Need
Analysis &
Professional
Judgment
Understanding the EFC
What you will learn
 Definition
of Need Analysis
 Factors that make up the EFC
calculation and why they are important
 The various federal formulas
 Types of professional judgment decisions
and how they are related to the EFC
and Need Analysis
 What is Professional Judgment
 Types of PJ
What is Need Analysis?
 Definition:
The process of
determining the student's
Expected Family Contribution
(EFC) based on the formula
established by Congress. Also
known as Federal Need Analysis
Methodology and Federal
Methodology, or FM.
Guiding Principles
• Primary responsibility to pay for
education rests with the student
and parents/family
• Family is expected to contribute
to the extent it is able
• Families must be evaluated in an
equitable manner
Expected Family
Contribution
 Definition:
Measure of how much
the student and his or her family
can be expected to contribute
to the cost of the student’s
education for the year.
 The EFC is calculated according
to a formula specified in the law.
What Comprises the EFC?
Basic EFC Formulas

Dependent

Independent w/no
dependent(s)

Independent with dependent(s)
Factors of EFC Calculations

AGI

Eligible to file a 1040A or EZ

Federal Means Test

Dislocated Worker
Total Income

AGI

Wages Earned

Untaxed Income

Additional Financial Information
Income Protection:

Taxes Paid

Household Size

Number in college

State and other Tax
allowance
Protection of Assets

Age of Student (if
independent)

Age of Older Parent
What’s so important about
the EFC?
EFC is Needed to Calculate Need
Cost of Attendance
(minus)EFC
Need
 The
EFC determines:
 Pell
eligibility
 Room for need versus non-need-based
aid
Basic EFC Formulas
Formula
 For
A
dependent students
Formula
B
 For
independent students without
dependents (other than a spouse)
Formula
C
 For
independent students with
dependents other than a spouse
For 14-15 EFC worksheets, go to IFAP: http://ifap.ed.gov
EFC Calculations
 There
are 3 special EFC
Calculations
 Regular
Formula: Takes BOTH
income & assets into account
 Simplified Needs Test (SNT):Takes
only income into account
 Auto-Zero EFC: Student’s EFC is
automatically zero
Simplified Needs Test
 How
does a student qualify for SNT?
Must have income (AGI/wages) of $49,999
or less
AND
 Be eligible to file a 1040A or 1040EZ
OR
 Qualify for a federal means test benefit
program
OR
 Be a dislocated worker

Auto-Zero EFC
 How
does a student qualify for AutoZero?
 Must
have income (AGI/wages) of $24,000 or
less
AND
 Be eligible to file a 1040A or 1040EZ
OR
 Qualify for a federal means test benefit
OR
 Be a dislocated worker
Only dependent students or independent students with dependents
other than a spouse qualify for an auto-zero EFC.
Federal Means Test Benefits
 So
exactly what is a federal means
test benefit program?





Supplemental Security Income (SSI)
Temporary Assistance for Needy Families
(TANF)
Special Supplemental Nutritional
Program for Women, Infants & Children
(WIC)
Food Stamps/SNAP
Free Reduced-Priced School Lunches
What is a Dislocated Worker?







Was terminated or laid off from employment or
received a notice of termination or layoff;
Is unlikely to return to a previous occupation; and
Is eligible for or has exhausted unemployment
compensation, or is not eligible for compensation
because, even though employed long enough to
demonstrate attachment to the workforce, he or she
had insufficient earnings or performed services for an
employer that weren’t covered under a state’s
unemployment compensation law; or
Was terminated or laid off from employment or
received a notice of termination or layoff as a result of
any permanent closure of, or any substantial layoff at, a
plant, facility, or enterprise;
Is employed at a facility at which the employer made a
general announcement that it will close;
Was self-employed but is now unemployed due to
economic conditions or natural disaster; or
Is a displaced homemaker
1040, 1040A or 1040EZ?
 Required to file a long form (1040) if
 Wages are $100k or more(line 7)
 Alimony received (line 11)
 Business or Farm (line 12 & 18)
 Capital gain or loss (line 13 if schedule D is
required)
 Rental property (line 17)
 Itemized deductions (line 40)
 Health Savings account deduction (line 25)
 Eligible

to file a 1040A or EZ
If there are capital gains/losses but a Schedule D isn’t
required, then a 1040A is fine
Apply your
knowledge!
Which EFC Calculation?
Test Your Federal Formula
Knowledge

