Need Analysis:

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Need Analysis

• Helping the Helpless or
• Rewarding the Rich?

Deborrah Glenn-Long Connecticut Student Loan
Foundation
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Agenda

• Defining families
• Need analysis principles
• EFC formula
• Case studies

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Need Analysis Principles

• Parents have a primary responsibility to pay for
  college costs.
• Students also have a responsibility to contribute
  to their educational costs.
• Need analysis should measure ability to pay, not
  willingness to pay.
• Families should be evaluated in their present
  financial condition.

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Need Analysis Principles

• Need analysis calculations should result in
  horizontal equity.
• Need analysis calculations should result in
  vertical equity.
• The result of the standard need analysis
  calculation serves as a benchmark and is subject
  to the use of professional judgment.

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Meet Mike Munkel
Father Maintenance Worker Earns 10/hr.
Mother Waitress Earns 7.50/hr. (including tips)
Parents Savings 2,000
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Take-home Pay 2,400/month

• Rent 1,100
• Utilities 300
• Food 400
• Clothing 150
• Cars
• Gas 150
• Insurance 75
• Maintenance 25
• Other 200

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Estimated Family Contribution

• Parent Income
• Parent Assets
• Student Income
• Student Assets

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Parents Income

• Fathers Wages 20,800
• Mothers Wages 15,600
• Other Income 100
• Total Income 36,500

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Available Income

• Total Income 36,500
• Federal taxes 1,805
• State taxes (6) 2,190
• FICA 2,785
• Employment allowance 3,100
• Income protection 17,970
• Available Income 8,650

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Parents Assets

• Family savings 2,000
• Investments/real estate 0
• Business/Farm (adjusted) 0
• Asset protection allowance 44,300
• Discretionary net worth 42,300
• Asset conversion rate 12
• Income Supplement 0

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Parent Contribution

• Available Income 8,650
• Income Supplement 0
• Adjusted Available Income 8,650
• Parent contribution from
• adjusted available income 1,903

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Student Contribution - Income

• Total Wages 3,000
• Federal taxes 0
• State taxes (4) 120
• FICA 230
• Income protection 2,550
• Available Income 100
• Assessment rate 50
• Student income contribution 50

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Student Contribution - Assets

• Student savings 1,000
• Investments/real estate 0
• Business/Farm (adjusted) 0
• Net worth 1,000
• Assessment rate 35
• Student asset contribution 350

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Estimated Family Contribution

• Parents contribution 1,903
• Student income contribution 50
• Student asset contribution 350
• Total EFC 2,303

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Federal Student Aid

• Pell Grant (full-time) 1,700
• Stafford Loan 2,625
• Other resources
• Hope or Lifetime Learning Tax Credit
• Private and institutional aid
• Campus-based aid
• PLUS Loan (parents)

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Filling Gap with Earnings

• If parents earn an extra 5,000
• Approximately 30 will go to taxes
• EFC will increase by 770
• Pell Grant will be reduced by 700
• If student earns an extra 3,000
• Approximately 10 will go to taxes
• EFC will increase by 1,350
• Pell Grant will be reduced by 1,300
• If parents and student increase earnings, Pell
  Grant will be eliminated.

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Meet Jackie Masters
Parents Income 118,142 Parents
Assets 51,000
Students Income 15,000 Students Assets 0
Sister also attends college
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Estimated Family Contribution

• Parents contribution 14,393
• (per child)
• Student income contribution 5,406
• Student asset contribution 0
• Total EFC 19,799

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Federal Student Aid

• Stafford Loan 2,625
• Other resources
• Hope or Lifetime Learning Tax Credit
• (student, if she has tax liability)
• Private and institutional aid
• Campus-based aid
• PLUS Loan (parents)