FINANCIAL AID 101 for High School Seniors & Their Families
Wethersfield High School 1 December 4, 2012
This presentation was developed by Stacey Musulin in concert with other staff members at the University of Connecticut Office of Student Financial Aid Services. This presentation uses materials created by the National Association of Student Financial Aid Administrators
The information in this presentation was based on rules and regulations interpreted as of the date of its creation. Please note that programs may change over time. Also, many forms of aid are based on individual schools’ policies and available funding. Examples used in this presentation should not be considered guarantees of aid a student would receive. Contact your school for details about application procedures and eligibility questions. 2
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Topics to Discuss Cost of attendance (COA) Expected Family Contribution (EFC) “Financial Need” Types of financial aid Free Application for Federal Student Aid (FAFSA) Post-Application processes
Special circumstances appeals
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What is Cost of Attendance (COA)? Combined direct and indirect costs related to educational program Direct: Billed by the college (e.g., tuition, room & board) Indirect: Usually estimates not on the fee bill, but needed (e.g., books, computer expenses, dependent care, mileage)
Varies according to: School (tuition/fee rates differ)
Student status (in-state vs. out-of-state, full-time vs. part-time) Housing status (on-campus, off-campus, with parent)
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What is the Expected Family Contribution (EFC)? Misnomer: EFC is NOT necessarily what a family
will actually pay!
Measurement of a family’s financial strength
Calculated using data from a federal application
(FAFSA) form and a federal formula Stays the same regardless of college
Exception: Special Circumstance appeal
Two components for dependent students: Parent contribution Student contribution
Determines the types and amounts of aid that
students are eligible to receive
EFC for Dependent Student (very basic Federal Methodology version) Parental contribution from income & assets + Student contribution from available income & assets
(adjusted if more than one dependent in college)
= Expected Family Contribution
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Financial “Need” - Federal Methodology NB: The official “Need” figure is not necessarily what is needed to pay the bill (billed & miscellaneous nonbilled expenses)
Cost of Attendance (COA) - Expected Family Contribution (EFC) = Financial Need
(schools will use this figure to determine eligibility for need-based aid)
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“Need” Based on Cost 1
X 2
Y 3
Z EFC
Cost of Attendance (Variable)
Expected Family Contribution
EFC
Need (Variable)
(Constant)
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Institutional Methodology Some schools, through the CSS Profile
application or their own financial aid applications, may require different information to calculate a separate, Institutional EFC The Institutional EFC and those schools’ policies
determine how institutional aid is distributed
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Important Tips: Cost of Attendance
KNOW YOUR COST OF ATTENDANCE!
COA may be adjusted to meet individual students’ needs, if the school accepts an appeal
COA increase may result in more need-based aid Must be able to document additional expenses E.g., fee bill for more-expensive meal plan or receipt for computer purchase
Contact your school for details! 11
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Types of Financial Aid Scholarships (not repaid) Need or merit-based
Grants (not repaid) Need-based
Loans (must be repaid)
Need and non-need types Federal or private lenders Student or parent as borrower
Employment ($ earned through work) Need and non-need types Work-Study (need-based)
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Scholarship Searches Guidance Counselor Local businesses and
civic organizations
State Dept. of Education Places of employment Student or parent
Internet - many sites, including: http://fastweb.com http://fastap.org
College or University Academic, athletic, and
other talent-based scholarships
Important Tip: There are scholarship scams! Do not pay for scholarship searches/ applications. Important Tip: Start Early! Application deadlines and procedures vary depending on source of aid! 14
Federal Grant Programs (FAFSA needed for all – Apply annually)
Federal Pell Grant Federal Supplemental Educational Opportunity
Grant (SEOG) Federal Teacher Education Assistance for College and Higher Education (TEACH) Grant
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Pell Grant Awarded to high-need, eligible undergraduates
pursuing first Bachelor’s degree and certain students enrolled in post-baccalaureate teacher certification or licensing programs
Portable (not attached to a particular school) Actual need-based award amount based on COA,
EFC, and enrollment status (more to come later)
Maximum authorized award for 2012-2013
academic year was $5,550
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Federal Supplemental Educational Opportunity Grant (FSEOG) Need-based – High-need
students a priority
Maximum award $4,000, but dependent on school packaging policy and available funds
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TEACH Grant Schools choose whether to participate and what
specific requirements are U.S. citizen or eligible non-citizen FAFSA completion required, but not need-based Award amounts up to $4000 per year Conditions GPA 3.25 or qualifying score on admissions test Sign “Agreement to Serve”: Teach in school serving
low-income students (Title I) for 4 years within 8 years of leaving university for each agreement signed Must teach in identified high-need field If conditions not met, grant will turn into Unsubsidized Stafford loan with accumulated interest from time of initial disbursement 18
Federal “Self-Help” Aid Federal Work-Study (FWS)
Federal Perkins Loan Federal Stafford Loan Subsidized Stafford Loan
Unsubsidized Stafford Loan
Federal Parent PLUS Loan
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Federal Work Study (FWS) Eligibility based on need, available funding, and school policies Allows student to earn money to help pay educational costs Paycheck or other compensation (e.g., payments off fee bill) Determined by school policy
Employment may be on or off-campus (per school policies) Eligible employers may be: School that student attends Federal, state, or local public agencies Certain private nonprofit and for-profit organizations
Tip: FWS earnings, if indicated specially on the FAFSA, do not count in the expected family contribution (EFC) calculation for the following school year!
