The EFC - How to Pay for it

Paying for College
1

<p>Hello,</p>

<p>My D got accepted into GW and BU. We are waiting for the financial aid package from GW. But BU met most of her $54K need through grants ($48K) and loans/work study ($6K). My EFC is about $10K. </p>

<p>If I am unable to come up with the money to pay this right away, what options do I have? I know BU for example can help schedule monthly payments - say around $900, but that will stretch our household finances? </p>

<p>I understand we can take a Direct Loans to help pay. Is this a viable option ? Any caution about regarding this, in terms of interest rates, repayment etc, since it is going to be in my name?</p>

<p>Also, I just bought a house - do I have to inform FAFSA and the college about a change in my financial circumstances ? How would that affect my D's financial aid and our EFC?</p>

<p>Thanks - PS</p>

2

<p>You can contact each of the places about your change in financial circumstance, and find out if they will be able to adjust the financial aid package. That may be possible. When you speak with them, find out if it is possible to get an early read on what the aid will look like in future years (for example if part of your EFC was based on a boat-load of money in the bank that was waiting to be used as a down-payment on the house, and is no longer there, that part of your EFC should drop). Will your EFC stay at about $10k or will it go up each year? You need to plan for all four years.</p>

<p>Also, ask them about payment plans. There should be one available.</p>

<p>Take a good long look at the aid package. Figure out what is covered in the Cost of Attendance that you and D student can control, and which are fixed costs. Take a look at your household budget too. If your D is living on campus, your grocery bill and some other household expenses probably will drop a bit - not to the tune of $10k of course, but every little bit helps.</p>

3

<p>Agreed with Happymom. Look for the billable costs, those billed directly BY the university. Those would be tuition, room, board, fees. Other costs, books, personal expenses and transportation are not billed BY the university.</p>

<p>If a Direct Loan is NOT already IN your financial aid package from the college, yes, your student can request this. You mention she HAS loans in her package already. If these ARE the direct loans, what is the amount? The total Direct Loan she can take is $5500 for the freshman year. If she doesn’t already have those loans, that would reduce what you need to pay to $4500. Hopefully your kiddo has a job, which should net at least $1000 for the year. That brings it down to $3500. That would be $350 a month for ten month payment plan, plus some fees for the payment plan…but they are not huge.</p>

<p>The FAFSA does NOT look at primary homes at all. The Profile does, but really the colleges consider only equity. If you used money from a savings and that money is now equity in a house, you really don’t have much of a change in circumstances.</p>

4

<p>Thanks to you both. I really appreciate your insights… just some more details.<br>
Here is the total aid package:</p>

<ul>
<li>Grants = $46,800</li>
<li>Federal Unsubsidized Stafford - Addtnl = $2,000</li>
<li>Federal Subsidized Stafford Loan = $3,500</li>
<li>Federal Work Study - Academic Year = $2,000</li>
<li><p>Total Aid Package = $54,300 </p></li>
<li><p>Total Cost of attendance = $64,000 </p></li>
<li><p>EFC ($64K - $54K) = about $10K</p></li>
</ul>

<p>So with this can I still qualify for the Direct Loans? Who applies - the student or parent? And in whose name is the loan held - parent or student?</p>

<p>The reason my EFC is high is because I had to do some part-time job last year which is not guaranteed this year… So in all probability, my EFC will be based purely on my income (without the part-time work) and this could reduce my EFC next year… Do I inform the school about this now or leave it until January 2015?</p>

<p>Thanks again for your suggestions …</p>

<p>rgds, PS</p>

5

<p>She has the direct (also known as Stafford) loan maximums already. Any further loans would have to be yours either through the Parent PLUS option, or private ones from a lender of your choice.</p>

<p>Unless you are prepared to come up with that missing $10k for each year for all four years, do have a chat with the financial aid office now. Ask them what you can expect next year’s package to look like given that you do not have the part-time income any more. </p>

<p>And have a long heart-to-heart with your D. The package from BU may be as good as it can be for BU. You two need to determine whether this package makes BU truly affordable for your family, or whether you need to kiss it good-bye and move on.</p>

6

<p>Schools do NOT award need based aid to cover the EFC. They don’t. They expect the family to cover the EFC. BU actually MET full need for you. EFC + aid offered = the cost of attendance.</p>

<p>The other thing to remember…BU does not guarantee to meet full need at all but in your case they actually DID. This very well could be the maximum they can offer. BUT you absolutely SHOULD clarify your situation. Just remember, neither BU nor you has a crystal ball. You can’t really predict what will happen for the whole of 2014. You say this part time work is not guaranteed which implies it could…or couldn’t happen. Your aid for this school year was based on 2013 income, and you assets as of the date of filing. For all BU (and you) know, you could have that pastime work…or get a huge raise this year. I’m not trying to sound doom and gloom, but it’s very hard for schools to base aid on PREDICTED issues. </p>

