How it All Works

All in the Family (Verification part 3)

moneyman

Archie Bunker was a bigot. He was a loud-mouthed, closed-minded, assertively prejudiced, blue collar bigot who dreamed of a time when people who thought like him would be in charge of the country. And Archie Bunker would have hated what is going on right now, but probably not for the reasons you’re thinking.

George Jefferson and Archie Bunker, best frenemies.

George Jefferson was Archie Bunker’s equal in many ways (some might even argue his superior). While no one could call them “friends”, per se, they certainly served as perfect foils for each other: two lovable, obstinate characters, each one proving that stereotypes never holds true when confronted with individual identity. “All in the Family” meets “Moving On Up”. And these shows left lasting memories. And they always showed prejudice and bigotry as the idiocy that it is; both characters always got what they deserved.

Do these sitcoms hold up? Are they worth watching nearly (gasp) 35 to 45 years later? A recreation in 2019 on TV would argue yes (as would Kerry Washington, Jimmy Fallon, Jamie Foxx, Wanda Sykes, Woody Harrelson, among others). These shows were way ahead of their time, or — sadder to say — our times haven’t moved way ahead in the last 40 years, and nothing is more relevant today than confronting the scourge of racism and the terrible conditions faced by BIPOC (Black, Indigenous and People of Color) in our country. We all should dream of a day when shows like “The Jeffersons” and “All in the Family” are viewed as relics of a historical past, barely able to be conceived of, and not simply dated reflections of our present.

With that in mind, “all in the family” carries a different connotation for me for financial aid, and I want to turn there next.

But first, a check in. How are you doing, dear reader? I personally have not been OK. The trauma of the last few weeks has me sad, angry, anxious, depressed, and frankly traumatized. And I am a white, cis-gendered, married man in my 50s who never has been the victim of systemic racism. I know that I am privileged and am here to witness, to listen, to learn, and to act to make change. This is not a political statement, this is a human statement. And I am here to partner with each of you to make change possible.

For me, that means I do all that I can to demystify the financial aid process so that each one of you can find your way into economic opportunity through higher education (and find the best and most cost-effective way to pay for it). We talk about a lot of subjects here, but the most important one is you. I am hoping you are OK. If not, I am here to listen. Contact me by commenting below or using the comment form.

Now to our financial aid subject: “All in the family”. Part of the verification process requires you to document who is in your family. And who will be in college. If you remember back to when you completed the FAFSA, you entered these numbers on the form. If you have been selected for verification, now is the time to provide your list.

Schools will ask you to complete a list of those in your family on the verification form. You will list each person, their relationship to you (the student), their age, and (if they are in college) where they are attending school. For a dependent student, this will mean the members of your parent(s)’ household. You usually will list the parent or parents you live with, if you have step-parents living with you, your siblings or step-siblings who live at the home with you, siblings or step-siblings at college or living elsewhere if your parent(s) provide more than 1/2 of their support, and any other person for whom your custodial parent provides more than 1/2 of their support if they live with you. This might include your grandparents, for example, if they live with you, or your cousin, or aunt, or uncle (if your parents provide more than 1/2 of their financial support each year).

A common mistake people make is assuming that someone has to be listed on your parents’ tax return as a dependent in order for them to be part of your family. This couldn’t be further from the truth; there does not have to be a one-to-one relationship between them. You do want to be prepared, though, to list them on your verification form because if the financial aid officer sees a difference between the number of people in your family on the FAFSA and the number on your verification form, they will want an explanation.

For an independent student, the household size always includes you and (if married) a spouse who is living with you. You can also include your children (even if they don’t live with you) as long as they receive more than 1/2 of their support from you (and your spouse). Finally, you can also claim people who live with you who are not your children if you provide more than 1/2 of their financial support (say an elderly parent or grandparent, or a cousin, or niece / nephew). Remember to list each of these household members on your verification form.

Now we turn to the number in college. If someone in your household plans to attend post-secondary school (college or university) at least half-time, even for one semester, they count as part of your family in college, with one big exception. For dependent students, you cannot count a parent in college. The government assumes (incorrectly in many cases), that parents in college have financial support for their education and are not paying that cost. (This, by the way, is a great example for when you might want to ask for a professional judgment; provide a copy of your parents’ tuition bill for their own education and ask the financial aid office to consider this as a cost when analyzing your EFC). The number in college also does not include students attending a service academy because most of their costs are paid for by the Federal government.

