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The school (academic) year is usually nine months (fall and spring semesters), but the period may vary according to the school and program.
Academic Competitiveness Grants, started in 2006, are for Pell Grant recipients in the first or second year in college.
AGI is a line on the IRS form indicating federally taxed income after adjustments have been made.
These are items that the IRS allows to be subtracted from taxable Income. See IRS form. Adjustments include: self-employment health insurance deductions, moving expenses, half of self-employment taxes paid, contributions to various retirement plans, penalty for early withdrawal of savings, alimony paid, etc..
Many high school offer AP classes that enable students to go on to higher level courses in college. Some colleges may award credit if students earn high grades in AP exams.
These amounts are allowed as deductions by college financial aid formulas. They include: Tax Allowance, Income Protection Allowance, Employment Expense Allowance, and Asset Protection Allowance.
The National Community Service Act’s AmeriCorps program provides jobs that pay a small allowance and provide educational benefits. The allowances are taxable, but they are not counted as income by aid formulas.
Advanced Placement classes offered in high school are followed in May by AP exams. High grades on AP exams may earn college credit. The classes help prepare students to choose higher level courses in college.
Assets are property, including cash, savings and checking accounts, investments, trust funds, money market funds, mutual funds, CDs, stocks, bonds, real estate, business assets, and mortgages or loans owed to you. A few private colleges ask about the value of your cars and retirement accounts.
Aid formulas determine an income amount they consider “available” for use in calculating the Expected Contribution. Total income from all sources minus allowances is “available income.”
This is the period for which aid is requested, usually the academic year between July 1 of one year and June 30 of the following year.
Your base year for aid is the calendar year before the academic year for which aid is requested. The first base year for students entering as freshmen in the year 2007 began on January 1, 2006. Income data from each base year is used to calculate the Expected Family Contribution.
This is the market value of business property plus other assets owned by sole proprietorships, partnerships, or corporations.
Private colleges that use the PROFILE aid application system require this form to collect additional information about business and/or farm assets.
The federal aid programs that are administered by the colleges are the Federal Perkins Loan, the Federal Supplemental Educational Opportunity Grant (SEOG), and Federal Work-Study.
Income earned from the sale of an asset is a capital gain to be reported on tax returns.
A loss resulting from the sale of an asset is a capital loss to be reported on tax returns.
Borrowers may choose to allow interest on unsubsidized Stafford loans to accumulate. Interest that is “capitalized” is continually added to the original principal amount of the loan, so the total amount owed becomes much higher than it would be if interest did not accumulate.
Each college uses its own standard figure for Cost of Attendance when awarding aid. It includes tuition, fees, room and board, books and supplies, transportation, and an allowance for miscellaneous personal expenses.
Under IRS Code Section 529 many states have contracted with an investment firm or mutual fund company to establish, run, and market education savings programs. Most plans encourage out-of-state residents to participate.
The College Board’s College Scholarship Service administers the PROFILE needs analysis system used by many private colleges to award their own aid funds to supplement federal aid funds.
Financial aid includes grants and scholarships, loans, and work-study awards.
This is a former name for what is now, with changes, called Federal Methodology (FM). It is a set of needs analysis formulas voted by Congress and used to compute the Expected Family Contribution to award federal funds to students at public and private colleges.
The number of dollars expected from a student and/or parents toward college expenses before aid is awarded is termed “contribution.”
For financial aid purposes, “deferment” refers to temporary postponement of the date at which education loan repayment must begin. Interest continues to accrue on deferred PLUS Loans and unsubsidized Stafford Loans, but not on subsidized Stafford Loans
A student who does not qualify as an independent student is dependent. Parents’ (as well as the student’s) assets and income will be considered by aid formulas.
Federal Stafford and Federal PLUS loans fall in either the Direct or FFEL category. If your school participates in the William D. Ford Federal Direct Loan Program, funds are lent directly by the U.S. government. At schools that do not use the Direct Program, the loans are of the FFEL (Federal Family Education Loan) type, made through banks, credit unions, and other private lenders.
Students may apply early for admission under Early Action. Unlike Early Decision, students may apply to other schools and are not required to agree to attend if accepted.
Some colleges allow students to apply early for an admission decision on condition that students must agree to attend if accepted and to withdraw applications at any other schools.
Now called a Coverdell Education Savings Account and greatly expanded, this was a trust account set up in the name of a beneficiary in order to save for education expenses.