<p>My son is a BU grad. They will discuss your aid package. But yours is already a very generous one from BU that meets full need (they have very transparent aid awarding, and have for years). </p>

<p>The other thing…again…look at those billable costs for BU. Then try to figure out how you can conserve costs on the OTHER things…books, travel expenses, etc.</p>

<p>The other thing you could do, but I do NOT suggest this…is you could apply for a Parent Plus loan to pay the excess cost. HOWEVER, given your concerns regarding finances, this is not such a great idea. The Plus Loan would be in YOUR name. direct loans (same as Stafford) are in the STUDENT’s span me. If you took out $10,000 in Plus loans, you kiddo would have almost $70,000 in loans after four years…$27,000 in Direct Loans and $40,000 in Parent Plus. Do you really want your 20 something college grad to start their adult life with $700 plus college loan payments? </p>

<p>GW and BU are both very expensive private universities that do NOT guarantee to meet full need for all of their accepted students.</p>

<p>If the finances for these two schools don’t work out, I hope your daughter has some affordable options in her acceptance list.</p>

7

<p>You’ve gotten good advice here. What I’m writing is mainly a reprise of everyone’s say. </p>

<p>The Expected Family Contribution, the EFC is just that. That’s what the schools expect you and your student to come up with out of your earnings, savings, loans. It’s up to YOU and your student to figure out a way to pay that amount, and if endangers your financial well being, you cannot afford that school, as simple as that. </p>

<p>Most schools, even the most generous ones, even Harvard will expect a student to come up with some money towards the cost. That’s even for students coming from families with a FAFSA EFC of zero. Maybe Uncle Sam will say you aren’t expected to pay a cent for education, but the schools are highly unlikely to look at it that way. You are smart enough to get accepted and aim for these colleges, you can figure out a way to pay some portion of the costs, and that portion tends to increase each year. Not by huge amounts, but yes, increase, as do the costs in general. Prices rise. So if you barely can make that first year payment, remember you have at least three more you are going to have to do, and the chances are good they’ll be 5l-10% more. </p>

<p>Your student should be working and plan on a job at school when it’s an issue for the parents to meet EFC. As said above, most schools think they should be anyways, and many parents who are able to full pay feel the same way. Your student isn’t going to have much in the way of loan options as BU has already given her the Direct Loan she can get on her own, and working that first year, during the school year beyond the work study hours that BU has allocated to her may be tough, so my advice in this area is that she had better get cracking and finding a job NOW and through the summer to pay something towards that EFC. She’s in, she just has to maintain grades, no more SATs, and other such things, NOW is the time to start on the real live embarkment of getting MONEY to pay for where she wants to go. </p>

<p>As for Parent loans, here is a thread on this forum that you might want to peruse: <a href=“Read this before you take out a Parent PLUS loan - Parents Forum - College Confidential Forums”>Read this before you take out a Parent PLUS loan - Parents Forum - College Confidential Forums; in the parents section. </p>

<p>Though you can contact the schools if there appears to be a change in EFC due to your house purchase, it’s doubtful IMO that any school will do anything unless it means a reduction in your package, heh, heh,(tongue in cheek). That will be reflected in your following year financial aid, and you might want to run some numbers to make sure this doesn’t result in LESS aid for you. Run it through the NPC of the schools in question as well as the EFC estimator and see what it does. Because neither BU nor GW guarantee to meet full need, be aware that just because you may need more in future years does not mean you’ll get it. I’ve seen that happen a lot with such schools… They will tend to keep their commitments with the initial package given freshman year with COL and some increased student responsibility changes, but MORE. Not likely, much more. That’s why if there are things like another kid going to school in the next year or so on the horizon, it’s a discussion one should have with such colleges because they may well NOT increase your aid for that change even though the parental part of the EFC is halved. That’s where the schools that guarantee to meet full need are often better, though even they may not extend that guarantee to future years. You gotta watch every little thing in this regard, it seems.</p>

<p>Basically, if you and DD cannot come up with the schools expected amount without endangering financial solvency, taking out loans you cannot afford in hopes that it will all work out, you cannot afford the school.</p>

8

<p>Another thing to consider…the cost of BU (and likely GW as well) will RISE every year by about 3%. And there is absolutely no guarantee at either that you will see an increase in aid due to cost increases.</p>

9

<p>Also keep in mind that she might not earn all of the Work Study. Sometimes a student can’t get all the hours they need.</p>

10

<p>Thanks very much - this has been a very eye opening insights. I will sit down with my D and consider all options once we get the package from GW. I am trying to avoid loans as much as possible, so will explore all other options after running various scenarios through the NPC.</p>

<p>cheers, PS</p>

11

<p>I don’t look at this like others do. I see COA at $64k and the grant at $47k. All the rest is for you to come up with. The school will help you with $5500 in loans and $2000 in work study, but you still have to pay/earn that, it’s not free money. It is likely that if BU grants you any more aid, it will be loans or something that you have to pay back, either a PLUS loan to the parent or if the parent can’t qualify, an increased Stafford loan.</p>

