Chuck Moore, CCFC, CAMC, CAFC Louisville, Kentucky ▪

How The EFC Is Calculated

What Is College Financial Aid Student financial aid refers to funding intended to help students pay educational expenses including tuition and fees, room and board, and books/supplies, and miscellanious costs, for education at a college, university, or private school. Financial aid may be classified into two types, merit- based or need-based.

Most student aid is provided by the federal government. Students received more than $109 billion in federal aid during the school year of 2011–2012. Most federal student aid is awarded as grants and low-interest loans. Where Does Most College Financial Aid Come Form

The Financial Aid Process FAFSA and CSS Profile

The FAFSA cannot be filed until after January 1 of the student’s senior year of high school. Furthermore, it must be filed each year the student is seeking financial assistance while in college. The Federal Methodology Formula that calculates the family’s EFC is based mainly on the parents’ and student’s income and assets minus certain deductions and allowances.

Completing The FAFSA Simple To Complete Complicated To Understand

FAFSA Formula Similar To Tax Formula Income Protection Allowance Asset Protection Allowance Employment Allowance Deductions For Certain Taxes Paid

Income Protection Allowance Family size Number in college $17,100$14, ,29018,38015, ,29023,37020,46017, ,02028,10025,19022,26019, ,29033,36030,45027,53024,620 Parents of Dependent Students

Income Protection Allowance Example Number In Household4 Number In College1 AGI:$85,000 Income Protection Allowance$26,290 Available Income$58,710

Asset Protection Allowance

Asset Protection Allowance Example Oldest Parent46 Allowance$37,100 Exposed Assets$50,000

Asset Protection Allowance Example Oldest Parent46 Exposed Assets $50,000 Allowance (minus) $37,100 $12,900 $12,900 X 5.65% Adjusted Available Assets$729 ($729 Is Added Into Your Adjusted Available Income)

Employment Allowance Example Number Of Parents Working 2 Lowest Earner Amount$26,000 Employment Allowance %35% Maximum Allowance$3,500 (Single Wage Earners Do Not Get An Employment Allowance)

Employment Allowance Example Number Of Parents Working 2 Lowest Earner Amount$26,000 Employment Allowance %X 35% $9,100 Maximum Allowance$3,500 (Single Wage Earners Do Not Get An Employment Allowance)

Employment Allowance Example Number Of Parents Working 2 Lowest Earner Amount$7,000 Employment Allowance %X 35% $2,450 Maximum Allowance$2,450 (Single Wage Earners Do Not Get An Employment Allowance)

Tax Allowance Example Federal Taxes $ 5,250 Social Security Taxes$ 6,120 State Taxes 4%$ 3,200 Total Tax Allowance$14,570

Total Allowance Income Allowance $26,290 Asset Allowance $ 729 Employment Allowance$ 3,500 Tax Allowance$14,570 Total Allowances$45,089

Adjusted Available Income Of Parents Total Income $85,000 Total Allowances-$45,089 Adjusted Available Income $39,911

Adjusted Available Income Of Parents If AAI is—Then the contribution is— Less than −$3,409−$750 ($3,409) to $15,30022% of AAI $15,301 to $19,200$3, % of AAI over $15,300 $19,201 to $23,100$4, % of AAI over $19,200 $23,101 to $27,000$5, % of AAI over $23,100 $27,001 to $30,900$6, % of AAI over $27,000 $30,901 or more$8, % of AAI over $30,900

Adjusted Available Income Of Parents Available Income$39,911 Adjustment Factor- 30,901 Adjustment Factor Left$ 9,010

Adjusted Available Income Of Parents First $30,901 Assessed$8,358 Second $9,010 Assessed 47%+4,235 EFC Of Parents$12,593

Student’s EFC First $6,130 - $0 (50% thereafter minus taxes) Assets 20% (No Asset Protection Allowance)

Student’s EFC Student’s Income $ 3,850 Student’s Assets$10,000

Student’s EFC Student’s Assessment From Income $3,850 - $6,130 = $0 Student’s Assets $10,000 X 20% = $2,000 Students EFC = $2,000

Total Family’s EFC Parents’ EFC$12,593 Student’s EFC+ 2,000 Family’s EFC$14,593

Student’s Financial Need Total Cost Of Attending$18,000 EFC Of Family- 14,593 Financial Need$ 3,407

Student’s Attends Private University Total Cost Of Attending$38,000 EFC Of Family- 14,593 Financial Need$23,407

BIG PROBLEM How Is This Family Going To Pay Their Expected Family Contribution Of $14,593 This is 14% of Gross Income or; 17% of Net Income After Taxes

Chuck Moore, CCFC, CAMC, CAFC Louisville, Kentucky ▪