Expected Family Contribution is the number of dollars a family is expected to pay toward college expenses before aid is awarded. Aid eligibility is determined by subtracting EFC from the college’s standard Cost of Attendance (COA.). If the student is dependent, the EFC consists of a student contribution and a parent contribution.
The amount of aid for which you are “Eligible” is the same as the “Need” for aid that has been calculated by the aid formulas that analyzed the family’s financial data. Different aid formulas may calculate different results. “Eligibility” (“Need”) may be met in part or in full by an aid package. If the family does not receive the full amount of aid for which it is “Eligible,” there is an aid gap.
To be eligible for most aid programs, a student must be a U.S. citizen or eligible noncitizen, have a high school diploma or equivalent, have a Social Security number, be enrolled as a regular student studying toward a degree in an eligible program, be registered with the Selective Service if required, make satisfactory academic progress, show financial “Need” (according to aid formula calculations), and sign a certification statement on the FAFSA form. Schools also need to meet “institutional” eligibility standards set by the Department of Education.
A single working parent or two working parents can benefit from the employment expense allowance, which takes into account the costs of going to work. FM allows the lesser of $3,200 or 35% of income (for the 2007-2008 aid year calculations).
Equity is the value of ownership in property. Home equity is the current value of the family residence less any amounts owed on it.
Certain income, expense, and asset items are allowed to reduce the amounts counted by aid formulas.
When figuring taxable income, the IRS allows a special deduction based on the number of persons in a family.
EFC is the number of dollars the family (student, spouse if any, and parents of dependent students) is expected to pay toward college expenses. There are two ways EFC is computed–by Federal Methodology (FM) and by Institutional Methodology (IM). (If the family does not receive aid for the full amount of the difference between the official cost of the college and the EFC, there is an aid gap.)
The Free Application for Federal Student Aid is the application form for all federal student financial aid. F
Aid formulas compute the number of dollars a family is expected to pay toward college expenses before aid is awarded. If the student is dependent, the EFC consists of a student contribution and a parent contribution.
FM is a set of needs analysis formulas used to compute the Expected Family Contribution. It is used when awarding federal aid to students at public and private colleges.
FWS is a federally-supported program of part-time employment based on an applicant’s financial need. FWS allows qualified students to earn money to pay part of their college expenses. These earnings are taxable, but they are excluded when aid formulas are applied.
Federal Stafford and Federal PLUS loans fall in either the FFEL or Direct category. FFEL (Federal Family Education Loan) loans are made through banks, credit unions, and other private lenders. (At schools that participate in the William D. Ford Federal Direct Loan Program, funds are lent directly by the U.S. government.)
Federal Methodology is a set of needs analysis formulas used to compute the Expected Family Contribution. It is used when awarding federal aid to students at public and private colleges.
A temporary postponement or reduction of student loan payments for a specific period of time. Interest continues to accrue during forbearance.
The Federal Supplemental Educational Opportunity Grant is a campus-based federal program for undergraduates with the lowest Expected Family Contributions (highest financial need for aid). Colleges award the funds.
In most cases, full time is at least 12 credit hours in a term or 24 clock hours per week.
When an aid package does not meet the full amount of the difference between the official cost of the college and the family’s Expected Contribution (EFC), there is an aid gap. “Unmet Need” is another term for aid gap. Student and parent loans are available to cover EFC and any Gap.
Grants or scholarships that do not need to be repaid are gift aid.
This is the time period during which a borrower is not required to make payments of principal or interest.
Grants are aid that does not need to be repaid. Financial aid formulas will not count this as income available toward the Expected Family Contribution. To the extent that it goes toward direct education costs, it is tax-free.
States have guaranty agencies or nonprofit institutions that insure education loans for lenders and work with the FFEL loan programs.
In most cases, half time means at least 6 credit hours in a term or 12 clock hours per week.
The Higher Education Act of 1965 authorizes federal Title IV student aid programs. It was reauthorized in 1998.
The Higher Education Reconciliation Act of 2005 was enacted in February of 2006. It made major changes to federal student financial aid regulations.
The Higher Education Act of 1965 (HEA) authorizes federal Title IV student aid programs. It was reauthorized in 1998.
HERA, enacted in 2006, made major changes to federal student financial aid regulations.
This is home value minus mortgage and other debts owed on the property. Home equity is not counted in the federal aid formulas, (FM) but is counted by the institutional formulas (IM).
