EFC and 529 plans

[OnMyOwn]

Using the college board's net price calculator, my family's EFC winds up being about $22,000. Total tuition, room, board, etc is about $30,000, so we would qualify for approximately $8,000 in grants. How are the grants applied? I ask this because I have a prepaid tuition 529 plan for my son. If we use that, and the grants are applied to the remaining amount of the bill, we are left owing abour $10,000/year. If however, the grants must be fully or partially applied to tuition, that leaves the 529 accounts much less valuable and leaves us with a significantly larger balance to pay.

[FaithManor]

Well, in my experience, one does not actually always qualify for grants to meet the gap between EFC and the final bill. Sorry to say, but this is often the case. Normally, at this EFC level, loans are what is offered if one has not earned scholarships to meet the gap. 

[OnMyOwn]

Thanks, Faith. So, basically, the EFC isn't reliable? Is that what you are saying? I've calculated it for 3 different schools and it was in the same range. These are all state schools if that makes a difference? I'm just trying to figure this all out and see what we can afford.

Edited April 21, 2016 by OnMyOwn

[OnMyOwn]

And, honestly, how on earth is it possible that we were supposed to save almost $200,000 on a middle class salary in a high cost of living area over the last 17 years if that is the case. We did save for the prepaid tuition accounts, which are worth at least $80,000, and with my kids working, we could probably put another $10,000 a year together, but I don't see how we can do almost $20,000 a year/kid without going into massive debt right before retirement. And this is just for the regular old State U.

[FaithManor]

Again, it has been our experience and that of many of our friends, that whatever FAFSA calculates as your EFC, not only do many schools expect you to meet it no matter how unrealistic that number may be, and often if the school is very expensive, will expect you to fill the gap with loans. So the key there is getting merit aid to fill that gap unless of course your child is so competitive that possibly full rides are an option.

 

In our case, when we filled out FAFSA this year with a second child entering college in the fall, we thought we would be looking at last year's EFC plus maybe just a little more and that would be divided between the two boys. Oh no....how naive of us! Our EFC was nearly doubled, on what is essentially the same level of income (dh got a small raise, but nothing big by any stretch). So having lived and learned, we expect that when the third boy goes in, we will pay EFC times three, or 2/3 of our income unless they have a lot of merit aid.

 

Thankfully, they each earned some merit, and they take out the federal student loans at the lower interest rate. Since they can't get the whole amount subsidized (ie. the taxpayers pay the interest while the student is in school), we will also try to pay the interest on the portion that is unsubsidized so that they don't have a larger bill than expected. We are totally against parent loans, and private student loans for them as those are much higher interest rates. So since they do not get a drop of need based aid, I am going back into the work force next year to help pay for all of the crazy EFC.

 

The FAFSA threshholds are apparently from the late 1960's and early 70's. They also assume savings. The only problem is that college tuition with room and board have outpaced wages in the last 10-15 years by 415% and prior to that were outpacing by 200% so there is no way that regular middle class people could save that kind of cash and still have a home, health insurance, utilities, cars, car insurance. Sigh...

 

Sorry to have to be the bearer of bad tidings. This is one reason that more and more kids who would normally matriculate directly from high school to four year colleges are now going to community colleges, or to regional universities and commuting so they do not have room and board. Until this issue is addressed at the state and federal levels - ie. increasing the threshholds at which students qualify for grants as well as the funding larger size grants, and increasing university funding, requiring colleges to not increase tuition and fees so rapidly - there will be more of this than less.

[Matryoshka]

Thanks, Faith. So, basically, the EFC isn't reliable? Is that what you are saying? I've calculated it for 3 different schools and it was in the same range. These are all state schools if that makes a difference? I'm just trying to figure this all out and see what we can afford.

 

It's just that "Expected Family Contribution" is a misnomer.  That's how much they say you can afford, but not necessarily how much you're expected to pay.  Many schools just blithely expect you to take out loans to make up the difference.  Most private schools dd was accepted to wanted us to pay $5-$25K over our FAFSA EFC.   That's after merit scholarships, grants, and yes, the standard student loans.  If you don't count the standard loans, they expected us to pay $10-30K over our EFC.  Loans are what you get first.  With your calculations, you'd get $5500 in loans first, then maybe if you're lucky grants for the remainder, but I wouldn't hold your breath.