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Federal Perkins Loan School lends Federal funds Student is borrower – no cosigner or credit check No fees! Amount dependent on funding and school policies but
there are maximums Interest rate: 5%
Does not accrue while in school or in grace period
9-month grace period after graduation (or if student
drops below ½-time status)
Repayment period may be up to 10 years Deferment and cancellation provisions available 21
Federal Direct Stafford Loans Student is borrower – no cosigner or credit check Amount undergraduate and graduate students can borrow
varies by academic year/ # of completed credits 1 % fee charged i.e., if $100 borrowed, $99.00 will disburse
No repayment required while in school at least ½-time
6-month grace period after graduation or if drop below ½-
time status
Maximum repayment period between 10 and 30 years
depending on repayment plan chosen
Deferment and cancellation provisions available
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Federal Direct Stafford Loans Subsidized: Must demonstrate “need” Unsubsidized: Not based on “need” Annual loan limits (combined subsidized
and unsubsidized) for dependent students: $5,500 for 1st year undergraduates $3,500 maximum subsidized $6,500 for 2nd year undergraduates $4,500 maximum subsidized $7,500 for each remaining undergraduate year $5,500 maximum subsidized
Total/aggregate limit for dependent undergrads:
$31,000
$23,000 maximum subsidized
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Federal Direct Subsidized Stafford Need-based, dependent on Cost of Attendance (COA),
Expected Family Contribution (EFC) figures, and other aid sources Annual maximum eligibility to borrow dependent on
student status Expected interest rate fixed 6.8% for undergrads as of the
2013-2014 school year (currently 3.4%) Interest does not accrue while in school at least ½-time 24
Federal Direct Unsubsidized Stafford Not need-based, but should fill out FAFSA to borrow
maximum possible subsidized loan
Interest Rate fixed 6.8% and accrues from time money is
disbursed
Can pay interest while in school!
Amount eligible to borrow dependent on student status Students whose parents refuse to complete a FAFSA may be
able to borrow a limited amount of unsubsidized Stafford loan in special circumstances
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Parent Direct PLUS Loans Loan program for parents (biological, adoptive, or step-parent in
household) of dependent undergraduate students Applicants must be considered “credit–worthy” Annual loan limit: COA minus other aid Fixed interest rates 7.9% Direct PLUS Loans
4% fee charged
i.e., if $100 borrowed, $96.00 will disburse
Repayment begins 60 days after loan is fully disbursed for parent
borrowers Parents may defer payment while student is in school at least ½-time Must apply for deferment with Dept of Education – not automatic! Other deferments, forbearances, cancellations possible in special circumstances 26
Financing Alternatives Monthly Payment Plans Allows payments to be spread over 10 months or less Dependent on school
Contact school for information
Alternative/Private Loans Applicants must be “credit–worthy” Payments may be deferred while student is in school
Dependent on lender
Usually the loan of “last resort”
Interest rates, fees, and repayment policies determined by individual lenders and subject to change 27
Tips for Borrowing Additional unsubsidized loan eligibility available for independent undergraduate and dependent students whose parents are unable to borrow PLUS (credit denied):
$4,000 per year for 1st and 2nd year undergraduates $5,000 per year for remaining years of undergraduate study
Parents and students who will be applying for PLUS or private/alternative loans should:
Consider lower-cost/interest Federal loan options first Consider the total cost of borrowing Double-check credit scores (www.annualcreditreport.com) prior to filling out applications Consider co-signing options for better interest rates
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The Forms FAFSA (Free Application for Federal Student Aid) Required for all types of Federal and some state and
institutional aid www.fafsa.ed.gov DO NOT go on the .com site – that’s a service for fee
CSS Financial Aid PROFILE Used primarily by private colleges Pay for each report sent to a school plus small registration fee https://profileonline.collegeboard.com
Institutional Applications
Check school publications and websites
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What is the FAFSA? A standard form that collect demographic and
financial information about the student and family
Information is used to calculate the EFC using the federal formula