Home equity loans may be set up so that the borrower can withdraw funds as needed.
The Hope Credit applies to expenses paid for the tuition and fees of undergraduates enrolled at least half time in the first or second year of college. The credit is on a per-student basis. Restrictions apply.
Institutional Methodology is a set of needs analysis formulas used to compute the Expected Family Contribution for awarding private (institutional) funds to students at private (and some public) colleges.
Federal rules say that a student can be considered independent if at least one of the following applies: the student is at least 24 years old, is married, has legal dependents other than a spouse, is an orphan or ward of the court, is an active duty member or a veteran of the U.S. Armed Forces, is enrolled in a graduate or professional program, or is a member of the armed services currently serving on active duty for other than training purposes. Private colleges sometimes have additional requirements and may require a contribution from an independent student’s parents.
IM is a set of needs analysis formulas used to compute the Expected Family Contribution for awarding private (institutional) funds to students at private (and some public) colleges.
Individual Retirement Account. Contributions to tax-deferred retirement accounts are allowed as deductions by the IRS, but they count as Untaxed Income for financial aid purposes.
Keogh is a type of retirement account. Contributions to tax-deferred retirement accounts are allowed as deductions by the IRS, but they count as Untaxed Income for financial aid purposes.
The Lifetime Learning Credit applies to the expenses of undergraduates who are beyond the first two years of college and to the expenses of graduate or professional education. The credit is on a per-family basis and can be taken for any number of years. Restrictions apply.
Loans, such as student Stafford Loans and student Perkins Loans, are included in aid packages. Parents may use non-aid PLUS Loans or alternative loans to pay for Parents’ Contribution or any aid gap.
One of the qualifications that help determine eligibility for Simplified Needs asset treatment is for the parents or dependent student (or independent student and spouse) to have received in 2006 benefits from certain means-tested federal benefit programs in which eligibility for or amount of benefits are determined on the basis of income or resources. These include Supplemental Security Income (SSI), Food Stamps, School Lunches, TANF, and WIC.
Merit aid is based on the characteristics of the student, rather than on financial need. The characteristics could be academic achievement, athletic ability, musical talent, place of origin, etc.
Sets of formulas are used to determine a family’s “Need” for student financial aid. There are two important types: “Federal Methodology” (FM) and “Institutional Methodology” (IM).
Aid administrators subtract the Expected Family Contribution from the college’s Cost of Attendance to determine the “Need” (“Eligibility”) for aid. “Need” may be met in part or in full by an aid package.
Determination of a family’s Expected Contribution and “Need” (“Eligibility”) for aid by examination of financial data is known as “needs analysis.”
Net worth is the total of all assets minus any liabilities or debts against these assets.
Scholarship money from private organizations originates from “outside” the aid package. All or part of “outside” scholarships may be subtracted from already-awarded college grants and loans, because the total of family contribution and aid can not be higher than the Cost of Attendance.
This is the process by which an aid administrator puts together grant, scholarship, loan, and job components to build an aid package for a student
This is the amount that aid formulas calculate parents must pay from their income and assets toward a dependent student’s college costs before aid is awarded. It is added to the Student Contribution. The total of the two is called Expected Family Contribution.
Pell is a federal grant (as calculated by analysis of the FAFSA form) to undergraduate students with the greatest financial need.
These assets include cash, savings and checking accounts, investments including trust funds, money market funds, mutual funds, CDs, stocks, bonds, real estate, and mortgages or loans owed. Aid formulas used by colleges that award private funds (IM) count the primary residence as a personal asset.
Aid administrators have the ability to make decisions based on special circumstances.
PLUS is a federal loan program for parents of undergraduates. PLUS loans are not based on financial need. They depend on the parents’ credit and can be used toward the Family Contribution or to cover an aid gap.
Some colleges try to attract certain students by offering them aid packages that provide a mix with more grants and fewer loans.
Under IRS Code Section 529 many states have established programs that allow residents to purchase credits toward future college tuition. Guidelines for 529 prepaid tuition plans vary from state to state.
This is the College Scholarship Service’s institutional (IM) aid application and needs analysis process, used by many private colleges.
Congress periodically reviews, revises, and votes on the Higher Education Act, which authorizes federal student aid programs. The Act was reauthorized in 1998.
Contributions to an IRA, Keogh, SEP, 401k, 403b or any other tax-deferred retirement accounts are allowed as deductions by the IRS, but they all count as Untaxed Income for financial aid purposes.