<p>It’s not a bad deal, but it really is $17k of your money per year, not just $10k. D can borrow/earn $7500, plus maybe another $1000 this summer, but you’ll need to pay the school about $6k in the fall and spring OOP (the rest is pay as you go, for books, transportation, etc.)</p>

12

<p>Twoin…most colleges include the Direct Loan and Work Study when they award need based aid. That is part of the package. This student’s FULL need was met by BU with those included, plus the EFC.</p>

<p>It’s actually an excellent award from a university that does NOT guarantee to meet full need.</p>

13

<p>Here is how I look at it: Add up tuition, fees, room, and board. These are the direct costs you must pay to the school. I see $60,694 per the BU COA published on their website. Now subtract the $48k in grants. This leaves $12,694 that you will owe the school. If your D borrows the whole $5500, she will have a net loan disbursement for the year of $5441 (after the 1.072% origination fee). This now leaves $7253 that you need to pay the school. You can do this on a payment plan, over the course of a number of months (depending on how early you begin paying on the plan: <a href=“Payment Plans | Student Accounting Services”>Add Insurance | Student Accounting Services). </p>

<p>Now you have to determine how much else you will need: Books (plan ahead to get used books or rent, if at all possible, to reduce expenses); personal items; travel expenses. That will be paid either from your D’s savings, her work earnings, or your own savings/income/borrowing. Hopefully, you won’t need to borrow. If you do need to borrow, it would probably be best if you can do it in your own name (you are more likely to have established credit & therefore have a lower interest rate than your D would be able to get). Parent PLUS loans are a good option, or you can do some investigating beginning with your own bank. If you do decide your D should get her own private loan, please be careful not to allow her to borrow too much … it’s not wise to borrow more than the federal maximum amounts annually.</p>

<p>When you break it down like this, it may not seem so difficult to handle (although I don’t know your personal situation).</p>

14

<p>Twoin and Thumper: you are both right - I see it as $17K parental and child responsibility. My question is about what is due + when?</p>

<p>I would assume that the $47K goes directly to pay her tuition + fees right?<br>
Transportation and books are pay as you go - hence in our control.<br>
What about the rest (about $14K) for room and board? When will they be due?</p>

<p>cheers, PS</p>

15

<p>For most schools, half of the annual cost is due each semester, with each school determining the due date (but do check your school’s website to know for sure!). With a payment plan, you can stretch all of your responsibility out over 10 months or 5 months, depending on the plan.</p>

16

<p>I prefer to look at this the same way as kelsmom. Look at the direct billable costs (60,694) not the COA. So tuition, fees, room and board. Remember that the work study can’t be used toward the billable cost. D uses work study to cover her personal expenses such as shampoo and pizza. She uses summer earnings to cover books. Then you need to figure out travel expenses depending on where you live. It looks like your direct payment to BU would be about 8000.</p>

<p>I have been using PLUS loan to cover a similar amount. The first year I took a 12,000 PLUS loan, but was able to return about 4,000 of it. I also chose not to defer payments. This year I took even less because my own living expenses have decreased with D away, and D has been able to cover more of her own expenses. I would recommend researching the PLUS vs. various private loans. </p>

17

<p>BU bills each semester. Your financial aid award will be divided in half, and the first half will be credited to your kiddos account the first semester, and the rest the second semester. This would INCLUDE half of the Direct Loan amount as well as half of the scholarships and grants and grants. The balance will be a bill to you.</p>

<p>This will be for tuition, room, board and fees.</p>

<p>So divide $52,300 in half. That is the amount that BU will credit to your account from your financial,aid award. Subtract that half from the costs for one semester of tuition, room, board, and fees, and the balance will be what YOU need to pay each term.</p>

<p>If you decide to set up a payment plan, you can do that this summer for. Ten month plan. Your full year allotment would be divided by 10.</p>

18

<p>Kelsmom’s post is more clear.</p>

<p>You don’t need to come up with $10k to the school. AND, you child should work as much as possible over the summer and contribute about $2k of those earnings if she wants that school. Your D needs to find cheap books…rent, buy used, etc.</p>

<p>If you can get YOUR share down to about $5k, can you pay that out of monthly payments? </p>

<p>If your D wants to attend a school like this then she needs to help bring down your costs to an affordable level. </p>

19

<p>Thanks, all: sure, I can reduce my share down to $5K … in which case, a monthly payment plan will be fine. She sure is looking for a job now and will get something to help defray the costs…</p>

20

<p>The only thing that hasn’t been covered is please remember that emergencies do occur. Dental, car, pets, furnace, etc. It seems every year you can count on something. So you don’t want to be stretched so tight that it becomes impossible. Best. </p>