Understanding Need Analysis
and Calculating the EFC Financial Aid 101
David Mahoney, Bates CollegeOctober 10, 2008
Agenda
• Overview of need analysis formula • Expected family contribution (EFC) • Discussion of financial need and
cost of attendance• Case study and EFC calculation
Need Analysis Overview/Financial Need
• Need analysis– Overall process of determining a
student’s financial need and eligibility for certain programs.
– Calculates the EFC• EFC is a measurement of a family’s ability to
contribute toward education cost.
Need Analysis Overview/Financial Need
• There are three basic formulas: • Dependent student• Independent student with no
dependents• Independent student with dependents
other than a spouse
• General elements of need analysis:
• Income• Number of dependents• Number of family members attending college• Assets• Marital status of the student• Age of older parent of a dependent student• Additional expenses incurred• Income and asset protection allowance• Education savings and asset protection allowance
Need Analysis Overview/Financial Need
Need Analysis Overview/Financial Need
• What’s not included:
• Parent and/or student debts• Whether or not a student lives
with his or her parents
Need Analysis Overview/Financial Need
• Income Protection Allowance• Allows for the most basic living expenses• Varies by household and number in
college• Developed using Bureau of Labor
Statistics (BLS) for a low standard of living and adjusted for the Consumer Price index (CPI)
Need Analysis Overview/Financial Need
• Formula Variations:- Simplified Needs Test (SNT)
• Parent or student (if independent) eligible to file IRS form 1040A or 1040EZ
OR• Recipient of benefits from needs-tested benefit
programsAND• Income less than $49,999
- Auto-Zero• Same as SNT, but earned income must be under
$20,000
EFC Overview
• What is the EFC?
• The Expected Family Contribution (EFC), is defined as a measure of the student’s (and the student’s parents’, if applicable,) ability to pay for college.
EFC Overview
• The EFC is not:
• The student’s bill for tuition and fees
EFC Overview
• How can I estimate my EFC?
• EFC worksheets• FAFSA4caster
www.fafsa4caster.ed.gov• Other online estimators
www.collegeboard.com
EFC Overview
• How the EFC is created• Student files the FAFSA• FAFSA data is calculated• Student receives a Student Aid
Report (SAR)• School receives an ISIR• The EFC will be displayed on both the
student’s SAR and school’s ISIR
EFC Overview
• There’s no EFC on my Student Aid Report!• Sometimes, the EFC is not calculated• Failure to sign the FAFSA is the most
common reason an EFC was not calculated
• Both the SAR and ISIR will indicate any errors or omissions
EFC Overview
• The EFC is used as a tool in awarding:• Federal Pell Grants• Other Federal Grant Programs, such
as ACG• State Grants• Institutional and other need-based aid
EFC Overview
• Some students may have more than one EFC.
• Federal Methodology (FM)- Used for most types of aid
- Always used when determining eligibility for
federal programs
• Institutional Methodology (IM)- Determined by forms such as the CSS Profile
- Used by some schools to award scholarship aid
Cost of Attendance
• The Cost of Attendance, or COA, is an estimate on what school will actually cost for a student.
• Tuition and Fees• Books• Room and Board• Transportation• Other
• Need Equation:
Cost of Attendance
- Expected Family Contribution
= Financial Need
Financial Need
Financial Need
• Why is need important?
• Certain programs are need based• Need based programs are only
available to students with demonstrated need
• Need may not equal financial assistance at all schools
Case Study
Maria is a dependent student from Maine. She is an only child whose parents had an Adjusted Gross Income (AGI) of $52,400 in 2007. Both parents work and most of their income is derived from their wages. Maria earned $4,000 in 2007 working hard at part-time and summer jobs and worries that her earnings will substantially increase the amount her family will be expected to pay for college.
0
52,500
52,500
100
100
0
52,400
50,000
52,400
24,000
26,000
4,684
3,150
1,836
1,989
19,150
8,400
3,300
34,109
52,500
34,109
18,391
15,000
35,000
0
050,000
43,400
792
6600
18,391
1
4,460
19,183
792
4,460
4,010
4,000
4,010
0
0
0
4,010
0
4,010
0
160
306
0
3,546
4,010
3,546
464
232
1,200
0
0
1,200
240
4,460
232
240
4,932
Questions?
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