Reserve Officer Training Corps programs are available at many colleges. Options include: –a traditional four-year program that pays a small monthly stipend during junior and senior years and requires a service commitment and –a competitive ROTC scholarship program that covers a substantial portion of costs in exchange for a longer service commitment as an officer after college.
A Student Aid Report is a report generated by the FAFSA form. It shows whether the student qualifies for a Pell Grant and the amount of the federal Expected Family Contribution. SATISFACTORY ACADEMIC PROGRESS (SAP) Aid rules require academic standards to be met in order for a student to continue receiving financial aid.
Scholarships are financial aid that does not need to be repaid. They come in several varieties. Colleges may award private grant money as a named scholarship. It may be part of a need-based aid package, or it may be based purely on merit. Money from scholarships that are not connected with the college are “outside” scholarships. Outside scholarships may benefit the college rather than the student if they would make the total of Family Contribution and already-awarded aid exceed the college’s standard Cost of Attendance.
Males who are U.S. citizens aged 18-25 are required to register for military service in case of national necessity.
In addition to the Student Contribution, students also help pay for part of their college costs through student loans and work-study jobs, as designated in their aid packages. SEOG (Supplemental Educational Opportunity Grant) SEOG is a campus-based federal program for undergraduates with the lowest Expected Family Contributions (highest financial need for aid).
Federal Methodology will not count parents’ or student’s assets when calculating Expected Family Contribution if AGI of parents of a dependent student (or of independent student and spouse, if any) is under $50,000 and EITHER parents (or independent student and spouse, if any) file, or qualify to file, IRS Form 1040A or 1040EZ or are not required to file a tax return OR the parents or student (or independent student and spouse, if any) received in 2006 benefits from certain means-tested federal benefit programs in which eligibility for or amount of benefits are determined on the basis of income or resources. These include Supplemental Security Income (SSI), Food Stamps, School Lunches, TANF, and WIC.
National SMART Grants are for third or fourth year college students majoring in math, science, technology, or a “critical” foreign language.
Aid administrators may use Professional Judgment to take unusual situations into account when awarding aid.
Stafford is a federal loan entitlement program available to students who file the FAFSA form. When the student qualifies on a financial need basis, the loans are subsidized–the government pays interest on the loan while the student attends at least half time and for six months thereafter.
An SAR is a report generated by the federal aid application form (FAFSA). It shows whether the student qualifies for a Pell Grant and the amount of the FM Expected Family Contribution.
The amount of college costs that aid formulas determine a student must pay before aid is awarded if the Student Contribution. If the student is dependent, it is added to the Parents’ Contribution and the total is called Expected Family Contribution. SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT (SEOG) SEOG is a campus-based federal program for undergraduates with the lowest Expected Family Contributions (highest need for aid).
Designates federal student financial aid programs authorized by the Higher Education Act. Programs include Pell Grants, SEOGs, Perkins loans, Stafford Loans, PLUS loans, and Federal Work-Study.
The Uniform Gifts to Minors Act (UGMA) in some states and the Uniform Transfers to Minors Act (UTMA) in other states allow setting up an account for the benefit of a minor (age varies according to state) as an irrevocable gift. A custodian manages the account. This type of account is counted by financial aid formulas as a student asset. Uniform Gifts to Minors Act / Uniform Transfers to Minors Act States adopted one or the other of these acts to allow setting up an account for the benefit of a minor (age varies according to state) as an irrevocable gift. A custodian manages the account. This type of account is counted by financial aid formulas as a student asset.
When an aid package does not meet the full amount of the student’s calculated need for aid, there is “Unmet Need.” Another term for “Unmet Need” is “aid gap.”
Most untaxed income and benefit items are counted by federal and institutional aid formulas. These include Social Security benefits, pensions, payments into retirement plans, tax exempt interest, child support received, welfare benefits, earned income credit, and living allowances. Private colleges also count depreciation and losses on businesses and real estate.
Verification means close inspection of all tax returns and other submitted financial documents to confirm that the amount of aid awarded is accurate. The federal government requires schools to verify approximately one-third of all aid forms submitted, but many colleges verify all applications.
Federal Work-Study (FWS) is a federally-supported program of part-time employment based on an applicant’s financial need. FWS allows qualified students to earn money to pay part of their college expenses. These earnings are taxable, but they are not counted by aid formulas.