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Money Management (Distributed by the New Jersey Society of Certified Public Accountants)

Financial Aid FAQs: How to Make College a Reality

Escalating college costs do not mean a college education is out of the question. There are financial aid resources that can help families meet college education expenses. To familiarize you with the available options, the New Jersey Society of Certified Public Accountants (NJSCPA) provides answers to frequently asked questions regarding financial aid.

1) What types of financial aid are available?
There are three major types of financial aid: scholarships or grants that do not have to be repaid, student and/or parent loans that must be repaid (usually after graduation), and work-study arrangements.

2) Do schools give preference to students who do not need financial aid?
Most schools maintain what they call a "needs blind" admission policy. This means that they do not consider a family's ability to pay in making admission decisions.

3) No one I talk to has qualified for financial aid. Should I bother?
Since each family's situation is different, the only way to find out whether you are eligible for financial aid is to apply. Financial aid is based primarily on two factors: the school's cost of attendance, which includes tuition and fees, room and board, personal expenses, books and transportation; and your family's ability to pay. That means if two families have exactly the same financial circumstances (and that is highly unlikely), one student could receive financial aid, and the other not, simply because a school costs more.

4) How do I qualify for aid?
When you apply, the financial information you provide is keyed into a federal formula that takes into account your family income, assets, family size, number of children in college, and other factors. It also calculates the amount you and your family are expected to contribute toward the education cost. This is known as your Expected Family Contribution or EFC. If this amount is less than the total cost of attendance, you've demonstrated need and are eligible for aid. If your family has special financial circumstances, such as high medical bills or loss of employment, that are not apparent in the numbers you submit, you should send letters of explanation to the financial aid offices of the colleges to which you apply.

5) What types of aid does the government provide?
The Federal government has two large grant programs - the Federal Pell Grant and the Federal Supplemental Educational Opportunity Grant - as well as a Federal work-study program that provides student employment during the academic year. There are also several need-based, government-subsidized loan programs for students including Federal Perkins Loans, Stafford Loans, and Federal Direct Loans. In addition, the Federal Parent Loan for Undergraduate Students (PLUS) allows credit-worthy parents to borrow the total cost of their child's education less any financial aid awarded to the student. Beyond these federal sources, some colleges and universities themselves provide financial aid, as do some states and community organizations.

6) How do I start the financial aid process?
The first step in the process is to complete the Free Applications for Federal Student Aid (FAFSA), the standardized national form for U.S. government grants, work-study jobs, state grants, and student loans such as the Perkins and Stafford. Since much aid is awarded on a first-come, first-served basis, you should complete this form as soon as possible after January 1 of a student's senior year in high school. Many schools also require a more detailed financial form called the "College Scholarship Service Profile." Both forms are available through the high school guidance office or can be filed online.

After you submit your FAFSA, you will receive a Student Aid Report (SAR) that summarizes the information you reported and includes your calculated Expected Family Contribution. The colleges you have designated will get the information you reported and use it to create your financial aid package. You should receive information concerning your financial aid package from each of the colleges that has accepted your child.

7) Are there steps I can take to improve my chances of receiving aid?
The best steps are to ensure that you fill out all aid forms accurately and meet all deadlines. As for your financial situation, CPAs suggest that, since the amount of aid is based on your family's income, during the years when seeking aid, parents should try to avoid selling stocks or property that will result in large capital gains that inflate income figures.

A CPA can help with other strategies to improve your chance to receive financial aid. If you don't have a CPA, you can easily locate one online using the NJSCPA Find-A-CPA service. Just go to www.findacpa.org and in a few clicks, you can locate a highly qualified professional who is right for you.

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Money Management is a weekly column on personal finance distributed by the NJSCPA.

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