1. Need Analysis : Understanding the EFC Rachael Fournier University of Dallas

2. What You Will Learn Definition of Need Analysis Factors that make up the EFC calculation and why they are important The various federal formulas How to calculate an EFC

3. Definition: –The process of determining the student's Expected Family Contribution (EFC) based on the formula established by Congress. Also known as Federal Need Analysis Methodology and Federal Methodology, or FM. What is Need Analysis?

4. Primary responsibility to pay for education rests with the student and parents/family Family is expected to contribute to the extent it is able Families must be evaluated in an equitable manner Guiding Principles

5. Definition: –Measure of how much the student and his or her family can be expected to contribute to the cost of the student’s education for the year. The EFC is calculated according to a formula specified in the law. Expected Family Contribution

6. What Comprises the EFC? Basic EFC Formulas Dependent Independent w/no dependent(s) Independent with dependent(s) Factors of EFC Calculations AGI Eligible to file a 1040A or EZ Federal Means Test Dislocated Worker Total Income AGI Wages Earned Untaxed Income Additional Financial Information Income Protection: Taxes Paid Household Size Number in college State and other Tax allowance Protection of Assets Age of Student (if independent) Age of Older Parent

7. WHAT’S SO IMPORTANT ABOUT THE EFC?

8. Cost of Attendance (minus)EFC Need The EFC determines: –Pell eligibility –Room for need versus non-need-based aid EFC is Needed to Calculate Need

9. Formula A –For dependent students Formula B –For independent students without dependents (other than a spouse) Formula C –For independent students with dependents other than a spouse Basic EFC Formulas For 15-16 EFC worksheets, go to IFAP: http://ifap.ed.gov/fsahandbook/attachments/1516AVGCh3.pdf

10. There are 3 special EFC Calculations –Regular Formula: Takes BOTH income & assets into account –Simplified Needs Test (SNT):Takes only income into account –Auto-Zero EFC: Student’s EFC is automatically zero EFC Calculations

11. How does a student qualify for SNT? –Must have income (AGI/wages) of $49,999 or less AND –Be eligible to file a 1040A or 1040EZ OR –Qualify for a federal means test benefit program OR –Be a dislocated worker Simplified Needs Test

12. How does a student qualify for Auto-Zero? –Must have income (AGI/wages) of $24,000 or less AND –Be eligible to file a 1040A or 1040EZ OR –Qualify for a federal means test benefit OR –Be a dislocated worker Auto-Zero EFC Only dependent students or independent students with dependents other than a spouse qualify for an auto-zero EFC.

13. So exactly what is a federal means test benefit program? Supplemental Security Income (SSI) Temporary Assistance for Needy Families (TANF) Special Supplemental Nutritional Program for Women, Infants & Children (WIC) Food Stamps/SNAP Free Reduced-Priced School Lunches Federal Means Test Benefits

14. Was terminated or laid off from employment or received a notice of termination or layoff; Is unlikely to return to a previous occupation; and Is eligible for or has exhausted unemployment compensation, or is not eligible for compensation because, even though employed long enough to demonstrate attachment to the workforce, he or she had insufficient earnings or performed services for an employer that weren’t covered under a state’s unemployment compensation law; or Was terminated or laid off from employment or received a notice of termination or layoff as a result of any permanent closure of, or any substantial layoff at, a plant, facility, or enterprise; Is employed at a facility at which the employer made a general announcement that it will close; Was self-employed but is now unemployed due to economic conditions or natural disaster; or Is a displaced homemaker What is a Dislocated Worker?

15. Required to file a long form (1040) if Wages are $100k or more(line 7) Alimony received (line 11) Business or Farm (line 12 & 18) Capital gain or loss (line 13 if schedule D is required) Rental property (line 17) Itemized deductions (line 40) Health Savings account deduction (line 25) Eligible to file a 1040A or EZ –If there are capital gains/losses but a Schedule D isn’t required, then a 1040A is fine 1040, 1040A or 1040EZ?

16. APPLY YOUR KNOWLEDGE! Which EFC Calculation?

17. Test Your Federal Formula Knowledge Student is married with a child who they support more than 50%. Student and spouse AGI= $47,000, they reported $0.00 in assets, and marked yes to filling a 1040 however answered yes to being able to file a 1040A or EZ, they answered no to all federal means test benefits, and no to being a dislocated worker – What is the correct formula? F. Simplified Needs Test (SNT)/Model B

18. Which EFC Calculation? A dependent student qualifies for this _______ calculation if: –The parents’ combined AGI was less than $50,000 AND –The parents answered yes to being able to file a 1040A or EZ. The CPS will assign a _____ EFC to an independent student if: –The student’s and spouse’s combined AGI is $24,000 AND –Anyone counted in the household sized received a means-tested federal benefit during 2013 or 2014.

19. FM automatically protects a set amount of income varied by household size and number in college (called IPA) –Food 30% –Housing 22% –Transportation 9% –Clothing/Personal Care 16% –Medical 11% –Other consumption 12% US Taxes Paid –Also considers state & other taxes Income Protection Allowance

20. IPA Worksheets This example is from Worksheet A (dependent students)

21. Asset Protection: Dept of Ed automatically protects a set amount of assets based on the age of independent students or parents of dependent students –The older the student or parent, the greater the amount of assets protected – due to anticipated retirement Asset Protection Allowance

22. Asset Protection Table This example is from Worksheet A (dependent students)

23. APPLY YOUR KNOWLEDGE! Hand Calculation of EFC

24. Dependent Student Example Parent Information AGI: $67,000 Parent 1 Income: $37,000 Parent 2 Income: $30,000 Untaxed Income: $2,500 Taxes Paid: $4,916 Investment: $20,000 Savings: $5,000 # in College : 1 # in Household : 4 Student Information AGI : $12,500 Income from Work: $12,500 Taxes Paid: $853 Savings: $2,000

25. Why Calculate an EFC? Students do not know how it is determined EFC perceived as the “gate keeper” for aid Ex: “What is the maximum amount my family can make and still get Pell?” Understanding how to calculate helps us explain how all pieces work together

26. A myriad of elements go into the EFC! –You can’t “guesstimate” what someone’s EFC would be just by asking income information Having a strong foundation of how the EFC works will help you know if a professional judgment will help a student Final Thoughts on Need Analysis

27. Questions? Contact Information Rachael Fournier Assistant Director of Financial Aid University of Dallas rfournier@udallas.edu

28. 2015-2016 EFC Formula Guide http://ifap.ed.gov/efcformulaguide/attachm ents/090214EFCFormulaGuide1516.pdf http://ifap.ed.gov/efcformulaguide/attachm ents/090214EFCFormulaGuide1516.pdf 2015-2016 FSA Handbook, Application Verification Guide, Chapter 3 Resources