 

Some schools 'meet full need', but that can backfire too.  The one school we applied to like that also requested the CSS and somehow managed to more than double our EFC based on that (so it came out to over 2/3 our annual income - I thought they'd forgotten to take our twins into account and had figured it based on only one kid in college).  We own the house we live in (built 1880 with bats in the attic), and we remembered to save some money for retirement.  No second home, no fancy cars, nothing else.  Apparently they expect we will mortgage the house and/or empty the 401k - would probably be and with three kids to get through.  I actually called and asked them this.  They confirmed that was the expectation.  And dh will be 64 when we're done, so what would we live on now that the 401k is empty, and how do we pay off that new mortgage on the house they think we should take out?  From social security payments?

 

Yeah, not picking that school.

 

529 plans are somehow figured into your assets/income for EFC.  Not sure how, as we didn't go that route (paid off the house instead).  I think more of what's in your 529 is expected to go to college costs than if it were regular savings??

Edited April 21, 2016 by Matryoshka

[FaithManor]

I won't name the school here, but when dd was a high school senior, an insane conversation went down between a college financial aid representative and myself in which it was suggested that we not only re-mortgage the house, but that I stop homeschooling and place the other boys in school so I could get a job, and that as soon as the oldest boy was able to get an after-school job, he should contribute his money to his sister's college education in the hopes that when she graduated, she would be able to re-pay him the favor. This after trying to get us to take out parent loans at 14% interest, and suggesting that she also try sending out fundraising letters to family and friends!!!

 

It was the last two suggestions that kind of pushed me over the edge, and I told him no child of mine would ever attend that school, then wrote a scathing letter to the president of the university. I hope his head was rolled for it.

 

But yah, financial aid departments do not have their feet firmly planted on planet earth.

[OnMyOwn]

Okay, thank you. It's all coming back to me now. It's been awhile since I had read up on this and I had forgotten that many schools will not meet EFC. So, even though it's bad news, I appreciate you breaking it to me. Now that my son is about a year away from applying to colleges, I am trying to get an idea of what is realistic and the numbers are unbelievable. I have high hopes that my dd will get merit aid, but I'm not sure about my son. Is there a way to figure that out by ACT scores? I'm sure his current score (that I was so happy about) will not net any, but maybe if he works at it, he could bring it up a few points next year.

Edited April 21, 2016 by OnMyOwn

[8filltheheart]

http://talk.collegeconfidential.com/financial-aid-scholarships/1486647-financial-aid-faqs.html#latest

http://talk.collegeconfidential.com/financial-aid-scholarships/1678964-links-to-popular-threads-on-scholarships-and-lower-cost-colleges.html#latest

 

I would recommend starting here.

[JanetC]

Your 529 plan will be used to meet your Net Price, which may or may not be equal to your EFC.  Your Net Price will be the college's Cost of Attendance minus any scholarship and grant money.  In addition to your EFC, each college will have a Net Price Calculator (NPC) which will estimate your EFC and then estimate your financial aid at that particular school. If the NPC is asking about your grades, class rank, and test scores, then it may be estimating both your need-based and merit-based aid.

 

You were originally asking about how a specific state tuition plan interacts with financial aid grants at in-state colleges. This is something you should clarify with the in-state colleges you are considering.

 

Your eligibility for merit aid will vary greatly depending on the schools you are interested in. Generally speaking, the higher ranked on USNews a school is, the less likely they are to give anyone a scholarship just for a high test score. Private schools generally treat their merit aid formulas as ingredients to their "secret sauce," but some state schools will have tables of "this stat gives you that dollars". There are also lists of schools that give extra grants to National Merit Semifinalists.

 

For schools where the merit aid info is "secret sauce," CollegeData.com is a good way to figure out how many students are getting merit aid and what the typical awards are. Look up your school then click on "Financial matters". You should see amount of "need" met for need-based aid and the number of kids receiving merit-based gifts.

[teachermom2834]

We have just gone through this for the first time. Ds applied to 10 schools. All came on close to what the NPC predicted. So that is a good place to start. Our state schools do not figure merit aid into the calculators(you know because they do not ask for test scores). For those I was able to find scholarship amounts on their websites and subtract to know what it would cost.

 

I also used the college data.com site. I looked at their percentage need met and predicted what we would be offered. We did have two schools meet our full need even though they only averaged 85% or so of need met. Ds was well above 75th percentile scores at those two schools.