Otherwise anyone who counts as a member of your family could count as part of the number in college. The number in college is important since your PC (Parent Contribution) is divided by this number. For example, if a family has a 12,000 total PC, and two in college, each student would have a 6,000 PC (granting them an additional 6,000 in need each). If there were three in college, the PC for each would be 4,000 and all three students would likely be Pell Grant eligible.

On the verification form, you will be asked to list each college / university attended for each member of the family, and occasionally a school may ask you to have your sibling’s college fill out a form documenting that they really are attending there. Just another way to “trust but verify“.

In closing, while you want to think expansively and include everyone you can in your family list on the verification, you want to make sure you can document the folks you choose. In short, you want to make sure you keep it “all in the family”.

Here’s hoping and praying for change to come soon. In the words of James Taylor (in his song Shed a Little Light):

Shed a Little Light

There is a feeling like the clenching of the fist
There is a hunger in the center of the chest
There is a passage through the darkness and the mist
Though the body sleeps the heart will never restOh let us turn our thoughts today to Martin Luther King
And recognize that there are ties between us
All men and women, living on the earth
Ties of hope and love, sister and brotherhood
That we are bound together
With a desire to see the world become
A place in which our children can grow free and strong
We are bound together by the task that ties before us
And the road that lies ahead, we are bound and we are bound

Heads up, the T(r)ails of Verification (part 2)

moneyman

Let’s face it. Verification isn’t fun. When you are selected for verification, it can feel like a burden, and it may feel like those of us who are working in financial aid are trying to “get into your business”. Trust moneyman, it isn’t our choice. If you are selected for verification it might feel like the flip of a coin at random (heads or tails?), but once you have been selected there are certain principles we need to follow.

Flip a coin… See where it lands…

One of these principles is that while financial aid officers are not accountants, we do need to know some basic tax information. Federal Student Aid publishes an annual Application and Verification Guide for financial aid administrators (which is very technical, feel free to read it if you have nothing better to do) which perhaps says it best:

Financial aid administrators do not need to be tax experts, yet there are some issues that even a layperson with basic tax law information can evaluate. Because conflicting data often involve such information, FAAs must have a fundamental understanding of relevant tax issues that can considerably affect the need analysis. You are obligated to know (1) whether a person was required to file a tax return and (2) what the correct filing status for a person should be.

Page 132 of the 2020-21 AVG

So here we go. Let’s start with Heads… In this case, Heads of Household.

If moneyman sees one common mistake that holds up families from completing verification, it is both parents filing their tax returns as head of household even though they are married and living together. The rules for filing Head of Household (as published by the IRS) say:

“You may be able to file as head of household if you meet all the following requirements:

  1. You are unmarried or “considered unmarried” on the last day of the year…
  2. You paid more than half of the cost of keeping up a home for the year.
  3. A qualifying person lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the qualifying person is your dependent parent, he or she doesn’t have to live with you. See Special rule for parent, later, under Qualifying Person.”

If two parents file as married on the FAFSA as their marital status and then provide separate tax returns with one or both filing as Head of Household, this is usually a problem. To correct this, the family either needs to prove that they meet the qualifications above, or they need to file an Amended Tax Return. Otherwise we cannot complete verification.

Why would a family want to file as Head of Household? Usually tax rates are lower, so amending a return may mean that the family needs to pay more in taxes, but to qualify for aid it is necessary to resolve this discrepancy. There could be a possible reason for a parent to file Head of Household on a tax return (say for the 2018 tax return), but file the FAFSA as “married” for 2020-21, but the situation is unlikely. Lots of examples (and much more detail) can be found at this link.

More T(r)ials (or trials) of verification:

The quote above also mentions that financial aid administrators should kow if a parent or student should have filed a tax return (if they earned enough income to be required to do so).

How does this work? The same IRS publication lists the minimum income thresholds which require a taxpayer to file a Federal income tax return.

According to the chart, if a regularly employed (not self-employed) individual earns above 12,000 (and they are single and under 65), they must file a tax return. Of course, a taxpayer might choose to file anyway so that they can get their tax refund, but the above chart represents the numbers of income at which you must file a return. Note (by the way) that spouses who file separately have a very low income threshold – only $5.

Self-employed individuals have even a lower threshold. If you are self-employed and your net earnings are greater than $400, you need to complete a tax return.

Sometimes we hear from students whose parents do not file a tax return because they don’t believe they have to. In these cases, we are required to collect copies of W-2s, and “non-filer” from the IRS to show that the taxpayer did not file a tax return. But if the income is above the minimum income threshold, we must have a tax return.

