General Terms
529 Plan (Qualified Tuition Program): Qualified tuition programs allows families to save for college expenses on a tax deferred basis and are tax free if used for qualified educational expenses. QTP’s are administered by the various state agencies and vary significantly from state to state. There are two types:
- Pre-Paid Tuition Plans: where you are pre-paying for college tuition, fees, books, and if you are at least a half- time student, room and board expense. Future increases in Tuition expense relative to the year in which contributions are made are covered.
- 529 Plans (College Savings Plan): your money is placed in varying investment portfolios and rise and fall with the market.
Adjusted Gross Income: This is the same figure shown on your tax return and reported on most financial aid applications.
Asset Protection Allowance: A family may omit this dollar amount from the financial aid formula during Expected Family Contribution (EFC) calculation.
Award Letter: The official notification letter sent from a student’s chosen institution(s) indicating the amount and type of assistance offered.
Award Year: The period beginning July 1st and ending June 30th of following year during which a student receives financial aid.
Base Year: This period begins January 1st and ends December 31st in advance of any given application period. For example, if a student’s FAFSA is eligible for filing on January 1st 2009, the base year spans January 1st through December 31st 2008. This is important information during the planning process, with the more planning conducted prior to and during the base year the better.
College Scholarship Service (CSS): This needs analysis service is responsible for the Profile Form used primarily by select private colleges and administered by the College Board. This service, located in Princeton, New Jersey, is also responsible for administering the SAT scholastic exam.
Cost of Attendance: This includes all costs associated with attendance at a particular college. This includes tuition, fees, room and board, books and supplies, personal, computing and transportation (i.e. bus) expenses.
College Work Study (CWS): Funded by the federal government, CWS is a program designed to provide college monies to students through employment in exchange for services to the university, state or other agency.
Dependent Student: A dependent student must be under the age of 24 and at least partially dependent on his or her parent’s financial support. In the case of financial aid, parental income and assets are assessed when determining a student’s EFC.
Education Savings Account (ESA): Also known as the Coverdell Education Savings Account and is a type of trust account created to assist families in funding educational expenses for their children 18 years or younger. The annual contribution limit in 2008 is $2,000 based upon qualifying income limits. Anyone can establish a Coverdell for a child/beneficiary and there can be multiple savings accounts for a specified child/beneficiary. However, the $2,000 contribution limit must be maintained for each child regardless of the number of savings accounts.
Free Application for Federal Student Aid (FAFSA): Administered by the Central Processing System (CPS), this is the official financial aid form used to capture each parent’s and student’s asset and income information for use in determining the EFC via the Federal Methodology (FM).
Section 125 Plan: Is a benefit plan that allows employees of the participating company to withhold a portion of their salary on a pre-tax basis to cover the cost of qualifying medical expenses, insurance premiums, dependent care expenses, etc.
Admissions
Deferred Admissions: A student may defer or postpone enrollment for up to one year for select financial, personal or work-related issues.
Early Action: This admission type is used when a student applies to a college by the early deadline for guaranteed admission upon acceptance. These students are not obligated to attend that particular college.
Early Decision: This admission type is used when a student applies to a college by the early deadline for guaranteed admission upon acceptance. These students are obligated to attend that particular college under a binding contract.
Early Entrance: This allows a student acceptance, admittance and enrollment prior to high school graduation.
Regular Admissions: This occurs when a student applies for admission under normal circumstances.
Rolling Admissions: A student may apply for admission at various times during the year with no obligation to attend.
Expected Family Contribution (EFC): This is the minimum dollar amount a college expects a family to contribute toward their child’s education in any given school year. EFC is calculated using the family’s asset and income information as submitted on the financial aid application forms. The two methodologies used to calculate EFC and potential Federal, State and Institutional Monetary participation are:
- Federal Methodology Formula (FM): FM is a formula used to calculate the EFC by every accredited U.S. undergraduate, graduate and trade school. This determines how much potential federal money can be disbursed by the school to cover the student’s Cost of Attendance (COA). This information is gathered on the FAFSA (Free Application for Federal Student Aid) form. Most states also use this formula as a basis for state financial aid distribution.
- Institutional Methodology Formula (IM): IM is an alternative formula used in addition to the FAFSA by some private colleges to calculate an institutional EFC. This methodology is more detailed than the Federal Methodology Formula (FM) when evaluating a family’s income and assets, often resulting in a higher Expected Family Contribution (EFC). The College Board determines this formula on an annual basis, collecting data to establish EFC using this methodology via the Profile Form.
