DETERMINING EXPECTED FAMILY CONTRIBUTION

Transcription

1 7 DETERMINING EXPECTED FAMILY CONTRIBUTION The completed FAFSA furnishes all the information needed to calculate the Estimated Family Contribution (EFC) for dependent and independent students. EFCs are calculated using a uniform formula approved by Congress for each student category and are used to determine a student s need for federal student aid. This chapter outlines the three basic EFC formulae: Dependent Student, Independent Student without Dependents (other than spouse), and Independent Student with Dependents (other than spouse) and gives the worksheets and tables needed to hand-calculate an EFC for each category. Also discussed are additional special calculations that may be applied in certain circumstances: the Simplified EFC Formula, the Automatic Zero EFC and EFCs for enrollment periods other than 9 months. CONTENTS EFC Formula for Dependent Students (Regular and Simplified) Regular Worksheet: Dependent Students Parents Analysis Student s Analysis Final EFC Calculation EFC Calculation for Enrollment Periods Other Than 9 Months Simplified Worksheet: Dependent Students Parents Analysis Student s Analysis Final EFC Calculation EFC Calculation for Enrollment Periods Other Than 9 Months Dependent Student Analysis Tables EFC Formula for Independent Students Without Dependents Other Than Spouse (Regular and Simplified) Regular Worksheet: Independent Students Without Dependents Other Than Spouse Student s Analysis EFC Calculation for Enrollment Periods Other Than 9 Months Simplified Worksheet: Independent Students Without Dependents Other Than Spouse Student s Analysis NEED ANALYSIS COMPUTATION 7-1

2 OSFA EFC Calculation for Enrollment Periods Other Than 9 Months Independent Student Analysis Tables EFC Formula for Independent Students With Dependents Other Than Spouse (Regular and Simplified) Regular Worksheet: Independent Students With Dependents Other Than Spouse Student s Analysis EFC Calculation for Enrollment Periods Other Than 9 Months Simplified Worksheet: Independent Students With Dependents Other Than Spouse Student s Analysis EFC Calculation for Enrollment Periods Other Than 9 Months Independent Student Analysis Tables NEED ANALYSIS COMPUTATION 7-2

3 SAM EFC Formula for Dependent Students (Regular and Simplified) The Regular Dependent Student Formula calculates the EFC from three elements: the parents contribution (including a contribution from both income and assets), the student s contribution from income and the student s contribution from assets. The EFC is the sum of the three. The Simplified Dependent Student Formula is basically the same as the regular formula except that the asset information isn t included in the calculation. A dependent student qualifies for the simplified formula if: the student s parents either filed or were eligible to file a 2013 IRS Form 1040A or 1040EZ, or were not required to file any tax return, OR anyone included in the household size received benefits during 2012 or 2013 from a means-tested Federal benefit program such as Supplemental Security Income, Food Stamp Program, Temporary Assistance for Needy Families (TANF), etc. OR either parent is a dislocated worker, AND the parents combined AGI (or income earned from work for non-filers) was less than $50,000. Parents Contribution The three basic steps in calculating the parents contribution involve 1) determining the parents available income, 2) calculating the parents contribution from assets and 3) calculating the parental contribution using the available income, contribution from assets and the number in college. Parents available income is calculated by first adding all taxed and untaxed parental income and then subtracting from the total income allowances that account for certain non-discretionary expenses such as taxes paid, basic living expenses and an employment expense allowance. The amount of income remaining is assumed by the formula to be available at least in part to help pay for a post-secondary education. This amount can be a negative number. [Note: the school may assume the IPA includes 30% for food, 22% for housing, 9% for transportation, 16% for clothing and personal expenses, 11% medical expenses and 12% miscellaneous.] In the full formula, a portion of the parents net worth is calculated by adding together the assets reported on the FAFSA and applying certain offsets and allowances to come up with a number that is called the parents discretionary net worth. The parents contribution from assets is calculated by multiplying the discretionary net worth by a conversion rate of 12%. If the contribution from assets is a negative number, it is set as zero. In the simplified formula the parents assets are not counted in the calculation. Finally, the parents available income and the contributions from assets are added together to obtain the parents adjusted available income. This amount can be a negative number. The parents total contribution is a percentage of the adjusted available income and represents the total amount parents are expected to contribute toward all of the family members postsecondary costs. This amount is divided by the number in college to get the parents contribution for the individual student. Parents are not included in the number attending college. NEED ANALYSIS COMPUTATION 7-3

