SPOTLIGHT FEATURES

2003-04 Ross Scholarship Recipients | Help Comes Too Late
PLUS Loan Questions to Consider | FAFSA Analysis – Line 74
Scholarships are Available for College Students

2003-2004 Sue D. Ross Endowed Scholarship Fund Recipients

The students at Hampton Roads School of Technology would like to say thank you.  We wanted as many students as possible to receive part of the Sue Deaton Ross Scholarship fund. The school awarded 15 students a $100.00 scholarship. The students were very thankful of the award and wanted VASFAA to know that they appreciate the scholarship. The following students received the Sue Deaton Ross Scholarship fund.

Submitted by Tim Freeman
VASFAA Past-President

Help Comes Too Late

Originally published July 8, 2003, in the Baltimore Sun

I’ve just finished awarding $10 million in financial aid to students who otherwise couldn't afford to attend the Johns Hopkins University.

You'd think that would be a tremendously gratifying moment, an opportunity to reflect with satisfaction on the good we're doing for people who really deserve it. And it is.

But it's also a tremendously frustrating moment. I'm frustrated because there is a large group of deserving people I haven't been able to help.

It's tough for financial aid officers to assist families who have never before sent a student to college. Why? Because, however unintentionally, the system in some ways is stacked against them.

At selective colleges, most of our students and families have always regarded post-secondary education as the obvious, if not the only, next step after high school.

Helping these families find ways to pay for college is relatively easy. They know, from experience, what college is all about and what to expect. They have realistic ideas about how an investment in education repays the student, what that investment costs and, most importantly, how that out-of-pocket cost can be reduced through long-term savings and financial aid.

Working with first-generation college families is a different story.

Unfamiliar with arcane, complex and expensive aid application procedures and with other options, these students and families may make bad decisions. Those decisions may, in the end, prevent students from attending the school that is the best match for them.

Maybe the dinner-table conversation goes something like this: "You can't even think about Johns Hopkins. We can't possibly afford it." Or like this: "You can go, but we can't pay for it, so you'll be in debt for the rest of your life."

Often, these talented students and their families are so discouraged, before they even begin, that they don't fill out free federal financial aid forms or don't file them on time. They miss out on institutional aid, state grants and federally subsidized loans. Recent research suggests that unmet need prevents 60,000 talented and capable high school graduates from attending college each year.

These are not unintelligent people. Here's one example: A young woman from the Bronx. Her mother is dead and her father is imprisoned. Her high school teachers call her "brilliant." But how can we expect her, at 18 and without family support, to navigate through a sea of forms, requirements and deadlines?

We eventually were able to help. She will start at Johns Hopkins this fall. But she is, I fear, an exception.

There are new private scholarships that attempt to help to mitigate this lack of sophistication. I applaud these philanthropic efforts. But they are flawed: The awards simply are not made soon enough to lift the hopes and aspirations of these potential "first in their family" college students.

The Gates Millennium scholarship program, for instance, notifies winners in April of their senior year of high school. That's after colleges mail their acceptances and months after most colleges' application deadlines.

The deadline for a new Sallie Mae program for Hispanic-Americans is April 15; that's too late for Sallie Mae to notify winners by May 1, when seniors have to choose among the colleges that accept them. Some state grant scholarship agencies do not notify winners until May.

The question: How can we - colleges, state agencies, private benefactors, the federal government - work together to raise the goals and aspirations of less sophisticated but no less capable students?

As the Advisory Committee on Student Financial Assistance wrote to Congress recently, the forthcoming reauthorization of the Higher Education Act provides us with an excellent opportunity to make changes, both in federal programs and in the activities of colleges, private philanthropists and state agencies.

Earlier information about federal and state aid eligibility would help. So would awarding scholarships in the junior year of high school. There are too many students who conclude that the door is closed to them. Our job is not just to open the door, but also to get them to the threshold.

Submitted by Ellen Frishberg, Director of Student Financial Services at the Johns Hopkins University.

PLUS Loan Questions to Consider

As parents explore ways to finance their children’s higher education, many consider borrowing through the Federal PLUS-loan program. As they decide whether to pursue a PLUS loan, parents of dependent undergraduate students should be advised to consider the following questions:

Have I exhausted other sources of financial aid? Before applying for a PLUS loan, parents should thoroughly research all forms of financial aid — especially grants and scholarships — and turn to the financial-aid office for information about sources of financial assistance.

What if I don’t pass the credit check? Parents who fail the PLUS-loan credit check should be advised that they still have options, including the following:

- A parent still may obtain a PLUS loan if a friend or family member who can pass the credit check agrees to endorse the loan application and assume the debt if the parent fails to repay the loan.

- A lender still may approve a PLUS loan if parents can demonstrate extenuating circumstances, such as updated credit information showing that they have brought their accounts up to date or have made satisfactory arrangements to repay their debts.

