How Will You Compare Fin-Aid Packages?

Paying for College
1

<p>just curious... does anyone have a tried and true "formula" for how you compare financial aid offers? Hoping some folks with financial aid experience might have an answer for me! </p>

<p>do you compare whole packages or just the "free money" parts or do you separate out the loans from everything else? </p>

<p>D received a wonderful (i think... i guess i really don't know much about all this) from a local private today. just wanted to get a second opinion (or twelve) on how i'm digesting this to see if my methodology nees any tweaking before things start picking up later this month:</p>

<p>Step One:</p>

<p>TOTAL COST OF ATTENDANCE* (tuition + room/board + books + fees)</p>

<h2>- Scholarships, grants, & other "don't-pay-it-backs"</h2>

<p>= the total amount I/we will need to fund</p>

<p>*Step Two: *</p>

<p>the amount I/we will need to fund (from above)</p>

<h2>- low-interest student loans (Fed. Sub and Unsubsidized Staffords, etal.)</h2>

<p>= the amount I/we will need to fund "out of pocket"</p>

<p>*i've intentionally left out two amounts:<br>
transportation - because I want to separate that amount for each school - some IS, some OOS.
personal expenses - because D will have that covered via summer earnings</p>

<p>EXAMPLE:</p>

<p>Local private LAC:
Tutiion = 37,640
R/B = 11,760</p>

<h2>Books/Fees = 1,000</h2>

<p>TOTAL = 50,400</p>

<p>Aid package received today:</p>

<p>50,400</p>

<h2>- 30,000 --> institutional scholarship (20K) and grant (10K)</h2>

<p>20,400</p>

<h2>- 8,300 --> state grants </h2>

<pre><code>12,100
</code></pre>

<h2>- 5,500 --> Stafford loans</h2>

<pre><code> 6,600 = needs to be "out of pocket" (outside loans, etc.)
</code></pre>

<p>QUESTIONS:</p>

<p>Where does the $2,700 in Federal Work Study fit in? The letter says that that is paid directly to the student and shouldn't be deducted from the costs. So is that... "pocket money" and it shouldn't figure into this picture at all? </p>

<p>Am I missing anything in my figuring?<br>
(Besides transportation and personal spending money - both of which I'd imagine handling on an as-needed and out of pocket basis?)</p>

2

<p>Your problem is you are subtracting some things that need to be in the formula to enable an accurate comparison.</p>

<p>For each school and offer, you should add back in the personal expenses and your real transportation costs to get a “True CoA.” Then subtract all the financial aid, including the work-study earnings, to calculate the “Gap.” The Gap has to be filled from the student’s summer earnings and your pocket.</p>

<p>Compare each school by its Gap. If Dream School happens to have the lowest Gap, then you are done. What is more likely is that Dream School will have a higher Gap than less desirable schools, so a decision will have to be made if it is worth it.</p>

3

<p>I will be comparsing financial aid packages mainly by the amount of loans I will be required to take out, assuming no school will be asking for money out of pocket since my efc is zero. The more affordable the school is, the more I can consider it.</p>

4

<p>1stime mom, you are looking at it as I look at it. Work/Study is paid directly to the kids so we view that as additional walking around money to whatever they have left after summer earnings. I do generally look up the fees and back out the books but that’s just me. I take that final number Tuition/Room & Board/Fees and subtract everything to get a number. I compare those numbers figuring transportation and books will be pretty similar regardless of school (none of mine looked instate). We required out kids to fun their own spending money out of summer earnings and work/study but we do send an occasional “I Love You” bit of money.</p>

5

<p>^
So you do not look at the amount of loans required to take out? I thought this is what everyone looks at when comparing FA.</p>

6

<p>We won’t take out loans, we do have the kids take the Staffords but that’s it. So yes, when colleges put the PLUS loan into the line by line package I deduct PLUS.</p>

<p>I suppose if a family is counting on taking out loans then yes, you would look at that amount in context of how the package is put together.</p>

7

<p>(Oh, but I do not understand the major differences of a stafford and plus loan)</p>

8

<p>It is definitely handy if the “walking around” money required just happens to match the available summer and work-study earnings. Then the parents do not have be involved in questions of how much the student works and how much the student spends on things like eating out and shampoo. What I found with my kids is that they are cheapskates when it is their own money, and they had thousands of dollars accumulated in their walking around accounts when they graduated. That was fine with me, really.</p>