Student is married with a child who they
support more than 50%. Student and spouse
AGI= $47,000, they reported $0.00 in assets,
and marked yes to filling a 1040 however
answered yes to being able to file a 1040 A or
EZ, they answered no to all federal means test
benefits, and no to being a dislocated worker
– What is the correct formula?

F. Simplified Needs Test (SNT)/Model B
Which EFC Calculation?

A dependent student qualifies for this _______
calculation if:



The parents’ combined AGI was less than $50,000
AND
The parents answered yes to being able to file a
1040A or EZ.
The CPS will assign a _____ EFC to an independent
student if:


The student’s and spouse’s combined AGI is $24,000
AND
Anyone counted in the household sized received a
means-tested federal benefit during 2012 or 2013.
Income Protection Allowance
 FM
automatically protects a set amount
of income varied by household size and
number in college (called IPA)






Food 30%
Housing 22%
Transportation 9%
Clothing/Personal Care 16%
Medical 11%
Other consumption 12%
 US

Taxes Paid
Also considers state & other taxes
IPA Worksheets
This example is from Worksheet A (dependent students)
Asset Protection Allowance
 Asset
Protection: Dept of Ed
automatically protects a set
amount of assets based on the
age of independent students or
parents of dependent students
 The
older the student or parent, the
greater the amount of assets
protected – due to anticipated
retirement
This example is from Worksheet A (dependent students)
Apply your
knowledge!
Matching Exercise of EFC
Terms
Match the EFC Terms
EFC Terms
Auto-Zero EFC
Definition
Takes only income into
account
Federal Means Test Benefits
Takes BOTH income & assets
into account
Simplified Needs Test (SNT)
Food Stamps/SNAP
Dislocated Worker
Student’s EFC is
automatically zero
Regular Formula
Income Protection
Allowance
Protects a set amount of
income varied by household
size and number in college
Was terminated or laid off
from employment
Final Thoughts on Need Analysis
A
myriad of elements go into the
EFC!
 You
can’t “guesstimate” what
someone’s EFC would be just by
asking income information
 Having
a strong foundation of
how the EFC works will help you
know if a professional judgment
(coming next) will help a student
Professional
Judgment
It’s Your
Decision!
What is Professional Judgment?
Section 479A in the HEA authorizes us to use PJ
Examples of PJ Situations
 Adjusting
Cost of Attendance
components
 Adjusting data elements used to
calculate EFC

Direct changes to EFC is not permitted
 Performing
a Dependency Override
 Establishing eligibility for a dependent
student to receive Unsubsidized Stafford
if parent refuses to complete FAFSA and
support student
Elements that CAN be Adjusted











AGI
Wages Earned
Taxes Paid
Number in Household
Number in College
Additional Financial Information
Untaxed Income
Asset information
Dislocated Worker Status
Federal Benefit Programs (i.e.- SNAP, WIC, TANF, etc.)
Dependency Status

Only for dependent to independent
First Rule of PJ is…
 DOCUMENT!
 Keep
in mind that all special circumstances
must be verified first to ensure you start with
accurate data
 Types
of documents you may wish to
collect
 Tax
returns
 W2s
 Last pay stubs
 3rd party documents
 Legal documents
 Letter from employers
Loss of Income
and/or
Additional
Expenses
Types of Income Losses
 Losses of Income
 Unemployment or
income reduction
 Death of
parent/spouse
 Divorce of
parent/student
 Loss of child support
 One-time lump sum
payout