- Consensus Approach (CA): CA is a new methodology used by several elite private schools. It is used to minimize the impact caused by more controversial elements of the Institutional Methodology. Although it uses the same core data contained in the Profile Form, it may reduce EFC found under the IM method.
Profile Form: This is a form distributed by College Scholarship Service (CSS) and administered by the College Board. In addition to FAFSA, some colleges require completion of the Profile Form to assist in determining a student’s financial aid package when it includes a college facility’s own funds.
FAFSA and Profile Form Reports
Financial Aid Form Acknowledgement (FAFACK): This acknowledgement is mailed to the student to inform him or her that the CSS has processed the Profile on the student’s behalf. Mailed separately from the Student Aid Report (SAR), this also provides a list of the colleges in which the SAR was sent and which institutions require additional information.
Financial Aid Form Need Analysis Report (FAFNAR): This profile report is electronically transmitted by CSS to the college.
Student Aid Report (SAR): This report is generated using the information provided in a student’s FAFSA to calculate federal Estimated Family Contribution (EFC) and assists the Financial Aid Office (FAO) at your chosen schools in determining financial aid eligibility. The SAR must be submitted to the financial aid office at the institution the student chooses to attend prior to payment disbursement under Pell Grant or other need-based aid.
Financial Aid Officer (FAO): This chief financial administrator for each college is responsible for determining financial aid package awards. This individual has broad discretionary authority and professional judgment to permit Estimated Family Contribution (EFC) adjustments based on unique or special circumstances. These adjustments are intended to more accurately reflect the family’s financial situation.
Financial Aid Package: This is the total amount and type of aid a student receives from one school and may include a variety of programs such as federal and state-funded grants, loans and college-based programs.
Full-Time Student: Full-time students are enrolled in at least 12 credit hours during any given quarter or semester.
Half-Time Student: Half-time students are enrolled in at least six credit hours during any given quarter or semester.
Housing Index Multiplier: Used by the Financial Aid Officer (FAO), the Housing Index Multiplier verifies the value of a home based on a national average. This multiplier often results in a lower home value than the homeowner states as the actual property value on the financial aid application. If this is less than the originally value provided on the financial aid application, the applicant should ensure the appropriate value is used to determine final cost.
Independent Student: These students are not dependent on their parents for financial support. An independent student:
- is at least 24 years of age by December 31st of the upcoming academic year; or,
- has a legal dependent other than a spouse; or,
- is a ward of the court or both parents are deceased; or,
- is a veteran of the U.S. Armed Forces; or,
- is married; or,
- is a graduate or professional student; or,
- is determined by the FAO to be independent.
Income Protection Allowance: This includes the amount of income the family may protect by omitting it from the financial aid formula when calculating the Expected Family Contribution (EFC).
Types of Aid
Self –Help Aid: This includes interest-subsidized loans and work study programs which must be repaid either through financial obligation or service to the school or state.
Gift Aid: This includes grants and scholarships that do not require repayment.
Merit-Based Aid: This includes financial awards to a student based primarily on special talents he or she exhibits such as above-average academic achievement, art, music or athletic aptitude.
Need-Based Aid: This includes financial aid awards based solely on a student’s and families monetary need. Most aid granted to the student by federal, state and respective institutions is needs based.
Need: This is the difference between the total cost of college and the Expected Family Contribution (EFC).
Unmet Need: This is the difference between the student’s total financial aid award and his or her official calculated need.
Verification: A process used to confirm the accuracy of the information supplied by a student on his or her federal student aid form. As much as 30 percent of all provided information is verified.
Grants, Scholarships and Loans
Grants: A grant, offered with or without a service requirement, is a monetary award that does not require repayment.
Scholarships: This monetary award is generally provided to students based on merit, talent, academic concentration, ethnicity or other unique qualifying attribute. Scholarships may or may not be taxed.
Loans: This monetary award must be repaid. The federal government may or may not subsidize a student loan.
Subsidized Loan (Stafford): This needs-based loan provides federal government principal payment deferment until a student graduates from college. The federal government makes interest payments on behalf of the student while he or she attends college.
Unsubsidized Loan (Stafford): The federal government allows principal payment deferment of unsubsidized loans until graduation. However interest payments are paid by the student while he or she attends college.