[OnMyOwn]

Your 529 plan will be used to meet your Net Price, which may or may not be equal to your EFC. Your Net Price will be the college's Cost of Attendance minus any scholarship and grant money. In addition to your EFC, each college will have a Net Price Calculator (NPC) which will estimate your EFC and then estimate your financial aid at that particular school. If the NPC is asking about your grades, class rank, and test scores, then it may be estimating both your need-based and merit-based aid.

 

You were originally asking about how a specific state tuition plan interacts with financial aid grants at in-state colleges. This is something you should clarify with the in-state colleges you are considering.

 

Your eligibility for merit aid will vary greatly depending on the schools you are interested in. Generally speaking, the higher ranked on USNews a school is, the less likely they are to give anyone a scholarship just for a high test score. Private schools generally treat their merit aid formulas as ingredients to their "secret sauce," but some state schools will have tables of "this stat gives you that dollars". There are also lists of schools that give extra grants to National Merit Semifinalists.

 

For schools where the merit aid info is "secret sauce," CollegeData.com is a good way to figure out how many students are getting merit aid and what the typical awards are. Look up your school then click on "Financial matters". You should see amount of "need" met for need-based aid and the number of kids receiving merit-based gifts.

Thanks for the collegedata.com website. For Virginia Commonwealth University, collegedata.com lists need met at 52% and merit aid at 29%. The average ACT score is a 24. My son's score is a 25. How would I interpret those numbers? I'm assuming no merit aid, since he falls right in the middle, but what about need? Does that mean they generally meet 52% of most people's need or that they only meet need for 52% of students?

 

Also, there is a 29% graduation rate listed. That seems very low, but am I misunderstanding that?

[FaithManor]

If the average ACT score is 24 then that would indicate that a 25 puts him roughly in the range of being right around or a little above 50% of the freshman class, though not exact given that outliers skew averages. You could see if you can find a graph of their scores which would give you a better idea. I think that possibly www.collegeconfidential.com (click on additional facts, and then on testing and scores) represents this info by graph. As a general rule, merit aid is often awarded to the top 25% of the class, and at competitive schools sometimes only the top 10-15%.

 

The 29% graduation rate is low, and relates to the four year graduation rate. Now there could be several reasons for that. Schools that are heavy with commuter students, often have many, many part time students thus the low rate. Some have the five year program - Michigan Tech comes to mind - in which a student in the honors college can earn both a bachelor's and a master's degree in five years with the fifth year billed out at the undergraduate tuition rate and financial aid and merit aid extensions for the fifth year. It is a really good financial bargain for the student who can manage it, and lucrative so a school with that kind of program may have a lot of students who don't graduate in four with good reason. Some may be attracting a lot of students choosing to double or triple major. Some medical degrees - like the BSRN - can be difficult to complete in four due to clinical rotations as well as coursework. Then there are the negatives that could cause it, not enough sections of general education courses offered for students to get their prerequisites done in a timely manner, lack of support, lack of faculty office hours (ie. lots of adjuncts who may teach at multiple institutions so they do not have time to assist struggling students), lack of tutoring and other support like writing labs, high number of low achieving low scoring students who may not have been ready to attend college full time....

 

The raw statistic itself doesn't really tell you what's up, so you may want to ask around and see if you can find some parent forums, student forums, etc. where someone is posting information about the statistic.

[teachermom2834]

Thanks for the collegedata.com website. For Virginia Commonwealth University, collegedata.com lists need met at 52% and merit aid at 29%. The average ACT score is a 24. My son's score is a 25. How would I interpret those numbers? I'm assuming no merit aid, since he falls right in the middle, but what about need? Does that mean they generally meet 52% of most people's need or that they only meet need for 52% of students?

 

Also, there is a 29% graduation rate listed. That seems very low, but am I misunderstanding that?

If I was looking at that data, I would plan on getting about that 52% need met. That is an average and your student is about average for the school. So, I would take the cost of attendance and subtract your EFC. With what is left (the gap between EFC and COA) I would multiple by .52 to get an estimate of what grant aid you might get. You might get merit but that would count in the .52, not in addition to it.

 

So...I would add EFC + 48% of the gap and expect to pay that. subdisized loans would be part of the aid offered, not applied to the amount you are expected to pay.

 

Of course that is just a guess but I would not expect a radically different outcome.