<p>So, assume now you are going with the “Child’s Earnings = Walking Around Money” system. In that case, you separate out what the parents will pay for, and figure the Gap based on that. Take the university bill, which will be the tuition, room, board, and fees, add your actual transportation costs, subtract the grant aid and student loan aid, to find the Gap.</p>

9

<p>Don’t people compare…</p>

<p>1) how much do I have to pay out of pocket (including gap)?</p>

<p>2) how much would my kid have to borrow?</p>

<p>3) how much would parents have to borrow (if I’m not going to take any offered loans, then I put this number in the #1 question.)</p>

10

<p>I look at the 4-year picture, which means making some assumptions about the future in terms of earnings, (dwindling) assets, % increase in COA. I don’t think it’s enough to compare 1st-year numbers only, especially if you are drawing from 529 funds or some other funds that will be exhausted after a couple of years. It takes some time to build a spreadsheet and the schools don’t offer much help with projections after year 1, but the 1st-year fin aid package from each school should give you a pretty good idea of how close their packages are to what the fin aid calculators estimate, and the structure of the package in terms of grant, loan, and work-study.</p>

<p>After I did this a couple years ago with my oldest, I simply presented him with what he, not his parents, could expect to borrow to make it through 4 years at each of his choices. He then opted for his 2nd-choice school because he wasn’t willing to borrow what it would have cost to attend his top-choice school. Then he got off a waitlist at a school with even better fin aid and decided to go there. My estimates have turned out to be pretty good and the amount my son has had to borrow through 2 years is a couple thousand less that anticipated.</p>

<p>In April I will be going through the process again with the next-oldest child. I am expecting to have to run the projections for 4 or 5 packages.</p>

11

<p>Coolbreeze, the Stafford is a loan the student can take out. There is a cap on the amount the student can borrow each year. Right now all it requires is to fill out a FAFSA and most colleges include Stafford these days in the student’s finaid package. PLUS is a parent-only loan and the interest rate is around 8% (higher than the stafford). PLUS is “often” included to illustrate how a parent without cash reserves can cover the full cost of attending for their student. Depending on a parents age and number of future earning years PLUS may or may not be attractive. We’re “old” so loans aren’t attractive to us. PLUS is an entirely family by family decision (as are Stafford loans).</p>

12

<p>My Excel spreadsheet always has tuition, room & board as the the total COA.
We leave out personal expenses & Books. </p>

<p>List each loan separately, but total at bottom: how much student will borrow.
A line item for Grant and/or Merit Aid… </p>

<p>We list the Work Study, but it isn’t subtracted from the COA. </p>

<p>At the bottom next to how much student will borrow, is line item for EFC: What Mom & Dad will pay. That is the last item we list. Usually highlighted! </p>

<p>There is a version on the Collegeboard website, you can use also.</p>

13

<p>I will add up the EFC plus Loans plus Work Study expectations plus Miscellaneous expenses…</p>

<p>The costs is all mine, so Everything not in finaid will be included</p>

14

<p>Another to consider:</p>

<p>Do you expect your EFC to remain similar in future years? If not, you might want to consider who gave the most mreit aid and the GPA necessary TO KEEP IT.</p>

<p>Look to see if you can expect your FA grants to be similar after freshman year if your EFC remains the same. Consider tuition increases.</p>

<p>Consider those schools who lock in tuition for all 4 years without increases (a few schools do this).</p>

15

<p>Thank you to everyone who responded.
Great advice, all!</p>

<p>I’m feeling a littl bit more confident, as I learn the vocabulary and patterns of the financial aid world… but it’ll take some time before I feel like I’m not clueless. </p>

<p>Our situation is only-child of a single-parent household - mom (me) is a public school teacher. Single-income household earning 50K.</p>

<p>Mine -vs-Hers:
So far I’m looking at the Stafford loans as “hers” and anything that needs to be borrowed above that as “ours” - in terms of who pays what back, (they’re her responsibility, but I do intend to help out to whatever degree I can).</p>

<p>Magin Number:
I’m still trying to come up with my “magic number” - what debt am I willing to get (either myself or allow her to get herself) into. I’m thinking $7,000 - $10,000 per year… independentof the Stafford loans.
I think that’s about what it would cost to go to one of our state flagships… probably 5K - 7K. In order to be competetive with that, an OOS dream school would have to be in the 7L- 10K range… which, when I write it down like that seems more dream-liek than ever.</p>

