• Do FM needs analysis together, then talk
about it
• Review/revisit the EFC Formula Guide
• Discuss PJ in the context of knowing the
calculation
• If we have time: Look at regulatory changes
to FM EFC data elements over time
• If we have time: Discuss IM practices and
anything else we feel like talking about
Dependent
Student Case
Study: Let’s dive
in!
Scarlett White is a cheerleader enrolled as a
senior at Huron High School in Ann Arbor.
Her brother Jesse will be a college Junior at
Wayne State University, where he studies
chemistry. Brother Alphonso is entering 7th
grade, and sister Holly will again be in
elementary school. Scarlett is the aid
applicant for this case study.
The parental AGI for 2014 was $83,821. Dad (Walter
White, pharmaceutical executive and former high school
chemistry teacher), age 52, earned $199,214 in wage
income, and mom (Skyler, age 46, financial executive and
car wash owner) earned $163,277. A massive net loss from
Line 17 of their Form 1040 (Vamonos Pest LLC; Los Pollos
Hermanos Partners; A1A Car Wash S-Corp) largely accounts
for their reduced AGI. They filed a Form 1040 and itemized
their deductions, with a federal tax paid of $6,021. Walt and
Skyler claimed all 4 children as 2014 tax exemptions. They
are careful money managers despite their IRS paper losses,
and have budgeted exactly $2015 for Scarlett’s 2015-2016
educational expenses.
Walt and Skyler claimed a 2014 IRA deduction in the amount of
$2000. They also claimed a Hope Educational credit for Jesse in
the amount of $1500. Due to an earlier divorce agreement, Walt
paid out $6000 in 2014 child support to one of his ex-wives.
As parents they reported $1,941 in savings, $78,257 in combined
529 savings plans for all 4 kids, and $10,885 in a money market
fund.
Scarlett did not file a 2014 tax return, and listed earned wage
income of $1821. She had $5 in her savings account on the day
she filed her FAFSA.
1.
2.a.
2.b.
3.
4.
5.
6.
7.
Parent’s 2014 AGI:
Father’s work income
Plus Mother’s work income
Equals total Parent work inc.
Parent’s taxable income
Untaxed income:
Taxable and Untaxed
Less offsets to income
Equals Total Parent Income
83821
199214
163277
362491
83821
2000
85821
<7500>
78321
8.
9.
10.
11.
12.
13.
2014 U.S. tax paid
State/other tax (TableA1)
Father’s FICA (Table A2)
Mother’s FICA (Table A2)
Income Protection Allowance (T. A3)
Employment Expense Allowance
14. Total Allowances:
Total Income (from line 7)
Minus Total Allowances
15. Equals Available Income (AI)
6021
3133
10143
9622
34310
4000
67229
78321
<67229>
11092
16.
17.
18.
19.
20.
21.
Cash & Savings
Net Worth of Investments
Net Worth Business/Inv. Farm
Adjust. Net. W. Business/Farm (A4)
Net Worth (sum 16, 17, 19)
Edu. Savings/asset protect. (A5)
22.
23.
24.
Discretionary Net Worth (20-21)
Asset Conversion rate (multiply by .12)
Contribution from assets
1941
89142
0
0
91083
33500
57583
6910
Parent’s Available Income (line 15)
Plus Asset Contribution (line 24)
11092
6910
25. Equals Adjusted Available Income
18002
26. Total contrib. from AAI (Table A6)
4030
27. # in college (exclude parents)
28. Equals Parent Contribution
2
2015
29.
30.
31.
32.
33.
34.
Student AGI
Student’s work income
Taxable income
Untaxed income:
Total, taxed/untaxed
Less offsets to income
0
1821
1821
0
1821
0
35.
Equals Total Income
1821
36.
37.
38.
39.
40.
41.
Student tax paid
State/other tax (Table A7)
Student FICA (Table A2)
Income Protection Allow.
Allow. for Parent Neg. AAI
Total allowances
0
55
139
6310
0
6504
42.
43.
Total Income (line 35)
Less Total Allow. (line 41)
Equals Available Inc. (AI)
Assessed at .50
1821
6504
<4683>
0
44.
Equals Student Cont. from AI
0
45.
46.
47.
48.
49.
50.
Student cash, etc.