Electronic version is preferred & faster
English and Spanish versions
Information is sent to secure Dept. of Education
system called CPS Did I mention it’s free? 31
General Federal Aid Criteria Must be enrolled or accepted for enrollment in eligible program of study
Must be pursuing degree, certificate, or other recognized credential Must be U.S. citizen or eligible noncitizen Must be registered with Selective Service (if male and required)
May not have eligibility suspended or terminated due to drug-related conviction 32
General Federal Aid Criteria (Continued)
Must have valid Social Security Number (SSN) Including parent of dependent student Must not be in default on a federal student loan Applies to parent applying for PLUS loan Must not owe an overpayment of federal grant or
loan funds Must continue to make Satisfactory Academic Progress (as defined by school)
GPA , % of completed credits, maximum credit limit 33
About Deadlines: Each college may set its own deadline for filing the
FAFSA, the Profile, or an additional institutional financial aid application Know the deadline for each school to which you apply!
For the 2013-2014 academic year, the FAFSA is
available on January 1, 2013 The FAFSA may be filed at any time during the academic year to be considered for Pell Grant and Stafford and/or PLUS loans Understand that if you file late, you may miss out on
forms of aid that are limited 34
First Step: Get Student & Parent Financial Aid Personal Identification Numbers (PINs) Web site: www.pin.ed.gov Can request PIN now Sign FAFSA electronically May be used by students
and parents throughout aid process, including subsequent school years’ FAFSAs and signing Federal Direct Loan MPNs
Tip: Get student AND parent PINs (1 each) now! 35
What information to collect before starting the FAFSA: Social Security Numbers (student and parents) Alien Registration # (permanent residents only) Student’s driver’s license number
State residency information Marital information (dates) 2012 W-2 Forms (statement of earned wages)
May estimate for initial completion by deadlines
2012 Tax forms (student & parent, if applicable)
May use last year’s data to estimate for initial completion by deadlines
Email addresses Other income info (contributions to tax-deferred pensions/savings, child
support paid/received, etc.) Investment information (NOT IRAs) School codes (also available on online FAFSA)
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FAFSA on the Web Worksheet
4-page PDF booklet
Cautions:
Worksheet does not include all FAFSA questions
Section #s on Worksheet don’t necessarily coincide with section #s on FAFSA Many families will be asked to provide additional information
Child Support Paid Untaxed Income (including untaxed interest, IRA deductions, Child Support received) Assets (NOT IRAs) Businesses/Investment Farm value
Tips: Using this worksheet might help to organize information prior to going online
Have this and supplemental information handy to make data entry easier 37
Good reasons to file electronically
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Built-in edits to prevent errors Skip logic allows student and/or parent to skip
unnecessary questions
Option to use Internal Revenue Service (IRS) data retrieval More timely submission of original application and any
necessary corrections More detailed instructions and “help” for common questions Ability to check application status on-line Simplified application process in the future
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FAFSA on the Web
Website:
www.fafsa.ed.gov 2013-14 FAFSA on the Web available on January 1, 2013 FAFSA on the Web Worksheet: Used as “pre-
application” worksheet Questions follow order of FAFSA on the Web
General Tips for completing the FAFSA: Read each question carefully
Some questions apply to students, others to parents – don’t mix! Some questions tell you what income/ asset data NOT to include – be careful! Double-check all data entry If estimating income/ asset information, supply your best HONEST guess You may go back and make corrections (possibly IRS Data Retrieval) if there are significant changes When using tax forms, double-check the type of form you are using (1040EZ, 1040A, 1040) to reference the correct specific line numbers
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General Info Section Citizenship information Drug conviction status Parent’s educational background Grade level for the 2013-2014 school year
First year undergraduate
Type of Program?
Certificate/ Diploma
Associates degree
Bachelor’s degree
TIPS for General Information: “Your” and
“Yourself” refer to the Student!
Use full, legal
names – no nicknames!