<p>That’s potentially $40,000 of debt.
I need to “wear” that idea for awhile… feels like a pretty big number. </p>

<p>It’s the question of the month around here - What’s the magic number?
I’ve done some reading on these forums that has really been enlightening, especially cautions about going into debt for a bachelor’s degree. Wise words. </p>

<p>Hidden Expenses:
One of the things I’m looking for when I read about other people’s experiences is the srpise fees that are a regular part of paying for college but get overlooked.<br>
So far student health insurance seems to be a surprise 1,200 - 2,000 fee at some schools. That can really throw-off a matrix.<br>
Any other surprise expenses ya’ll know about? </p>

<p>Would love to hear more ways that people “do the math” to compare financial aid packages!<br>
(The school I mentioned in the original post too the COA, MINUS"total financial aid", PLUS work study, PLUS Stafford Loan Fees to get a “your total share of the bill”.
That seemed like a strange way to go about it… but I see what they’re going for.
I wonder, in that equation, when you add in the "stafford loan fees (.5%) - is it .5% of the stafford loans you add in or the total amount of stafford loans plus .5%? That was strange to me.)</p>

16

<p>I have listed Direct costs (tuition, R&B) and I am estimating and adding 2,000 in indirect costs for all of the schools. </p>

<p>I am subtracting only grants and sub Staffords from that figure. We won’t have our child taking on more loans than the sub Stafford (regardless of loans they add into the package). I am making note of how much in grants is merit aid with a low gpa to keep it (if the gpa is higher than 3.0 the school is automatically off the table), vs. FA grants.</p>

<p>We are going to look into any required health insurance and differences in costs for flights (flight costs into major cities might be much less than into a small regional airport. Consider costs of that Thanksgiving weekend flight!). BTW, one school offered my son 2,000 per year as an OOS student grant. In my way of thinking, that means that they are paying for all of his flights and for my hotel stay at the beginning and end of the year.</p>

17

<p>I remember years ago with my son being so elated when seeing a final figure on a FA form, and then slowly realizing how much was actual merit and grants and how much was loans/workstudy. It was off the table.
I never count workstudy, (it’s usually pocket money and not guaranteed) although I do count stafford, (unsubsidized and subsidized) We paid the interest on my sons unsubsidized and it wasn’t very much but that was our choice. The decrease in rates this year though is only for subsidized. I traded at my son’s school his workstudy for subsidized vs unsubsidized loan. I didn’t know I could but sometimes you just have to ask.
We never needed the health insurance which brought costs down a lot and although some colleges push it, if your policy covers them as ours did,anywhere, it isn’t needed.</p>

<p>I found what I learned the most is to ask questions…will this change, how could it change, average increase in tuition, etc. If you get merit with GPA requirement, ask about the grace period. One of my daughter’s schools is 2 semesters, some might be less.</p>

<p>I found in our case the COA was lower for my son. His books were all bought used and much under the estimated figures. His out of pocket spending money was also, but he’s frugal and is more of a saver. You have to know your child also and some costs are different for each major.</p>

<p>One daughter gets a free computer at one school, another requires you to buy theirs…another expense the first year. A spread sheet really helps!</p>

18

<p>One more thing to think about with packages is what is required to keep funding renewed as GRANTS. It’s important to see what the requirements are and school’s track record for renewing (some schools are more likely to have grants change to loans, etc.)</p>

<p>Some schools have a GPA requirement that causes kids to frequently lose their funding. Other schools have a probation/grace period & lower GPA requirement. Some schools, grants are automatically renewed with satisfactory progress toward graduation & minimum GPA while others are not. READ terms very carefully & ask the school about whether the grants/scholarships are GUARANTEED renewed or may/will turn to loans in future years.</p>

<p>Remember, loans NEED to be repaid and net cost, including loans is the bottom line. Sometimes more expensive schools are actually cheaper when all the grants & scholarships GUARANTEED RENEWED FOR 4 YEARS are factored in.</p>

19

<p>Would any of you feel comfortable posting your spreadsheet headings? (So I can copy them of course :)</p>

20

<p>I found this thread to be informative as well. With me myself having a efc 0 I could not attend any school that request for my mom to take out a loan, do you think this is likely of a school when one have a efc of 0?</p>