Additional Expenses

Extended family support




Such as nursing home
expenses
Unusual medical/dental
expenses that exceed
11% of the IPA
Unusual nondiscretionary debt that
exceeds 12% of the IPA
Private school costs for
children in elementary
or high school
See GEN-09-04
How could some of these factors affect a student’s EFC?
Medical Expenses Example

Let’s say you have a dependent student whose parents
experienced an annual medical expense totaling $5,000. The
student has 4 in the household and 1 in college. How would
you calculate how much of the $5,000 exceeds the 11% of the
IPA?
Dependency
Overrides &
Unsubsidized
Stafford Eligibility
Authority given for dependency
overrides HEA Section 480(d)
Dependency Overrides
 Any
student who answers “No” to all the
dependency questions is dependent
even if student is self-supporting
 Students
who have extenuating
circumstances can request an FAA to
consider a dependency override
 Requires documentation to the validity of the
extenuating circumstances
 Personal
statement
 Letters from professionals
 Remember: DOCUMENT, DOCUMENT,
DOCUMENT!
Per CCRAA, Schools have the authority to accept the dependency override that was
performed and approved by another school without additional documentation.
Dependency Overrides
Factors
to consider
 Abandonment
by parents
 Unable to locate a parent after
reasonable attempts
 Situations of abuse
Dependency Overrides
None of the following examples merit a
dependency override:
1.
2.
3.
4.
Parents refuse to contribute to the
student's education
Parents are unwilling to provide
information on the FAFSA or for
verification
Parents do not claim student as a
dependent for income tax purposes
Student demonstrates total selfsufficiency
You be the Judge…

Laura is a first-time freshman living with her
grandparents. She is not under legal
guardianship, but she has been living with her
grandparents since she was 5 when her father
left the country. Her mother died when she
was 2. She has had no contact with her father
since she was 5 and neither has her
grandparents, although he sent a check out
of the blue when she turned 18 for $5,000.

Would you consider Laura independent?

Why or why not?
Unsubsidized Stafford Eligibility
 FAAs
may use professional judgment to
determine if a dependent student may
be offered unsubsidized Stafford loans
without parental data on the FAFSA
 To do this, FAAs must verify:



Parent no longer provides financial support
Parent refuses to file the FAFSA
FAA must collect a signed statement from
the parent affirming the above while also
certifying that they will not provide support
in the future (Include the date support
ended.)
Cost of
Attendance
Adjustments
Budgets, budgets, budgets!
Standard COA Components
1.
2.
3.
4.
5.
Tuition & Fees
Books & Supplies
Room & Board
Transportation
Personal Expenses
Types of Adjustments to Consider
Additional mortgage/rent
charges
o Unusual car repair or
transportation costs
o Dependent care costs
o Computer/Laptop expenses
o Unusual medical/dental expenses
not covered by insurance
o
What you CANNOT do in a PJ







A PJ is award year specific and cannot carry forward
from year to year unless subsequent request &
documentation are received
You cannot directly change an EFC
You cannot make changes to the EFC formula
You may not establish automatic categories of special
circumstances. All PJ must be conducted on a case
by case basis.
PJ cannot be used to circumvent the law
PJ cannot be used to waive student eligibility
requirements
PJ cannot make an Independent student dependent
Test your
knowledge!
Match that PJ!
Match that PJ!
Example of PJ Situations
Cost of Attendance
Abandonment by parents
Data Elements
Unusual car repair or
transportation costs
Dependency Override
Parent refuses to file the FAFSA
Eligibility for a dependent
student to receive Unsubsidized
Stafford
Unemployment or income
reduction
Wrapping Up
 Understanding
the complexity of the EFC makes
you an effective FAA!
 You have the authority to use professional
judgment so use it (with proper documentation)
Resources

2014-2015 EFC Formula Guide
http://ifap.ed.gov/ifap/byAwardYear.jsp?typ
e=efcformulaguide

2014-2015 FSA Handbook, Application
Verification Guide, Chapter 5, Special Cases

DCL: GEN-09-04, GEN-09-05, GEN-11-04, GEN11-15
Comments/
Questions?