Here are the trials of verification. What stories have you experienced? Where do you get hung up in verification?

NCAN (the National College Attainment Network) in 2017 published a study of the leaky FAFSA pipeline. According to their study, 22% of applications selected for verification drop out due to the difficulty of the process.

Don’t be part of the melt! Ask your verification question here and moneyman will help!! Don’t leave your financial aid unclaimed! Be “cool” (don’t be part of the summer melt) and don’t “flip”!

Please pass… the COLA.

moneyman1 Comment

Please pass

For many of you, final grades are in and the Spring semester has ended (in fact, some of you may already enrolled in Summer classes). Hopefully your Spring grade were what you wanted them to be and you are looking at a great end to your semester.

Pass the New Grading Options, please!

I recognize though that some of you may have had a difficult semester, especially with classes moving completely online, the changes in living and working situations, and the need to return home from your campus.

Remember, your grades have great impact on your eligibility for financial aid. Previously, I wrote about the Satisfactory Academic Progress (SAP) requirements for Federal Aid (and if you missed the post, I recommend going back and reading it). As a reminder, we look at three things when we examine your SAP:

  1. Your completion rate (Federally required to be 66.67% or above).
  2. Your cumulative GPA (required to be 2.00 or better).
  3. Your maximum timeframe (150% of the number of credit required for the degree program you are pursuing).

Also remember that if you were already on Financial Aid Warning or working under a Financial Aid Academic Plan while on Probation, you may find yourself with a need to appeal this semester because of your academic difficulties. In a previous post on the CARES Act, I indicated that this semester the Federal Government has offered an opportunity for colleges to ignore classes for which you withdrew if the reason was related to the pandemic. There has been no final guidance offered from the Feds on this yet however so if you withdrew from classes this semester and you are now on a negative SAP status (like Suspension), I would advise speaking to your financial aid officer and letting them know about the CARES Act exemption.

Even if you didn’t withdraw from classes, this is definitely a semester to write an appeal for consideration from the consequences of negative SAP. If your school processes appeals, they can let you know how they prefer these forms or letters to be submitted (ask them or look on their web page), but don’t give up! Of all times, we understand this last semester was tough on you; it was tough on all of us!

The COLA

I also wanted to share a little more advice in this post for those of you looking at post-graduation jobs. With the recent April jobs report showing losses in every part of the job market, it may seem like the most difficult time to be looking for work. That may be true, but the national story is not the story of every part of the country. State and local metro unemployment rates (not yet updated for April) show that different parts of the country have differences in their experience of job losses.

Graduation from college is a time in your life where you can reinvent yourself; this may be the time to think about moving to a new part of the country, or even a different part of the state. You may want to think about relocating to a major city or metro so you can experience urban life if you haven’t done so before, or you may want to try something different than your big city and find someplace more suburban or rural.

Before you run off to start your new life, though, you want to make sure you understand the difference in COLA!

No, not these kinds of COLA

When I say “COLA”, I mean a Cost of Living Adjustment. Think about it this way: a $30,000 income is very different if you earn that in Pensacola, FL vs. Manhattan (NYC), NY. In fact, to maintain the same lifestyle in New York City you would need to earn slightly more than $78,000 (more than twice as much).

Why is that? Well groceries, housing, taxes, transportation, health care – it’s all more expensive in New York City. You may have intuitively known that, but how do you put a number behind that analysis?

Here is where I can help. There are lots of great calculators online that can help you figure this out. Try CNN’s, or the one at Nerd Wallet, or if you know the area of work you want to do, you may want to try this one at salary.com.

Just don’t forget that costs matter. As you are comparing salary offers and trying to decide whether a move to a new city is worthwhile, check the COLA.

Upcoming Plans

Just a reminder that we have a few more topics in our exploration of life after college! Coming up in the next posts: applying for financial aid as a graduate student, creating a post-college budget, and managing those “adult” things — like an apartment lease, car loan, etc.

Feel free to post your questions and suggestions. I’m here for you!

“The greenbacks are coming, the greenbacks are coming…”

moneyman3 Comments

IMPORTANT NOTE: The guidance in this post was contradicted by later guidance from the Department of Education. See here for the most recent guidance. This post is left as it was originally published for historical purposes.

With apologies to Paul Revere. He was much more concerned with the Redcoats (aka the British). Today, we’re much more focused on the “greenbacks” – aka the moolah, the Benjamins, the bread, the dough, (I could go on like this for a while) – or to put it simply, the money.

