Posted On: 2005-11-18Length: 31:12
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Good Friday everyone it is Friday November 18, 2005 this is the Financial Aid Podcast episode 118 and my name is Chris Penn. We have a lot to cover today, a lot of mathematics and things and we are going to talk about the Federal Spending Bill on Capital Hill it was defeated and retreat in spending in the face of inflation. We have a scholarship update from The Education is Freedom Scholarship, we have some information about that and how to apply for it and when the deadlines are and understanding the EFC the Expected Family Contribution Federal Methodology and of course Podsafe music. Let's get this Friday started with some news.
The title of the headline on www.insidehighered.com is, "Okay now what?" a unified Higher Education Lobbying front got what it wanted Thursday as the House of Representative rejected a compromised 2006 Spending Bill for Education Bio Medical Research, that basically called for flat funding for student aid programs. Funding would have been preserved at 2005 levels and would have had the removal of the Perkins loan program and a couple of other programs. The 22 Republicans, many of them unhappy not because of the spending cuts but because the legislation had been stripped of all members sponsored pork barrels earmarks like Bridges in Alaska, broke ranks with the party leaders to join all 201 Democrats in the Chambers one Independent opposing the measure to the satisfaction of college lobbyists. However, the battle for Higher Education continues onward, there was an additional bill passed this morning at the very early hours that was a Budget Cut Bill, this Budget Cut Bill is one that we've been talking about, and this is where it gets confusing. There is actually five or six different bills they are trying to tackle the Budget Reconciliation. This is the one that is going to ax about $50 billion from the deficit. Most 26.3% which comes from student loans and we've talked about that in terms of the PLUS loan rates. However, this budget bill that was passed in the House now needs to face the Senate and needs to be reconciled between the two chambers so that battle is still ongoing. The justification for the broader Reconciliation Act is brought out by Jim Nussle, the Budget Committee Chairman, a Republican from Iowa said, "The un-checked spending is growing faster than our economy, faster than inflation and far beyond our means to support it." That's the reason that the Nation needs to be tackling these different spending projects interestingly enough they did not mention the hurricane relief efforts as part of the budget nor did they mention the Middle Eastern Campaigns as part of the budgets. One thing that I thought was interesting about the way Representative Nussle pointed out, inflation is tough concept to get other than understanding that the same item that you buy this year, that you will buy next year will cost more next year than this year. Effectively the net affect inflation, but the cause of inflation is something that economists have been wrangling with for a very long time. Essentially inflation is what you get when you have more money being created than growth in the economy.
I'm trying to think of a good way in explaining this, let's say for example-well there really is no way to do that without getting into a huge chunk of Macro-Economics but the short version is the United States Government is been printing money because the Government can create money, it's something that is possible for the Government to do. When you create more money than is really being used or being traded in transactions outside the Government, you get inflation. It would seem to be logical to not create any more money and thereby slow down inflation. For reasons that I am not clear on yet and I am still trying to learn the basics of the Economics inflation, the Government has chosen not to pursue that route. Since 2000, the money supply, the amount of money the Government has created has gone up about 40% which is vastly outpacing what we normally calculate inflation by and the reason for this we are not really sure yet. There will be more on that later.
From Massachusetts the Chancellor for Higher Education, wow wouldn't it cool to have a title like Chancellor? Maybe I should be like the Chancellor of Education Financial Aid Podcasting. The Chancellor of Higher Education in Massachusetts is planning to re-allocate $51 million from two state grant programs to combine them all and try and divert as much State aid to the state's neediest students at the expense of middle income college students. The Mass Grant program would be able to give every low income student attending college a $3,600 per year grant. The neediest students now get $1,600. However this would come at the expense of people who are in the middle income families. 41,500 students receive Gilbert and Access grants to programs that would be eliminated under the proposal. What was nice, although it took a lot of digging in the article, the definition of low income family in the state of Massachusetts is any family who earns less than $36,000 a year, middle income is $36,000 to $50,000 there abouts. Basically for the people who are making between $36,000 and $50,000 the eligibility for those families to receive these grants would go away and the people who make less than $36,000 would receive an increase in their state aid.
