher education in Florida (including both state colleges and state universities), for example, haven’t had a tuition increase since 2013-14 (over 7 years ago). This means that if you bought into the Florida Prepaid Tuition plan 7 years ago, your investment would still be worth the same amount today as it was then. This is part of the reason that prices have dropped for the program and Florida Prepaid returned $1.3 billion to current customers.

All of this said, making an investment in one of the programs is a great choice for college savings. A huge benefit of the program is that the amount of the program that you have saved is not counted as a scholarship for financial aid purposes; instead the amount is simply reported as an asset (like any cash, savings or stock account) by the person who owns the account. The important part there is the name of the owner; usually this is a parent or guardian who owns the account, not the student. The student is listed as the beneficiary of the account, but since the investment is not in her / his name, there is no need to list this as a student asset (or scholarship).

For my Take Stock in Children / Take Stock in College readers, this is REALLY important. Since Take Stock purchases the Florida Prepaid program and names you as the beneficiary, the account is not owned by you, and therefore does not need to be listed either as a scholarship or as an asset you own on your FAFSA. While Take Stock calls the program a “scholarship”, it is a unique one because it does not reduce your amount of financial aid eligibility (like an overaward does).

This exception also exists if someone other than a parent purchases the 529 plan (say a grandparent). There are some wrinkles to consider here (namely related to student income and tax status of the investment) so research carefully before making a decision.

So welcome to the prepay way! These programs serve as a wonderful way to fund your education. I need to run; it’s time to have some lunch – maybe Pei Wei?

HELP! I’ve been displaced!

moneyman2 Comments

So you’ve searched for scholarships, you’ve researched the ones for which you qualify, you’ve written an amazing essay, and you are lucky enough to receive a scholarship, only to find out that the college or university you are attending has reduced some of your other financial aid as a result. WHAT HAPPENED?

Some of my friends who work for community organizations providing scholarships call this phenomenon “scholarship displacement”. In the financial aid office, we refer to this as fixing an “overaward”. But what does it all mean for you?

To begin to understand why a college might take other money away if you receive a scholarship we need to go back to a concept I talked about in an earlier blog post: COA – EFC = Need. Remember that COA is cost of attendance (how much your education for that award year will cost you including both direct and indirect costs). Your EFC (or Expected Family Contribution) is a measure of how much you and your family can afford to pay towards those costs. And your Need is the difference between these two figures.

Let’s see how this works in an example:

The Financial Aid Barrel

In the picture above you see a school that costs $55,000 (chances are, your school costs a lot less, but for this example we will use the higher figure). This family’s EFC is $10,000 which leaves them with $45,000 worth of Need.

The college or university has offered this student a combination of grants and scholarships of $38,000, loan of $3,500 and a work study allocation of $1,500. The total financial aid offered is $43,000 leaving this student with an unmet need of $2,000.

So let’s say this student goes out and receives a $2,000 private scholarship. What happens to that money? Where does it go?

Well, according to the Federal government, any scholarship awarded by an agency or foundation outside of the college has to be considered a satisfying the need of a student, and if necessary, other financial aid has to be adjusted to make room for this scholarship.

In our example, though, there is room for a $2,000 scholarship (replacing the unmet need) so no change in the financial aid offer would be required. Imagine, however, that the student wins another scholarship for $5,000 bringing their total outside scholarship to $7,000. What now?

In this case the college is most likely to remove the work and loan funds to make room for the total amount of the scholarship. By replacing the unmet need, the student loan, and the work award, the college would make room for the $7,000 scholarship award.

What happens next? What if the student earns more in outside scholarships? If this is the case, most institutions will next reduce their own need-based scholarships or grants before the student will see an impact on the EFC.

So how do you avoid this problem and maximize your own scholarships? First, you need to understand your own financial aid offer. What is your COA? What is your EFC? What is your unmet need? By knowing your unmet need you will have a better sense of how much in outside scholarship you can receive before this becomes an issue for you.

You may also want to ask your school if it is possible to increase your COA. Some colleges will consider the purchase of a laptop computer, or higher than usual expenses (room, transportation, books, etc) and – with documentation – may be willing to make an adjustment to your COA therefore leaving you with more unmet need that can be filled by your scholarship.

Another option, especially if you receive a large outside scholarship, is to ask if you can use the scholarship for a future year (or perhaps summer enrollment). Often scholarship providers will let you defer some portion of your award, especially if you can show them that by doing so you can keep more of your other financial aid.

Just know we don’t want to displace your funds, but we are required to resolve these overawards. Be in touch with your financial aid officer to see what can be done to ensure you receive the benefit of this money you have worked so hard to earn.

For my Take Stock friends (or anyone with a Florida Prepaid plan or other 529 plan), keep in mind that a 529 plan is not considered a scholarship for these purposes. Next time we are going to dig into how the Florida Prepaid account you have received is handled by financial aid. Stay tuned!

How do you spell “essay”? “P-O-E-M”

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If you take a look at private foundation scholarship applications, you will quickly notice something pretty common about their application process — many of them require an essay.

