FINANCIAL AID 101 MSUSA OCTOBER 27, 2007 Chris Halling MnSCU Office of the Chancellor System...

FINANCIAL AID FINANCIAL AID 101101

MSUSA MSUSA OCTOBER 27, 2007OCTOBER 27, 2007Chris Halling Chris Halling MnSCU Office of the ChancellorMnSCU Office of the ChancellorSystem Director for Student Financial AidSystem Director for Student Financial Aid

TYPES OF FINANCIAL AID TYPES OF FINANCIAL AID

Grants and ScholarshipsGrants and Scholarships

LoansLoans

Student Employment and Work-Student Employment and Work-StudyStudy

Grants and ScholarshipsGrants and Scholarships Grants are gifts; funds that do not have to Grants are gifts; funds that do not have to

be repaid, and are most commonly awarded be repaid, and are most commonly awarded to students on the basis of “financial need” to students on the basis of “financial need” (a theoretically progressive basis for (a theoretically progressive basis for distribution that provides the most funds to distribution that provides the most funds to those students who have the least ability to those students who have the least ability to pay, and provides no funds to those pay, and provides no funds to those students who can afford to pay the full cost students who can afford to pay the full cost of their education)of their education)

Scholarships are also gifts, usually awarded Scholarships are also gifts, usually awarded to a student in recognition of a specific to a student in recognition of a specific talent or accomplishmenttalent or accomplishment

LoansLoans Loans are funds that must be repaid, Loans are funds that must be repaid,

either by the student, or in some cases, by either by the student, or in some cases, by the student’s parents or a co-signer. the student’s parents or a co-signer. Student loans are generally available Student loans are generally available without collateral or a credit history.without collateral or a credit history.

Student Loans often offer rates of interest Student Loans often offer rates of interest that are below market rates; if the loan is that are below market rates; if the loan is being used to help meet a student’s being used to help meet a student’s “financial need” the loan may be interest-“financial need” the loan may be interest-free while the student remains in school.free while the student remains in school.

Student Employment and Student Employment and Work-StudyWork-Study

Student employment consists of funds that Student employment consists of funds that are paid to students in exchange for work are paid to students in exchange for work performed (not class related “school-work” performed (not class related “school-work” or homework, but other types of jobs that or homework, but other types of jobs that are available on and off campus)are available on and off campus)

““Work-Study” funds are available to Work-Study” funds are available to students to help them meet their “financial students to help them meet their “financial need”. The amount that students can earn need”. The amount that students can earn is limited to the amount of their “financial is limited to the amount of their “financial need” minus any other financial aid that need” minus any other financial aid that they are receiving.they are receiving.

SOURCES OF FINANCIAL AIDSOURCES OF FINANCIAL AID

Almost all financial aid in Almost all financial aid in Minnesota comes Minnesota comes

from:from: The US Department of The US Department of

EducationEducation The State of MinnesotaThe State of Minnesota Higher Education InstitutionsHigher Education Institutions Private SourcesPrivate Sources

The US Department of The US Department of EducationEducation

The largest Federal financial aid programs are:The largest Federal financial aid programs are:

Pell GrantsPell Grants SEOG grantsSEOG grants FFELP (Federal Family Educational Loans FFELP (Federal Family Educational Loans

Program) loansProgram) loans Perkins loansPerkins loans Stafford Direct student loansStafford Direct student loans College Work-StudyCollege Work-Study Academic Competitive GrantsAcademic Competitive Grants SMART GrantsSMART Grants

The State of MinnesotaThe State of Minnesota

The main MN programs of aid are:The main MN programs of aid are:

Minnesota State GrantsMinnesota State Grants Student Education Loan Funds (SELF)Student Education Loan Funds (SELF) Minnesota State Work-StudyMinnesota State Work-Study Minnesota Post-Secondary Child Care Minnesota Post-Secondary Child Care

GrantsGrants MN GI BillMN GI Bill ACHIEVEACHIEVE

Higher Education Higher Education InstitutionsInstitutions

Can either raise funds from community or Can either raise funds from community or foundation sources, or dedicate a portion of their foundation sources, or dedicate a portion of their own budget to financial aidown budget to financial aid

These funds are frequently given to students in the These funds are frequently given to students in the form of scholarships and non-work-study student form of scholarships and non-work-study student employment.employment.

