Understanding Need Analysis and Calculating the EFC

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Understanding Need Analysisand Calculating the
EFC
Financial Aid 101 David Mahoney, Bates
College October 10, 2008
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Agenda

• Overview of need analysis formula
• Expected family contribution (EFC)
• Discussion of financial need and cost of
  attendance
• Case study and EFC calculation

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Need Analysis Overview/Financial Need

• Need analysis
• Overall process of determining a students
  financial need and eligibility for certain
  programs.
• Calculates the EFC
• EFC is a measurement of a familys ability to
  contribute toward education cost.

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Need Analysis Overview/Financial Need

• There are three basic formulas
• Dependent student
• Independent student with no dependents
• Independent student with dependents other than a
  spouse

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Need Analysis Overview/Financial Need

• General elements of need analysis
• Income
• Number of dependents
• Number of family members attending college
• Assets
• Marital status of the student
• Age of older parent of a dependent student
• Additional expenses incurred
• Income and asset protection allowance
• Education savings and asset protection allowance

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Need Analysis Overview/Financial Need

• Whats not included
• Parent and/or student debts
• Whether or not a student lives with his or her
  parents

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Need Analysis Overview/Financial Need

• Income Protection Allowance
• Allows for the most basic living expenses
• Varies by household and number in college
• Developed using Bureau of Labor Statistics (BLS)
  for a low standard of living and adjusted for the
  Consumer Price index (CPI)

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Need Analysis Overview/Financial Need

• Formula Variations
• - Simplified Needs Test (SNT)
• Parent or student (if independent) eligible to
  file IRS form 1040A or 1040EZ
• OR
• Recipient of benefits from needs-tested benefit
  programs
• AND
• Income less than 49,999
• - Auto-Zero
• Same as SNT, but earned income must be under
  20,000

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EFC Overview

• What is the EFC?
• The Expected Family Contribution (EFC), is
  defined as a measure of the students (and the
  students parents, if applicable,) ability to
  pay for college.

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EFC Overview

• The EFC is not
• The students bill for tuition and fees

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EFC Overview

• How can I estimate my EFC?
• EFC worksheets
• FAFSA4caster
• www.fafsa4caster.ed.gov
• Other online estimators
• www.collegeboard.com

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EFC Overview

• How the EFC is created
• Student files the FAFSA
• FAFSA data is calculated
• Student receives a Student Aid Report (SAR)
• School receives an ISIR
• The EFC will be displayed on both the students
  SAR and schools ISIR

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EFC Overview

• Theres no EFC on my Student Aid Report!
• Sometimes, the EFC is not calculated
• Failure to sign the FAFSA is the most common
  reason an EFC was not calculated
• Both the SAR and ISIR will indicate any errors or
  omissions

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EFC Overview

• The EFC is used as a tool in awarding
• Federal Pell Grants
• Other Federal Grant Programs, such as ACG
• State Grants
• Institutional and other need-based aid

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EFC Overview

• Some students may have more than one EFC.
• Federal Methodology (FM)
• - Used for most types of aid
• - Always used when determining eligibility for
• federal programs
• Institutional Methodology (IM)
• - Determined by forms such as the CSS Profile
• - Used by some schools to award scholarship aid

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Cost of Attendance

• The Cost of Attendance, or COA, is an estimate on
  what school will actually cost for a student.
• Tuition and Fees
• Books
• Room and Board
• Transportation
• Other

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Financial Need

• Need Equation
• Cost of Attendance
• - Expected Family Contribution
• Financial Need

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Financial Need

• Why is need important?
• Certain programs are need based
• Need based programs are only available to
  students with demonstrated need
• Need may not equal financial assistance at all
  schools

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Case Study

• Maria is a dependent student from Maine. She is
  an only child whose parents had an Adjusted Gross
  Income (AGI) of 52,400 in 2007. Both parents
  work and most of their income is derived from
  their wages. Maria earned 4,000 in 2007 working
  hard at part-time and summer jobs and worries
  that her earnings will substantially increase the
  amount her family will be expected to pay for
  college.

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52,400
24,000
26,000
50,000
52,400
0
100
100
52,500
0
52,500
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4,684
3,150
1,836
1,989
19,150
8,400
3,300
34,109
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52,500
34,109
18,391
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15,000
35,000
0
0
50,000
43,400
6600
792
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18,391
792
19,183
4,460
1
4,460
25
4,010
4,000
4,010
0
0
0
4,010
0
4,010
26
0
160
306
0
3,546
27
4,010
3,546
464
232
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1,200
0
0
1,200
240
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4,460
232
240
4,932
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Questions?