As an example take a look at Valencia College’s Scholarship Bulletin Board. A quick glance at some of the scholarships listed shows a series of essays required to apply:

  1. “Please tell us a bit about yourself and how you plan to make a positive impact on the world through your career after college.”
  2. “How you have used your creative talents to achieve at your college or university so far?”
  3. “What person, event, or activity in your life thus far has most prepared you for your future? How has this person, event or activity impacted your life?”

So maybe you aren’t an essay writer, or you aren’t even sure where to begin. That’s where moneyman (that’s me) comes in to help!

Time to get writing!!

What you may notice about the essay questions above (and, in fact, almost every essay question asked for scholarships) is that they ask you to say something about your passions; scholarship providers want to get to know you, and your 500 – 1000 word essay is their chance to do that.

So how do you decide what to write about? My advice is to begin by discovering your POEM. The word “POEM” is an acronym to help you focus your essay writing, and it is a great practice to discover your essay topic. Here’s what it means:

  • P stands for Passion. What are you passionate about? Maybe it’s theater, or biology, or football, or video games. Whatever your passion is, this is the perfect place to begin. Scholarship providers want to get to know you, and exploring the things that get you excited is a great way to share your story (and make the essay writing process fun). But your passion is only the beginning. Let’s move on to…
  • O stands for Opportunity. When have you had the chance to explore your passion? What specific chance have you taken to look deeply into the subject you are passionate about? Has this been a class on biology, a theater camp, a video game con? What was a time when you really got “into” your passion?
  • E stands for Experience. Now that you have identified the Opportunity, what one Experience stands out for you? Was it a project in your class, or a game that your team played where you were the underdog? Was it a role that you had a chance to perform in a play, or a time at your job where you had the opportunity to try something new that you have always dreamed about? Finding that experience helps bring you nearer to the final part of this winnowing process, and that is our final letter…
  • M stands for Moment. Find the one moment which was part of your experience that best tells your story. Maybe it was the time your forgot your line on stage in the middle of act two and had to rely on your cast mates to get you through it. Perhaps it was the seconds right before your final project presentation in class when you and your co-presenters had that nervous excitement about how your faculty and classmates would react to your creative style. Maybe it was the time when you didn’t succeed in making the goal (or completing the pass, or hitting a run), and you knew that even in losing in that moment, your passion for your sport would carry you through. Whatever your moment is, THIS is what carries your essay. Through your moment, you can connect back to your passion and an essay reviewer will see you!

So when you write your essay, write about your moment. Find a way to connect your moment to the theme, and you will have an essay that stands out.

Having this already written also helps when you start looking at scholarships. All you need to do then is add an opening and closing paragraph that connect to the particular theme and you have a finished essay you can use in applying to scholarships.

Have you tried writing scholarship essays? Have they been a challenge for you? Moneyman is here to help!!! Feel free to leave your questions or comments below!

I’m doing fine; how ’bout flu?

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Hello everyone. Sorry that I have been away from the blog for a few weeks. I have been severely under the weather with the flu and I am just now beginning to feel human again.

Sneezing and coughing and fever, oh my!

Needless to say, my priority has been sleep, sleep, oh – and more sleep, so the blog has slipped by me. My theme for February is scholarships so I didn’t want to waste any more time before diving into our subject of the month, so here we go.

Much of your financial aid award is outside of your control (you either qualify for a Pell Grant, or you don’t based on your EFC), and while you can apply early to increase your chances of getting other kinds of aid, there are a limited number of funds your college offers.

The sky’s the limit, though, when it comes to scholarships.

Private or outside scholarships are funds available to you that are offered by private foundations or community organizations which are not (usually) affiliated with your college or university. Some examples include the Gates Millennium Scholarship, the Coca-Cola Scholarship, and the Sarasota Education Foundation.

Annually, over $17B is given out in private scholarships to students every year. This is more in total nationwide than is given out in state scholarships ($12.6B), so your chances of qualifying for a private scholarship are reasonable.

How do you do it?

First, you need to understand that looking for and applying for private scholarships takes time and effort. This isn’t a streamlined or “once and done” process. You will need to be organized and manage your time well if you want to pursue this.

Second, you should understand what benefit you might receive from an outside scholarship. If you have already received a full need financial aid package, adding a private scholarship means something needs to be removed from your financial aid total to make room for this new fund (usually what is removed are loans or work awards). If you do not have a full financial aid package (or you have no financial aid or just a Pell Grant), then outside or private scholarships can prove a large benefit for you.

The most important thing to do is to research what kinds of programs might be available to you. Start with the monster of all search engines for private educational scholarships, FastWeb. With FastWeb you can set up an account, search for matching scholarships, and even apply for some through the webpage.

While FastWeb has a lot of scholarship listings, it isn’t your only resource. I also strongly suggest checking with your college to see if they have a scholarship service through their web page (or if their community foundation offers scholarships for which you might be considered).

Remember though that no matter what scholarship search engine you use, identifying the scholarship is only the first step. Next we’re going to talk about how to apply for the scholarship!