- The student may qualify to borrow additional sums under the unsubsidized Federal Stafford-loan program.

Parent or child — who pays? While many children agree to pay their parents’ PLUS loans, parents should be advised that if the child fails to make the loan payments, the parent who signed for the PLUS loan is legally obligated to repay the debt.

How can I make the loan payments and pay tuition at the same time? With PLUS-loan repayment beginning within 60 days after the loan is disbursed, some parents may face cash-flow difficulties as they make PLUS-loan payments. Financial-aid administrators should encourage parents facing this problem to consider the following repayment strategies:

- Forbearance. Lenders may grant forbearance to PLUS borrowers while their children are still attending college. Forbearance allows a borrower to postpone or reduce their monthly loan payments temporarily; however, interest continues to accumulate during the period of forbearance.

- Graduated repayment. The graduated-repayment option provides lower monthly payments initially.

Submitted by: Richard Burt, USA Funds Services

FAFSA Analysis – Line 74

A common error on the FAFSA is when parents enter an incorrect figure on line 74.  This is the line that reads:  "Enter the total amount of your parents' income tax for 2003.  Income tax is on IRS Form 1040—line 54;........etc.  Now, while I do not have a suggestion that will help parents' enter the correct figure I would like to point out how some recent tax law changes that have a large impact on "your parent's income tax for 2003".

There was much in the news this summer about the tax package (actually, "The Jobs and Growth Tax Relief Reconciliation Act of 2003) passed by Congress in August.  Mostly the news was about the $400 per child tax credit check many families were to receive.  But more significantly for taxpayers these other changes took effect:

1)  The standard deduction for Married Filing Jointly increased from $7,850 in 2002 to $9,500 in 2003, an increase of 21%.

2)  The 15% tax bracket applied to incomes from $12,000 to $46,700 in 2002.  For 2003 the 15% bracket was extended to include incomes between $14,000 and $56,800.  These two changes effectively did away with the 'marriage penalty'.

3)  Businesses may now expense qualified purchases up to $100,000.  This is up from $25,000 in 2002.  This means that a business may 'write-off' up to $100,000 of business equipment in one year rather than depreciate it over many years.  This has the potential to make a dramatic change in the amount of tax due for a self-employed person.  You may have recently heard radio ads or seen newspaper ads telling business owners they may now purchase a high end SUV and write off the entire amount from their income.  Also, 'bonus depreciation' rates increased from 30% to 50% for 2003.

4)  Tax rates for higher income earners dropped.  For example, in 2002 income between $46,700 and $112,850 was taxed at 27%, for 2003 income between $56,800 and $114,650 is taxed at 25%.  You can see that not only

did the tax rate drop but the income taxed at that lower rate expanded.

5)  The tax on most capital gains and dividends fell from regular rates to 15%.

6)  The maximum Lifetime Learning credit, the child and dependent care credit, the adoption credit, the child tax credit, the health coverage tax credit, the Earned Income tax credit and the self-employed health insurance deduction all increased for 2003.

7)  Finally, the deferral amounts for retirement savings increased for 2003.  These include the amounts that may be contributed pre-tax to IRA's, simple IRA's, SEP's, 401(k)'s and 403(b)'s.

O.K., what does this mean for the FAFSA?  All of the above changes will lower an individuals tax owed.  Many more families will receive a refund this year, and that refund can be significantly higher.  A larger refund means less tax paid which will translate into lower financial aid awards (families will have more discretionary income).  So it is more important than ever to be sure that the amount entered on the FAFSA line 74 is not the amount from box 2 on the employees W-2 but is in fact the amount of actual tax paid.

Mike Szydlowski, mike_szydlowski@woodberry.org

Scholarships are Available for College Students

If your students think scholarships are only available before college starts, they should think again. Many post-secondary scholarships exist, and if your students make an effort to apply for them, they can ease their college expenses.  Here are a few of the many awards available to your current students.

Association for Women in Science Educational Foundation (Ruth Satter Award)
www.awis.org/resource/scholarships.html
Deadline: January 27, 2004
Open to a graduate student who interrupted her education for at least three years to raise a family.

Barbara Wiedner and Dorothy Vandercook Memorial Peace Scholarship www.grandmothersforpeace.org/scholarships/  
Deadline – March 1, 2004
Open to college freshmen.

OP Loftbed Scholarship
www.oploftbed.com/scholarship/index.php
Deadline – July 31, 2004
Open to undergraduate and graduate students.

Students can also check out these free scholarship search resources:

www.fastweb.com 
www.fastaid.com
www.scholarships.com

Encourage your students to visit your financial aid office and ask about other scholarships to help them pay for college.

by Juan Perez, Regional Director, National Student Loan Program