4 OSFA Student s Contribution from Income The student s contribution from income is determined by first calculating the student s available income. Like the parents contribution, this figure is the total taxed and untaxed student income minus the total allowances. The allowances to the student s income include taxes paid, an income protection allowance of $6,260 and parent s Adjusted Available Income (if it is a negative number). The student s available income is assessed at 50% for student s contribution from income. If this amount is a negative number, it is set to zero. Student s Contribution from Assets The student s assets are treated similarly to the parents assets but with a 20% conversion rate and differences in the offsets. In the simplified formula the student s assets are not counted in the calculation. Final EFC Calculation The Parents Contribution, the Student s Contribution from Income and the Student s Contribution from Assets are added together to get the EFC. Alternate EFCs The law specifies that the EFC of a dependent student must be modified for enrollment periods greater or lesser than 9-months. For periods of less than 9 months, the parents contribution is pro-rated according to the number of months of enrollment. Likewise, the student s contribution from income is pro-rated and then added to the contribution from assets, which is not pro-rated. For periods greater than 9 months, the parents contribution is adjusted according to p. 3 of Worksheet A of the EFC Worksheets while the student s contribution remains the same. A table of alternate EFCs, used when students are attending for periods of from 1 to 12 months, can be found in the FAA Information section of the SAR/ISIR. Automatic Zero EFC A zero EFC is automatically assigned to a dependent student if: the parents of the student was not required to file a 2013 IRS Form 1040 (long form); OR if anyone included in the household size received benefits during 2012 or 2013 from a means-tested Federal benefit program such as Supplemental Security Income, Food Stamp Program, Temporary Assistance for Needy Families (TANF), etc., OR if either parent is a dislocated worker, AND the combined parental AGI (for tax-filers) or income earned from work (for nonfilers) was $24,000 or less. Using the Dependent Student Worksheets The following 12 pages contain Worksheets for the Regular Dependent Student EFC Formula, & the Simplified Dependent Student Formula, and Tables A-1 through A-7 needed to determine the necessary offsets and allowances. The worksheets allow hand calculations of both the 9 month EFC and the EFC for periods of enrollment other than 9 months for both categories of independent student. The simplified worksheet greys out the asset information not used in the calculation and alerts you if the student is eligible for the automatic zero EFC. NEED ANALYSIS COMPUTATION 7-4

5 SAM NEED ANALYSIS COMPUTATION 7-5

6 NEED ANALYSIS COMPUTATION 7-6 OSFA

7 SAM NEED ANALYSIS COMPUTATION 7-7

8 NEED ANALYSIS COMPUTATION 7-8 OSFA

9 SAM NEED ANALYSIS COMPUTATION 7-9

10 NEED ANALYSIS COMPUTATION 7-10 OSFA

11 SAM NEED ANALYSIS COMPUTATION 7-11

12 NEED ANALYSIS COMPUTATION 7-12 OSFA

13 SAM NEED ANALYSIS COMPUTATION 7-13

14 NEED ANALYSIS COMPUTATION 7-14 OSFA

15 SAM NEED ANALYSIS COMPUTATION 7-15

16 NEED ANALYSIS COMPUTATION 7-16 OSFA

17 SAM EFC Formula for Independent Students Without Dependents Other Than a Spouse (Regular and Simplified) The Regular Independent Student Without Dependents Formula calculates the EFC from two elements: the student s contribution from available income and the student s contribution from assets. These two numbers are added together and the sum is divided by the number in college. The Simplified Independent Student Without Dependents Formula is the same as the regular formula except that the asset information isn t included in the calculation. An independent student qualifies for the simplified formula if: the student or spouse either filed or were eligible to file a 2013 IRS Form 1040A or 1040EZ, or were not required to file any tax return, OR if anyone included in the household size received benefits during 2012 or 2013 from a means-tested Federal benefit program such as Supplemental Security Income, Food Stamp Program, Temporary Assistance for Needy Families (TANF), etc., OR either student or spouse is a dislocated worker, AND the combined AGI (or income earned from work for non-filers) of student and spouse was less than $50,000. Student s Contribution from Available Income The student s available income is the total taxed and untaxed income for the student (and spouse, if married) minus the total allowances for non-discretionary expenses. These allowances include taxes paid, an income protection allowance (for basic living expenses) and an employment expense allowance. The IPA is $9,730 for unmarried students (or for married students with a spouse attending college at least half-time), and $15,600 for married students with a spouse who is not attending college. The student s available income can be a negative number. The available income is assessed at a rate of 50% to come up with the student s contribution from available income. Student s Contribution from Assets In the full formula, a portion of the student s (and spouse s) net worth is calculated by adding together the assets reported on the FAFSA and applying certain offsets and allowances to come up with a number that is called the student s discretionary net worth. The contribution from assets is derived from the student s discretionary net worth by multiplying it by a 20% conversion rate. If the contribution from assets is less than zero, it is set to zero. In the simplified formula the student s assets are not counted in the calculation. Alternate EFCs The law specifies that the EFC of an independent student must be modified for enrollment periods greater or lesser than 9-months. For periods of less than 9 months, the EFC is simply pro-rated by dividing it by 9 and then multiplying the result by the number of months the student will be enrolled. For periods greater than 9 months, the EFC remains the same as for 9 months. Automatic Zero EFC Independent students with no dependents do not qualify for the automatic zero EFC. NEED ANALYSIS COMPUTATION 7-17