“And the money came riding in…”

As in, when will the money from the CARES Act (which I discussed here) and how will students apply for it and receive it?

Well, your friend moneyman has some answers, and lots of questions. Here goes!

On Thursday afternoon, Secretary of Education, Betsy DeVos, released a letter to college presidents (and copied to Directors of Financial Aid and Chief Financial Officers) nationwide explaining that the Department of Education was putting a priority on delivering 1/2 of the Emergency Stabilization Funds that were promised by the CARES Act to schools. Which half? The half that is going to students!

If you remember, this money has to be spent on students to help with expenses related to their education moving online (from the Act – “…expenses related to the disruption of campus operations due to coronavirus (including eligible expenses under a student’s cost of attendance, such as food, housing, course materials, technology, health care, and child care).”)

So how much will colleges receive? Take a look at the list provided by the Department of Education to find your school to see how much your school is receiving (and remember that the list is in school code order). The list shows both the total allocation as well as the amount specifically for students. If you are interested to see how these amounts were calculated, you can find the answer here.

The amounts are large here, but what does it mean for an individual student? So while the agreements that schools have to sign to receive this money (and the money will be available as soon as Wednesday) are also published, there are very few limitations on how the school can award this money.

For example, students don’t have to file a FAFSA to qualify. You don’t have to show financial need, and you don’t even need to be a US Citizen (or Permanent Resident). These funds can be awarded by schools to any attending student therefore, and in addition any amount awarded doesn’t have to follow the normal rules for overaward (or scholarship displacement). So the money gets to go straight to the student and will have no impact on other financial aid.

There is also no limit or requirement placed on the amount of the award which a school can make for a student (although the Secretary recommends no more than the Pell Grant maximum – currently $6,195). The funds must be spent by the college within one year of the date they sign the acknowledgement form.

So to go back to the main question, how do students apply for these funds?

The Secretary doesn’t specify and schools can choose their own process. Schools can also decide how they want to apply these funds (tuition, technology costs, fees, textbooks, etc). This means that for students you are going to need to speak with your individual financial aid office to find out how they are planning on offering this aid, and that there may be a delay while your school figures it out.

At moneyman’s college we are carefully examining the rules and options for these funds and will probably have a combination of some kind of online application for funds, and some categories where we will automatically award funds to students. We will hope to have some decisions in the next week.

So if you are a student, and you need some emergency funds, moneyman’s best advice right now is to be in touch with your school’s financial aid office and let them know that you have need for funds. Ask if you can be placed on a waiting list, or if there is some kind of application you can add your name to. There will be more information coming from your school, you can be sure!!

In the meantime, what other questions do you have?

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!!

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.

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?

The grades have come, and all is write with the world.

moneyman

What are your favorite holiday tastes? Do you live for peppermint around the time of year? Is gingerbread your thing? Maybe hazelnuts or macadamia? Or is it really maple syrup that sings to you during this time of year? Whatever flavor it is, I hope you find a taste of it this holiday season.

But maple isn’t the only sap you need to worry about this season. Financial Aid also has something called SAP, and it isn’t quite as tasty.

Tree sap makes maple syrup, but what does Satisfactory Academic Progress make? More financial aid!

At this point in the year, you are likely about to receive your grades for the Fall semester. Before you put them aside and focus on next semester, you should look carefully at a few items related to your financial aid.

Federal regulations require that you make Satisfactory Academic Progress (or SAP) through your academic career in order to continue to receive financial aid. SAP is made up of three parts:

  1. Your GPA. Federal Regulations require that you maintain a cumulative GPA of at least a 2.0 (a C average). While each class doesn’t have to be above a C, it is important that your overall GPA be at least a 2.0.
  2. Your completion percentage. Another important measure is the percentage of courses you pass (with a D or better) compared to the total courses you attempt. This percentage must be 66.67% or higher. This calculation includes courses from which you withdraw as well as those in which you receive a final grade.
  3. How long it takes to complete your degree. There is a limit placed on how long you can receive Federal financial aid. This limit (150% of the length of your program) is usually measured in credit or clock hours since some students attend full-time and others attend part-time. As an example, if you are pursuing a Bachelor’s Degree which takes 120 credits, you must complete that degree before you reach 180 attempted credits (again including those credits from which you withdraw or fail).

So let’s say you had a difficult semester and you didn’t meet all of these requirements. What happens? I’m glad you asked.

