1. Harvard Summer Institute on College Admissions
Financial Aid 102
Harvard Summer Institute
on College Admissions

2. F. Duane Quinn Financial Aid Specialist

3. Sally Donahue Director of Financial Aid Senior Admissions Officer Harvard University

4. Agenda Brief Review of 101 Calculation of the Family Contribution
Institutional Vs. Federal

5. Theory
Parents and students are responsible for financing education costs......…
Up to their ability.

6. Theory
The student and her family will benefit the most from higher education and should pay for it......
Borrowing
Saving
Working
Financial Aid should offer students Access and Choice to higher education

7. Eligibility
Cost less Family contribution = Eligibility for aid

8. Determining the Family Contribution
The Eligibility Index (EFC)
Theoretical Approach
Contrast the Federal Methodology to the “Institutional Methodology”

9. 1. Determining the Eligibility Index (EFC)
Total Parent Income Taxable and Non-taxable minus Taxes Paid (Fed. State and Local) minus Employment Allowance minus Income Protection Allowance minus Title IV Exclusion equals “Available Income”

10. 2. Total Parental Assets Cash, Savings and Checking
plus Other Real Estate / Investments (home?)
plus Business Value (100 or more employees / adjusted)
plus Farm Value
= “Total Net Worth”
less “Education Savings / Asset Protection Allowance
(Age 50 = $48,800)
times 12% Asset Conversion Rate
= “Income Supplement”

11. 3. Determining Parent Share of EFC
“Available Income”
plus “Income Supplement”
= “Adjusted Available Income”
times Conversion Percentage
divided Number Attending College
= Eligibility Index from Parent(s)

12. 4. Determining Student Share of Index
Total Student Income
less Taxes and FICA paid
less $ Protection Allowance
times 50%
= Index Available From Income
Total Student Assets X 20%
= Index Available from Student Assets

13. 5. Final Step
add “Eligibility Index from Parent’s Income and Assets” plus “Eligibility Index- Student Income” plus “Eligibility Index- Student Assets* equal “ELIGIBILITY INDEX” (EFC)

14. Asset Impact – Family Size: 4
Parent income remains level, assets increase
Family A
Family B
Family C
Income
$60,000
Assets $0
$75,000
$150,000
EFC
$3,930
$5,117
$8,348
Difference
$1,187
$4,418
MESSAGE: There is a generous parent asset protection allowance factored into the EFC formula.
While assets (current value of savings, checking accounts, investments and reportable businesses and farms) are considered in the financial aid formula, assets have minimal impact to the EFC, as it is primarily an income-driven formula
Having saved for college or having other assets that you can use to help pay for college is a good thing; it gives families options for paying the balance due
In this example:
An additional 75K in savings only increases the EFC by $1,187
An additional 150K in savings only increases the EFC by $4,418
Remember this is parental assets (up to 6%) while student assets would be assessed at a higher rate (20%)
This example is an estimate only. Based on Federal Methodology (one child in college)
Slide from Mass. Educational Financing Authority (MEFA).

15. Income Impact – Family Size: 4
Parent assets remain level, income increases
Family A
Family B
Family C
Income
$60,000
$100,000
$150,000
Assets
$50,000
EFC
$4,260
$12,832
$27,147
Difference
$8,572
$22,887
MESSAGE: The EFC formula can be heavily income-driven
Income (all income, from taxable and non-taxable earnings and other sources) is assessed at a higher rate in the financial aid formula than assets
In this example:
An additional 40K in income increases the EFC by $8,572
An additional 90K in income (from $60,000) increases the EFC by $22,887
Colleges don’t tell families how to meet their EFC. For example, with family B, the college wouldn’t require the family to use any of their reported assets for education expenses. This is an option the family may choose
Reminder, the EFC is determining how much the family can absorb in educational expenses over time. In many cases, families using multiple resources, which we will discuss later
Families should not use these charts to calculate their own EFC; instead they should utilize the EFC calculator link available on mefa.org/seniors
This example is an estimate only. Based on Federal Methodology (one child in college).
Slide from Mass. Educational Financing Authority (MEFA)

16. Federal Vs. Institutional Methodology
Income = AGI from tax return
Medical, dental, tuition costs upon appeal
Institutional
Not recognize losses in taxable income
Expenses collected on PROFILE

17. FM Vs. Institutional Methodology
Federal
No credit for educational savings
Income and Assets combined to calculate EFC
Institutional
Credit (per child) for future higher ed. expenses
EFC from Income and EFC from Assets

18. FM Vs. Institutional Methodology
Federal
Exclude home equity
No incentive to save for higher education (Some in recent act)
Institutional
Include home equity
Incentive in (CESA) Cumulative Education Savings Allowance

19. FM Vs. Institutional Methodology
Federal
20% of student assets
EFC divided by # in college
Based upon BLS
Institutional
25% of student assets
60% for 2 45% for 3
Based upon CES

20. Eligibility
Cost less Family contribution = Eligibility for aid

21. Example of “Packaging”
COLLEGE “A”
cost $40,000
- F.C $ 8,000
= need $32,000

22. The Financial Aid Package

23. The Financial Aid Package
cost
$40,000
$ 8,000.
F. C.

24. The Financial Aid Package
cost
$40,000
need = $32,000
$ 8,000.
F. C.

25. The Financial Aid Package
cost
$40,000
grant = $25,000 meet full need
$ 3,000
work
$4,000
loan
$ 8,000.
F. C.

26. The Financial Aid Package
cost
$40,000
unmet need “GAP”
$5,000
grant = $20,000
$3,000
work
$4,000
loan
$ 8,000.
F. C.