Institutions (usually private) often offer substantial Institutions (usually private) often offer substantial “tuition discounts”, that can, in combination with “tuition discounts”, that can, in combination with financial aid grants, equal a student’s “financial financial aid grants, equal a student’s “financial need”. These are usually funded from tuition need”. These are usually funded from tuition revenue. In other words, some students and revenue. In other words, some students and families subsidize other students.families subsidize other students.

Private SourcesPrivate Sources

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

FINANCIAL AID TO MNSCU FINANCIAL AID TO MNSCU STUDENTSSTUDENTS

Comparison of FY99 and FY05 end of year Comparison of FY99 and FY05 end of year

totalstotals MnSCU Four-Year InstitutionsMnSCU Four-Year Institutions

Y99 (% of total)Y99 (% of total) FY05 (%of FY05 (%of total)total)

App. % of students receiving some type of fin aidApp. % of students receiving some type of fin aid 40% 40% over 60%over 60%

Total grants and scholarships (all sources) $ 53,000,000 (31) $ Total grants and scholarships (all sources) $ 53,000,000 (31) $ 78,000,000 (27)78,000,000 (27)

Total student and parent loans Total student and parent loans $ 104,000,000 (61) $ $ 104,000,000 (61) $ 203,000,000 (70)203,000,000 (70)

Total student earningsTotal student earnings from work-study and institutional jobs $ 5,800,000 (7) $ from work-study and institutional jobs $ 5,800,000 (7) $

7,000,000 (2)7,000,000 (2)Total grants, scholarships, loans and earnings $ 162,800,000Total grants, scholarships, loans and earnings $ 162,800,000 $ 288,000,000 $ 288,000,000

DEFINITION OF NEEDDEFINITION OF NEED

Cost of AttendanceCost of Attendance

-- Resources Resources

== NeedNeed

EFC Formula -- EFC Formula -- Parent Parent ContributionContribution

Taxable IncomeTaxable Income ++Untaxed IncomeUntaxed Income ==Total Income Total Income -- US Income Tax US Income Tax -- State Tax Allowance State Tax Allowance -- Social Security Tax Social Security Tax -- Income Protection Allowance Income Protection Allowance -- Employment Expense AllowanceEmployment Expense Allowance ==Available IncomeAvailable Income

EFC Formula -- PEFC Formula -- Parent arent ContributionContribution

Cash, Savings, CheckingCash, Savings, Checking++Real Estate/Investments Real Estate/Investments ++Net Business ValueNet Business Value++Net Farm ValueNet Farm Value ==Net Worth Net Worth -- Asset Protection AllowanceAsset Protection Allowance ==Discretionary Net WorthDiscretionary Net Worthxx Asset Conversion Rate Asset Conversion Rate (12%)(12%)==Contribution from AssetsContribution from Assets

EFC Formula -- PEFC Formula -- Parent arent ContributionContribution

Available IncomeAvailable Income

++Asset ContributionAsset Contribution

==Adjusted Available IncomeAdjusted Available Income

xx Taxation RateTaxation Rate

==Parent ContributionParent Contribution

EFC Formula -- EFC Formula -- Student Student ContributionContribution

Taxable IncomeTaxable Income ++ Untaxed IncomeUntaxed Income == Total Income Total Income -- US Income TaxUS Income Tax -- State Tax Allowance State Tax Allowance -- Social Security TaxSocial Security Tax -- Income Protection Allowance ($2550 FY07)Income Protection Allowance ($2550 FY07)== Available IncomeAvailable Incomexx Assessment Rate Assessment Rate (.5)(.5)== Contribution from IncomeContribution from Income