You are not a 1st
year Graduate student - yet
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Dependency Status (Whether or not parent information required on FAFSA)
Students may be only considered Independent if they are:
Born before January 1, 1990
Married at time of application
Have children/ dependents for whom student provides over ½ financial support during upcoming year
In Graduate school (already earned a Bachelor’s degree) Tip: In extreme
On active duty stats in US Armed Forces
A veteran of the US Armed Forces
An orphan, Ward of the Court, or in foster care
Considered “unaccompanied youth” and “homeless” / “at risk of being homeless”
anytime when age 13+
circumstances, dependency status may be appealed. Contact your school’s financial aid office for more details.
As determined by director/ professional staff of shelter or program any time on/after 7/1/2012
Legally considered “emancipated minor” or in “legal guardianship”
NOTE: THIS IS DIFFERENT FROM A DIVORCED PARENT HAVING CUSTODIAL STATUS!!!! 42
Who is a “Parent?” “Parents” do not include grandparents or other relatives/ friends/
legal guardians with whom the student may live, but who have not formally adopted the student When parents are divorced, give information about the primary
custodial parent (with whom the student lived longer during the past year) To break a tie, give information about which parent provided more
financial support
When parents are remarried, given information about the primary
custodial parent AND that parent’s spouse (the stepparent in whose household the student lives most) 43
Tips for Household Info Include student and siblings if parent(s) will provide over half support from 7/1/2013- 6/30/2014 even if the student will not be living with the parent during that time (i.e., in college) Include other dependents if they live in the house and if parent(s) will provide over half support from 7/1/2013- 6/30/2014 # in college figure must be children/ dependents counted in the household who are enrolled at least ½-time Do not include parents in # in college even if the parents are in college Dislocated Worker Status for Parents:
Receiving unemployment benefits and unlikely to return to that field/job Is “displaced homemaker,” laid-off, or lost own business due to economic conditions 44
IRS Data Retrieval
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Available early February 2013 for 2013-2014
processing cycle Participation is voluntary Makes updating FAFSA information easier
Reduces documents requested by financial aid office Not available when filing status is Married-Separately
How IRS Data Retrieval Works So long as the tax returns have already been processed: While completing FAFSA, the student and/or parent
may submit real-time request to IRS for tax data IRS will authenticate taxpayer’s identity If match found, IRS sends real-time results to applicant in new window Student and parent choose whether or not to transfer data to the online FAFSA These are separate transfers, one for the student and
one for the parent
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Tips for Student/Parent Income Info OK to estimate and correct later! Tax Filing Status and type of return (1040EZ, 1040A, 1040) Eligible to file 1040 EZ or A if make less than $100,000, does not itemize, and
does not have income from self-employment, own farm, alimony, or capital gains on a required Schedule D
Adjusted Gross Income for 2012 – not always the same as income from work on W-2 May include income from other sources and certain deductions
Income earned from work – May be different than AGI – Include SelfEmployment! Federal Income Tax for 2012 (What was tax liability on 1040 – NOT necessarily paid on W-2)
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Additional Tips for Income Info Untaxed Income : DO include specified IRA/pension savings, Workman’s
Compensation, untaxed disability, untaxed IRA distributions/pension/interest, and child support RECEIVED
Do NOT include Unemployment Compensation, untaxed Social
Security benefits, SSI, IRA rollovers, and other such specified income.
Do NOT include scholarship/ financial aid amounts as
income UNLESS you will pay taxes on it (i.e., if you must include this as taxable income on 1040) This usually occurs only if the scholarship exceeds the billed
educational expenses
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Tips for Asset Info Do NOT include these in assets questions:
Net worth of the home you live in
Retirement accounts (e.g., 410K, IRA, pensions)
Net worth of family-owned (greater than 50% ownership) business employing less than 100 people Net worth of family farm on which you live
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Tips for Asset Info (continued) Do include these in assets questions:
Cash, savings, checking account balances
Net worth (Value – Debt/Mortgage) of rental/investment properties
If you live in your investment property, do NOT include the percentage of the area in which you reside
Educational benefit/ savings accounts (e.g., 529, Coverdell)
Include as parent asset even if the student is the beneficiary
Net worth of family business if employ over 100 employees
Net worth of investment farm 50
Additional Info & Tips Federal School Codes needed for each college
Up to 10 codes allowed – Feds will send data to schools
Available online if you don’t have them handy (follow prompts)
Housing plans for each college (used by schools to determine
Cost of Attendance)
On-campus (allows for billed room & board/meals)
Off-campus (allows for rent & meals)
With parent (allows for meals)
For Dependent Students: Both Parent and Student must sign with separate PINs! 51
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FAFSA Processing Results: Central Processing System (CPS) calculates and sends info including EFC:
Student gets Student Aid Report (SAR)
…by email with direct link to online SAR
…by snail mail if no email address provided
Tip: Review your SAR carefully for accuracy and keep a hard copy!