 

That probably was very confusing. Keep reading. It does take a while but eventually the pieces come together and it starts to make sense.

[Grantmom]

Also, do you know about looking at the Common Data Set?  That might give you more info about the statistics.  

[OnMyOwn]

If I was looking at that data, I would plan on getting about that 52% need met. That is an average and your student is about average for the school. So, I would take the cost of attendance and subtract your EFC. With what is left (the gap between EFC and COA) I would multiple by .52 to get an estimate of what grant aid you might get. You might get merit but that would count in the .52, not in addition to it.

 

So...I would add EFC + 48% of the gap and expect to pay that. subdisized loans would be part of the aid offered, not applied to the amount you are expected to pay.

 

Of course that is just a guess but I would not expect a radically different outcome.

 

That probably was very confusing. Keep reading. It does take a while but eventually the pieces come together and it starts to make sense.

Thank you. That was very helpful and makes sense to me.

[OnMyOwn]

Also, do you know about looking at the Common Data Set? That might give you more info about the statistics.

Off to check this now.

[Grantmom]

If you just google the school name and then "common data set" you will see many years worth that you can look at. 

[JanetC]

Be very careful about applying the average percent of need met to a state school, particularly if the school draws from a national applicant pool. The in-state students typically get higher than average, and the out-of-state-kids lower-than-average or even nothing. The average net price paid is also skewed when in-state and out-of-state kids get averaged into one statistic. Virginia Commonwealth draws 93% of the student body from in-state so you are OK.

 

Another thing to watch for in the data is a state school that seems to give almost no financial aid whatsoever. In a few instances, the state higher education board (or somesuch name) gives grants to needy kids to take to any in-state-public they get into. The school has little to no financial aid to award on its own, but the kids are getting aid from the other state agency. If you live in a state like this, work with the college and the state grant websites directly, not something like collegedata.

 

Virginia Commonwealth does publish stats of students who have received merit aid in previous years, but does not guarantee a scholarship for a particular gpa. http://www.ugrad.vcu.edu/apply/scholarships.html Also note on this page that merit aid applicants need to apply by December 1st.

 

As far as graduation rate goes, for an in-state public, it's best to use the 5 year graduation rate to compare. It's fairly common to have engineering students take 5 years, or for courses to over-fill and students not get a required class on time, and for students to take lower courseloads and hold jobs to pay tuition at these schools. VCU's 5-year rate is 50%, which is acceptable for a state school. There are many which are less. Anything above 70% is outstanding for an state public university. Another thing to consider is whether there are programs that are expected to take 5 years due to a co-op requirement or special dual-degree programs, etc. These things will also reduce 4 year grad rates.

[teachermom2834]

Be very careful about applying the average percent of need met to a state school, particularly if the school draws from a national applicant pool. The in-state students typically get higher than average, and the out-of-state-kids lower-than-average or even nothing. The average net price paid is also skewed when in-state and out-of-state kids get averaged into one statistic. Virginia Commonwealth draws 93% of the student body from in-state so you are OK.

 

Another thing to watch for in the data is a state school that seems to give almost no financial aid whatsoever. In a few instances, the state higher education board (or somesuch name) gives grants to needy kids to take to any in-state-public they get into. The school has little to no financial aid to award on its own, but the kids are getting aid from the other state agency. If you live in a state like this, work with the college and the state grant websites directly, not something like collegedata.

 

Virginia Commonwealth does publish stats of students who have received merit aid in previous years, but does not guarantee a scholarship for a particular gpa. http://www.ugrad.vcu.edu/apply/scholarships.html Also note on this page that merit aid applicants need to apply by December 1st.

 

As far as graduation rate goes, for an in-state public, it's best to use the 5 year graduation rate to compare. It's fairly common to have engineering students take 5 years, or for courses to over-fill and students not get a required class on time, and for students to take lower courseloads and hold jobs to pay tuition at these schools. VCU's 5-year rate is 50%, which is acceptable for a state school. There are many which are less. Anything above 70% is outstanding for an state public university. Another thing to consider is whether there are programs that are expected to take 5 years due to a co-op requirement or special dual-degree programs, etc. These things will also reduce 4 year grad rates.

Oh I do agree with this. My explanation above was how I handled estimating aid from private schools. The two public schools ds looked at I used net price calculator and subtracted published amounts for automatic merit aid. We did not qualify for any FA at state schools. So definitely heed this advice about VCU.