Cash, Savings, Checking Cash, Savings, Checking

++ Real Estate/Investments Real Estate/Investments

++ Net Business ValueNet Business Value

++ Net Farm ValueNet Farm Value

== Net WorthNet Worth

xx Assessment Rate Assessment Rate (.35(.35))

== Contribution from AssetsContribution from Assets


Student Contribution from IncomeStudent Contribution from Income

++ Student Contribution from AssetsStudent Contribution from Assets

+ + Parent ContributionParent Contribution

== Expected Family ContributionExpected Family Contribution

Computation of State Grant Computation of State Grant AwardAward

Cost of Attendance (COA)Cost of Attendance (COA)

-- (Student Share)(Student Share)

-- (PC)(PC)

-- (Pell Grant)(Pell Grant)

= = State GrantState Grant

COA (Public) = Tuition and Fees + LMECOA (Public) = Tuition and Fees + LME

COA (Private) = Tuition and Fees (capped) + LMECOA (Private) = Tuition and Fees (capped) + LME

Student Share = 46% of COAStudent Share = 46% of COA

Tuition Cap = $9438 (4yr), $6436 (2yr)Tuition Cap = $9438 (4yr), $6436 (2yr)

LME = $6065LME = $6065

KEY ISSUES RELATED TO KEY ISSUES RELATED TO FINANCIAL AIDFINANCIAL AID

When the federal government has raised When the federal government has raised the amount of Pell grants for the financially the amount of Pell grants for the financially most needy students, the MN State Grant most needy students, the MN State Grant formula has reduced those same students’ formula has reduced those same students’ State Grants, dollar for dollar. State Grants, dollar for dollar.

Those dollars have then been re-distributed Those dollars have then been re-distributed to students from wealthier families, thus to students from wealthier families, thus denying the increase in benefits that the denying the increase in benefits that the federal government intended to provide for federal government intended to provide for the neediest studentsthe neediest students. .


Many students who are actually financially Many students who are actually financially independent of their parents and who are paying independent of their parents and who are paying for all of their own educational and living expenses for all of their own educational and living expenses are nevertheless considered by the federal are nevertheless considered by the federal “financial need” formula to be dependent on their “financial need” formula to be dependent on their parents. parents.

These students do not have sufficient access to the These students do not have sufficient access to the financial aid resources that they need. [The federal financial aid resources that they need. [The federal rules define students as “independent” for financial rules define students as “independent” for financial aid purposes only if they are 24 years of age, a aid purposes only if they are 24 years of age, a graduate or professional student, married, an graduate or professional student, married, an orphan or ward of the court, a veteran of the US orphan or ward of the court, a veteran of the US armed forces, or have legal dependents other than armed forces, or have legal dependents other than a spouse.]a spouse.]


Students are borrowing more and more Students are borrowing more and more each year, in both real dollars and as a each year, in both real dollars and as a percentage of all financial aid received. percentage of all financial aid received.

The long-term (up to 25 years in some The long-term (up to 25 years in some cases) repayment process for these loans cases) repayment process for these loans can place a significant burden on these can place a significant burden on these students as they enter the work force and students as they enter the work force and become consumers and tax payers.become consumers and tax payers.


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


Independent students who work part-time and Independent students who work part-time and attend higher education part-time are not treated attend higher education part-time are not treated fairly by the Minnesota State grant program’s fairly by the Minnesota State grant program’s Shared Responsibility formula for pro-rating awards.Shared Responsibility formula for pro-rating awards.

Because of the Shared Responsibility formula, Because of the Shared Responsibility formula, increases in Public College and University tuition increases in Public College and University tuition and fees are only partially offset by increased State and fees are only partially offset by increased State Grants.Grants.

More and more grant programs (Federal, State and More and more grant programs (Federal, State and Institutional) are based, at least partially) on “merit” Institutional) are based, at least partially) on “merit” instead of or in addition to financial need.instead of or in addition to financial need.

FINANCIAL AID 101 MSUSA OCTOBER 27, 2007 Chris Halling MnSCU Office of the Chancellor System...

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