News from Massachusetts, don't know about the wisdom of that yet, but it is certainly interesting and I think its something that we are going to see more of as state's try to re-jigger their financial aid packages to deal with not only the fact that there are more and more college students needing more and more aid as the economy contract, the need for aid goes up because wages and income go down. But also because well state budgets are in a real crunch so they have to figure out how they are going to prioritize their spending. As always if any of this is a concern to you, if any of this kind of makes you uncomfortable sitting down and makes you twitch a little bit, makes you want to go and punch through a wall what ever, get involved in the political process. There is no other way to make the changes that you want to see happen than to get involved with the political process. And obviously with this news coming out of Massachusetts it's clear that being involved not only in the Federal levels important by voting and lobbying and things like that, but also being involved at state and local level politics as well. These are all areas where there is a lot of change going on. That is the news for this Friday morning. Let's kick it off with a little bit of Christmas music from Number One Fan from the Podsafe Music Network, the song title may-let me just get this cued up here, is "Christmas is Here."
"Christmas is Here," by Number One Fan new from the Podsafe Music Network. It's nice to see some holiday music coming out. Holiday music that is original holiday music that is new, these are all good things. Scholarship update time. Let's do a scholarship update, we are gong to do the Education is Freedom Scholarship. This is a scholarship sponsored by originally by 7-11, the quickie mart store. Scholarship is target towards B average students who may not qualify for traditional academic aid, but show leadership, responsibility and a strong desire for higher education. Each scholarship is $2,000 award renewable for up to three years for a total potential value of $8,000. In three years 85% of scholarship recipients have renewed their award after their freshman or sophomore years maintaining a required GPA. Eligibility, you must be a U.S. resident for at least one year at time of applications, so this is actually an un-restricted award as long as you have been living in the United States for at least a year. You must be a current United States high school senior with a GPA of anywhere between 3.0 or 3.5 on a 4.0 scale. This must be your first time enrollment on a full time undergraduate course of study at an accredited two year or four year college or university. Selection criteria include financial need, activities in leadership, work history and candidate appraisal. The scholarship is payable to the institution bi-annually there is no deferment and is renewable up to three years for the completion of an undergraduate degree. The application period opened on November 1 and concludes on January 15, 2006, so the deadline is January 15, 2006 just after the New Year. The approval will be given in May and the scholarships will be notified by e-mail in May for distribution in August. You can apply for this and find out more information by going to show notes today and you will find a link to our scholarship site at the www.studentscholarshipsearch.com I guess is the easiest way to put it out there. You'll find the detail page including information about the award and how you can apply for it. The Education is Freedom Scholarship is today's scholarship update. We'll get away from the Holiday music for a little while, we'll do-let's see I was talking to a friend yesterday and they were saying that they needed something sound like Evanescence to motivate their day, so let's do "Sin," from I scintilla a little harder edge here to get your Friday going but it's a great song. I love it. As C.C. Chapman would say, "Crank it."
"Sin," from I scintilla from the Podsafe Music Network. By the way if you don't know who C.C. Chapman is I've mentioned him before a few times on our show, he is the producer of the Accident Hash Show, a podcast, very good music podcast, one of my favorite music shows that is also a podshow, you can find his website at www.accidenthash.com that's a great show, at least give it a couple of listens. He's got a lot of personality, a lot of individuality that really comes through. All right let's talk about News You Can Use. I was looking this morning to see about how easy it would be to build a calculator to calculate the EFC. For those of you who don't know or who are trying to figure out the FAFSA in all of its bloody glory, the EFC is the Expected Family Contribution that what it stands for. What the EFC is effectively is, is the amount that the family can be expected to contribute towards the students college costs. Financial Aid Administration determine an applicants need for Federal Student Aid from this EFC basically by determining-they subtract the EFC from the students cost of attendants which is called COA, there are more acronyms in financial aid than almost any other field except maybe technology which invents acronyms every week just for fun. The EFC formula is used to determine the EFC and ultimately determine the need for aid from the following types of Federal Student Assistance. Pell Grants, Stafford loans, Perkins loans, Work Study Opportunity Grants, and pretty much anything else that the Federal Government gives out in terms of Federal Aid.