Student investments
Student bus./farm
New Worth (sum 45-47)
Assessed at 20 percent
Contribution from assets:
5
0
0
5
1
1
Parent Contribution (line 28)
Plus Student AI Contrib. (line 44)
Plus Student Cont. from assets
2015
0
1
51.
2016
Equals Overall EFC
1. Dependent Student, Regular
2. Dependent Student, Simplified
3. Independent, without Dependents
other than a Spouse, Regular
4. Independent, without Dependents
other than a Spouse, Simplified
5. Independent, with Dependents other
than a Spouse, Regular
6. Independent, with Dependents other
than a Spouse, Simplified
7. Auto Zero
If you know how the FM EFC
formula works, you can
efficiently respond to “what if”
questions and utilize
appropriate Professional
Judgment
•
•
•
•
•
•
•
Medical/Dental costs: 11% is already in the IPA
“I saved a lot, so I won’t get financial aid”
“I lost my job, so I will get more aid…right?”
“We now have 2 in college, so our aid will double, right?”
“We took money out of our IRA…please help us, this is not
our real income from work!”
“We are saving for our grandchild…should we put the money
into an UGMA?”
My parent just died…will I get more aid?”
College Cost
Reduction and
Access Act of 2007:
“CCRAA”
“HERA”
Higher Education
Reconciliation Act
of 2005
HERA increased the
income protection
allowance for
dependent students
from $2,200 to
$3,000
CCRAA increased this
further:
• AY2009-2010 - $3,750
• AY2010-2011 - $4,500
• AY2011-2012 - $5,250
• AY2012-2013 - $6,000
• AY2013-2014 - $6,260
• Now: $6310
Effective July 1, 2009, CCRAA changed the
definition of “total income” by excluding:
•
•
•
•
•
•
Welfare benefits
Earned Income Credit
Special fuels credit
Excluded foreign income
Untaxed Social Security benefits
Additional Child Tax credit
Former language:
• “…an orphan or ward of the court or was a ward of the
court until the individual reached the age of 18…”
Current language:
• “…was an orphan, in foster care, or a ward of the court,
at any time when the individual was 13 years of age or
older…”
CCRAA added additional categories:
“…is an emancipated minor or is in legal guardianship as
determined by a court of competent jurisdiction…”
“…has been verified during the school year in which the
application is submitted as either an unaccompanied youth who
is a homeless child…or as unaccompanied, at risk of
homelessness, and self-supporting…
HERA added “qualified education benefit” to the
definition of assets.
CCRAA addressed the ownership of these accounts:
•
•
Student asset if owned by Independent student
If a dependent student, the asset is considered the
parent’s whether the owner is the student or parent
CCRAA made a change to the eligibility standards impacting
the simplified needs test and the Auto Zero calc eligibility
• The Act added a new category of eligibility – dislocated
workers (& displaced homemakers).
• The dislocated worker was defined in the Workforce Investment
Act of 1998.
Sometimes a big impact – assets ignored
CCRAA changed the qualifying standard:
•
Income limit moved from $20,000 to $30,000
•
Directed ED to adjust this limit annually based on increases
in the CPI
•
But, this has subsequently been tinkered with, and for 201516, the limit is now down to $24,000
http://ifap.ed.gov/efcformulaguide/attachments/090214EFCForm
ulaGuide1516.pdf
•
•
•
This is annually updated, the worksheets and tables you used
today are right out of the guide
Lots of definitions (i.e. Dependency, Simple Needs, Auto
Zero, needs-tested benefits) are in there
All the different hand calculation worksheets are there for
different FM formulas
• Many privates, some publics, often using the CSS
Profile
• There is a cost involved for filers, with some waiver
exceptions
• Non Custodial Parent (NCP) data can also be
requested
• Home equity is considered; significant number of
formulaic differences relative to FM
•
•
•
•
•
When “compelling budgetary concerns” make overall
higher EFC’s desirable
When your institution believes all students are best
served by a more realistic assessment of family financial
strength
When another filter is helpful to sort out families who by
any reasonable definition should likely not be grant
eligible
As an avenue to simply get Non Custodial Parent (NCP)
data
Your answer here: ____________
• Institutional aid applications (sometimes for
both needs analysis and scholarships)
• Cherry picking some CSS Profile outputs
• Running parallel processing, using CSS
Profile calculation data within PC spreadsheet
or other software
• Calculating need for international students
• Other?