  1. Warning. During the first semester after your GPA or completion percentage falls below the minimum, you will likely be placed on Financial Aid Warning. During this term, you can still receive your financial aid, but it is important that you work to bring your GPA and completion percentage up above the minimum thresholds before the end of your Warning semester. Otherwise you might wind up on:
  2. Suspension. Financial Aid Suspension occurs when you have two semesters in a row where your cumulative GPA and/or completion percentage fall below the minimum threshold. You may also be placed on suspension when you reach the 150% of your degree program. Under Financial Aid Suspension, your Federal financial aid is not available. Don’t worry though, because you have a chance to appeal and be placed on:
  3. Probation. Financial Aid Probation is a status given to students who have successfully appealed their SAP Suspension and are being given an opportunity to rehabilitate their GPA or completion percentage. During this time, students may continue to receive their financial aid as long as they continue to make progress under the terms of their approved appeal (usually you are not allowed to withdraw from a class, earn a grade lower than a C, or change your major).

The details for all of this can vary based on your institution, so make sure to look at your college or university’s SAP policy to make sure you understand how it works at your school. In addition, you may want to note that Financial Aid SAP works very differently than Academic Probation / Suspension, so be sure to make sure you understand how your academic decisions may impact both of these.

Now hopefully your grades were terrific this semester and you don’t need to worry about any of this. If you did struggle, though, don’t worry too much. Many students do, and by seeking out the help of an academic advisor, a learning support specialist, or their faculty member, they can be very successful. If you do have to write a letter of appeal for your SAP status, then be sure to offer full disclosure of what caused issues for you this semester and what changes you will make to ensure success next semester.

If you have questions about SAP (or want to tell me about your favorite holiday flavor), go ahead and post your question or comment below.

The only constant is change; and that changes constantly…

moneyman

Heraclitus had it right. Change happens all of the time; our whole life is filled with change. Just the basic act of getting up in the morning causes a whole variety of changes in your life; every decision I make, every choice I choose, each brings about a variety of different options and closes a number of different pathways to me. Each decision (and even the decision not to decide) causes variety in my day.

Hey brother, can you spare some change?

If you like variety, you may want to work as a Financial Aid officer. We know change in our profession because it is an essential part of the work we do. When you work with partners as diverse as the Federal Government, State Government, College Foundations, Private Donors, and other sources for funds, there is a chance that every day will bring about a change in rules or regulations that govern how we award and disburse funds to students. This last week has been no exception.

I spent the last week in Reno, NV, at the Federal Student Aid Training Conference. This annual gathering of more than 5000 financial aid officers and partners from every state in the country (and several international attendees as well) is a massive gathering of those of us who work in the industry. This year’s conference (over 4 1/2 days) had more than 5 General Sessions (imagine 5000 people in one massive ballroom, and you get the idea), 32 concurrent sessions (several offered more than once to give attendees the chance to see them), 3 hands-on sessions, and 10 “Birds of a Feather” sessions for those from similar backgrounds to share news. All of the sessions are audio recorded so that several weeks after the conference is over, attendees and non-attendees can go back and hear what was said.

If you get the idea that this conference is a big deal, it is. Just follow the Twitter hashtag #fsatc2019 and you can read a number of updates from those attending with their comments about the content of the sessions.

While there were lots of interesting items shared, there were TWO BIG CHANGES which will impact each one of you, so I thought I would share those here. Sorry it took me a few days to get this update to you, but needless to say between the full conference days, the 3 hour time difference, and the high altitude (at over 4500 feet above sea level), my body needed its rest.

  1. Starting next year (2020-21), every student loan borrower will have to go through a new process. Before receiving any loan disbursement for the year, the student (or parent for PLUS loans) will need to log into the Federal government’s web site, take a look at their current balance for loans (including potential monthly repayment amount, current loan balance, and remaining eligibility) and confirm that they understand this amount and obligation before taking out additional loans.
  2. While we are on the subject of web pages, the government’s student financial and and student loan web pages are going through a major overhaul. This nextgen process will bring about a streamlined experience for consumers (students, schools, and loan servicers).

The video below explains both of these changes (and was shared at the conference). Also included is the newly announced chatbot (or virtual assistant) named “Aidan” (see 3:30 in the video).

The Digital Future of Federal Student Aid

Some other changes announced were much more technical, but these were the most important for you (and will have the most impact on you). What are your thoughts about logging in to confirm your loan balance before you receive your next loan for the year? While I agree it is good practice, I have lots of questions about how this will work for students. Stay tuned to the blog and I will share more news as it comes.

As you can guess, there are always more changes coming down the line!