The EFC is an unpleasant formula there is no other way to put it; I'm looking at the documentation for how to actually compute this sucker and the documentation is 35 pages long. Now grant it some of it's introductory stuff with tables and things but you can pick this up at www.fafsaonline.com I'm going to put the PDF out there so that you can actually try it yourself. There is nothing that's really complicated in the math, you don't require knowledge in calculus or anything, and it'll just take you some time. It's an interesting reflection that the FAFSA which is on paper about eight pages gets transformed into this 35 page monstrosity when it comes to try to figure out how a student is eligible for aid. Some important things to take note of as you are-if you wanted to go down the route of trying to figure out what your EFC will be-the reason you would do this is so that you could get an idea of what's taken into consideration on your FAFSA, which is not an insignificant thing if you know what is involved in the computation in the FAFSA, you would know which fields would be less and more important. Okay page eight in this manual says, it says this page intentionally left blank, I hate it when they do that, that's so stupid-you know what's important in the FAFSA, you know what is given a lot of weight for example parent's contribution from assets. This is on page nine of the guide, basically you total up the net worth of the parents investments and you multiply it times point 12. This is effectively saying that if the parents have a lot of money, a lot of assets, 12% of the value of those assets is taken into consideration. If you go to page ten in this formula, you'll see here that a student's assets are taken at 35% assessment rate. So clearly the students-the amount the student makes or the assets that they have everything from cash that's in your couch all the way up to 401K's and things like that if you've had the opportunity to accrue those by working all this is taken into account and assessed it at a much higher rate. There are a couple of exceptions on regular worksheet A page two section 39, there is what's called an income protection allowance. Basically if you are student you are allowed to work up to $2,440 worth of income. This is-looks like adjusted gross income? No it's income tax paid. Effectively they are saying this is what you can make a year that will not be taken into account. If you work a summer job or something like that, you can accrue up to $2,440 it looks like after taxed income because there are allocations for taxes on here. So $2, 440 in take home pay is what you can earn is what the EFC will not see, it will not see it. Students contribution on income, available income, interesting available income is assessed at 50%, that's effectively money made. So asset income versus working income taken into account and working income interestingly enough is penalized at a higher rate which is interesting.
There are also allocations in here, there is one in here for parents, difference between the income protection allows for a family of four and a family of five with one in college $3,830 per year. That's not very helpful, I think I'll have to sit down and actually write a calculator and figure how this comes into play. The short version is however, they really don't want to see much of any income on the student's half, or let me rephrase that, you don't want that, you don't want the student to have any kind of assets, whether it's working income above and beyond the $2,440 allocated or and of course any kind of investment assets. You just don't want those because it's going to be heavily penalized in your financial aid assessment. Equally true for the parents. You want to try and get your net worth in assets down to really as close to zero as possibly without actually being zero, and you can do that with a number of different offsets that we've talked about in the past on the FAFSA show. There is no income protection allowance for parents which is interesting there is an employment expense allowance but really parent's income is taken into account as well. Tons of information in this thing, very dense reading, its certainly not the easiest thing and definitely not what you would probably want to spend a Friday night doing. I will put it out there so you can get a look at the raw, unadulterated, unfiltered EFC calculations and you can check it out for yourself and try it out for yourself. It's worth doing at least once, you are going to be sitting down doing financial aid paper work in the near future anyway if you are going to be filling out the FAFSA, so it would not be a bad exercise to go through and see how your assets and things are computed and what way they are assessed. News You Can Use, like I said this will be available at www.fafsaonline.com definitely check it out. There are a few little surprises in Easter Eggs and things that might be helpful for you to know when you are doing your FAFSA. That will be that, so let's do one more piece of Podsafe music, what did we yesterday, we did some Audio Farm and stuff yesterday. Let's do a little bit of Rebecca Lobey, I feel in the mood for some of her music so, we'll do "There Tonight," from Rebecca Lobey via Podsafe Music Network.
"There Tonight," by Rebecca Lobey new from the Podsafe Music Network, actually no it's not new but it's still from Podsafe Music Network. It's really good, I love her music, I think she is going to be in Boston relatively soon. Hopefully I will get a chance free some time up on my schedule and go see her. I really like her sounds. That is going to do it for today's show, let's see reminders of course the Ipod Nano contest is still on and you can find more information at www.financialaidpodcast.com you'll also find our show notes there and links to everything we've discussed in today's show including the Education is Freedom scholarship, the EFC calculations PDF and any other appropriate links like to the different artists stuff featured in today's show. I think I am actually going to try and do a music show this week end so stick around for that, I might even do one just a Podsafe Holiday music just for fun, and well it's getting to that season anyway. It'll be a lot of fun, if you are not subscribed get subscribed it's very easy go to www.financialaidpodcast.com if you like the show get a friend subscribed. If you have questions or comments you can e-mail me at email@example.com and I guess we'll see you maybe this weekend and definitely Monday take care.