18 NEED ANALYSIS COMPUTATION 7-18 OSFA

19 SAM NEED ANALYSIS COMPUTATION 7-19

20 NEED ANALYSIS COMPUTATION 7-20 OSFA

21 SAM NEED ANALYSIS COMPUTATION 7-21

22 NEED ANALYSIS COMPUTATION 7-22 OSFA

23 SAM NEED ANALYSIS COMPUTATION 7-23

24 NEED ANALYSIS COMPUTATION 7-24 OSFA

25 SAM EFC Formula for Independent Students W/ Dependents Other Than a Spouse (Regular and Simplified) The Regular Independent Student With Dependents Formula calculates the EFC from two elements: the student s contribution from available income and the student s contribution from assets. The Simplified Independent Student With Dependents Formula is the same as the regular formula except that the asset information isn t included in the calculation. An independent student with dependents qualifies for the simplified formula if: the student or his or her spouse either filed or was eligible to file a 2013 IRS Form 1040A or 1040EZ, or was not required to file any tax return, OR if anyone included in the household size received benefits during 2012 or 2013 from a means-tested Federal benefit program such as Supplemental Security Income, Food Stamp Program, Temporary Assistance for Needy Families (TANF), etc., OR either the student or spouse was a dislocated worker, AND the combined AGI (or income earned from work for non-filers) for student and spouse was less than $50,000. Student s Contribution from Available Income The student s available income is the total taxed and untaxed income for the student (and spouse, if married) minus the total allowances for non-discretionary expenses. These allowances include taxes paid, the income protection allowance (for basic living expenses), and an employment expense allowance. The student s available income can be a negative number. [Note: the school may assume the IPA includes 30% for food, 22% for housing, 9% for transportation, 16% for clothing and personal expenses, 11% medical expenses and 12% miscellaneous.] Student s Contribution from Assets In the full formula, a portion of the student s (and spouse s) net worth is calculated by adding together the assets reported on the FAFSA and applying certain offsets to come up with the student s discretionary net worth. The contribution from assets is derived from the student s discretionary net worth by applying a 7% conversion rate. If the contribution from assets is less than zero, it is set to zero. In the simplified formula the student s assets are not counted in the calculation. Final EFC Calculation The student s (and spouse s) available income and the contributions from assets are added together to obtain the student s adjusted available income. This amount can be a negative number. The student s total contribution is a percentage of the adjusted available income and represents the total amount the student s family is expected to contribute toward all of the family members postsecondary costs. This amount is divided by the number in college to get the EFC. Alternate EFCs The EFC of an independent student must be modified for enrollment periods greater or lesser than 9-months. For periods of less than 9 months, the EFC is simply pro-rated by dividing it by 9 and then multiplying the result by the number of months the student will be enrolled. For periods greater than 9 months, the 9 month EFC is used. NEED ANALYSIS COMPUTATION 7-25

26 OSFA Automatic Zero EFC A zero EFC is automatically assigned to a independent student with dependents if: the student or spouse was not required to file a 2013 IRS Form 1040 (long form), OR if anyone included in the household size received benefits during 2012 or 2013 from a means-tested Federal benefit program such as Supplemental Security Income, Food Stamp Program, Temporary Assistance for Needy Families (TANF), etc., OR either student or spouse was a dislocated worker, AND the combined AGI (for tax-filers) or income earned from work (for non-filers) for student and spouse was $24,000 or less. Using the Independent Students With Dependents Worksheets The remaining pages of this chapter contain Worksheets for the Regular Independent Student with Dependents Formula, the Simplified Independent Student With Dependents Formula and Tables C-1 through C-6 which are needed to determine the necessary offsets and allowances. The worksheets allow you to hand calculate both the 9 month EFC and the EFC for periods of enrollment other than 9 months for both categories. The simplified worksheet greys out the asset information (which is not used in the calculation) and alerts you if the student is eligible for the automatic zero EFC. NEED ANALYSIS COMPUTATION 7-26

27 SAM NEED ANALYSIS COMPUTATION 7-27

28 NEED ANALYSIS COMPUTATION 7-28 OSFA

29 SAM NEED ANALYSIS COMPUTATION 7-29

30 NEED ANALYSIS COMPUTATION 7-30 OSFA

31 SAM NEED ANALYSIS COMPUTATION 7-31

32 NEED ANALYSIS COMPUTATION 7-32 OSFA

33 SAM NEED ANALYSIS COMPUTATION 7-33

34 OSFA THIS PAGE LEFT BLANK INTENTIONALLY. NEED ANALYSIS COMPUTATION 7-34