Students with PINs may view SARs online anytime at www.fafsa.ed.gov
Schools get Institutional Student information Record (ISIR) Information sent electronically within 7-14 days after FAFSA submitted to CPS
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After the FAFSA is processed… Students check SARs for accuracy of information Students log in and make corrections online
Remember IRS Data Retrieval Option
Schools review ISIRs and then develop financial aid
packages
Schools may request additional information for verification or to resolve database mismatches or conflicting information
Federal Verification
CPS/ Dept of Ed. determines which applicants must supply documentation verifying FAFSA info Give specific documentation to schools only if they request it
Remember IRS Data Retrieval option
If selected, provide requested documentation to schools ASAP! 54
Special Circumstances Contact each financial aid office about unusual/
extreme circumstances such as: (not exhaustive list)
Change in employment status Medical expenses not covered by insurance Change in marital status or household size Student inability to obtain parent information
Schools may request additional documentation to
review on case-by-case basis Different schools may interpret cases differently per their policies School decisions are final and cannot be appealed to US Dept. of Education 55
How it works - Summary Student submits completed FAFSA Federal processor determines Expected Family Contribution (EFC) Federal processor sends Student Aid Report (SAR), which includes your EFC
Using your EFC, your prospective college determines your financial need Prospective college develops a financial aid package to try and meet need. Sends student an award package
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The Award Notification May be sent by email, letter, or made available via a
online system
Continue to check email or online systems in case aid office requests additional information
Meet all deadlines to respond to the award notifications Keep copies for your records! 57
Tips: Making Decisions @ Aid Never decline aid you don’t understand! Know whether or not aid is guaranteed throughout program!
Need-based aid is reconsidered each year after annual renewal of FAFSA Are there GPA or Major requirements for renewal of institutional aid? Are there aggregate maximums for institutional aid?
Consider Federal loans before private ones, as these offer fixed interest rates and guaranteed benefits:
Perkins Subsidized Direct Stafford Unsubsidized Direct Stafford Direct Parent PLUS
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Tips: Making Decisions @ Aid (continued)
If applicable, shop around for private loan lenders
Fees may vary by lender Private loan interest rates, dependent on credit, can vary significantly Repayment terms/ benefits (e.g., auto-withdrawal for reduced interest?) Customer Service/ Reputation (e.g., selling loans) Ask if school has “suggested” lender list and review their selection criteria 59
Tips: Making Decisions @ Aid (continued)
Consider the long-term costs of borrowing
Will student be borrowing the same amount for 4+ years? Will student/parent pay the interest while in school? (best) Will interest not be paid while in school? (interest accrues on interest, increasing total cost) www.finaid.org – Great Resource!
See calculator section to see total cost of borrowing over various terms, including monthly payment estimates and amount of interest paid
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Where Do I Go From Here? Obtain aid application requirements from
each school
Forms Deadlines
Research private scholarships Applications Deadlines
Apply for PIN for FAFSA Assemble financial information
FAFSA Worksheet 61
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Resources Federal Student Aid http://studentaid.ed.gov (US Dept of Education) – links to FAFSA sites
http://studentaid.ed.gov/fafsa 1-800-4-FED-AID (1-800-433-3243) TTY: 1-800-730-8913
FAFSA4caster online tool (early estimate – not EFC guarantee: http://studentaid.ed.gov/fafsa/estimate)
www.pin.ed.gov - to get PIN www.fafsa.ed.gov – to fill out FAFSA See in Help
“Getting Started/Before You Apply” “General Questions” and “Completing Your FAFSA” 63
Resources
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More from Federal Student Aid: www. studentaid.ed.gov/pubs Funding Your Education: The Guide to Federal Student Aid Federal Grant/ Federal Student Loan Programs Videos/ PDFs/ calculators
College Goal Sunday: www.collegegoalsundayct.org
January 27, 2013
Locations across the state
Get 1-1 assistance in filling out the FAFSA 64
Resources
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FinAid! (independent and objective financial aid information) http://www.finaid.org
Mapping Your Future (tips on applying for aid, saving for college, budgeting, etc) http://www.mappingyourfuture.org Individual School/ College Financial Aid Office
websites
Check each school’s website for information!
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