Demonstrating Expected Family Contribution (EFC) Hand-Calculations

1. Session 39 Demonstrating Expected Family Contribution (EFC) Hand-Calculations Rachel Coghlan, Misty Parkinson | Dec. 2014 U.S. Department of Education 2014 FSA Training Conference for Financial Aid Professionals

2. Agenda • Purpose of the Expected Family Contribution (EFC) • Formula calculation • Six Types • Intermediate steps • Simplified Needs Test (SNT) • Auto Zero (AZ) • Exercise – Formula 1 • Review exercise • Overview of Formulas 2 - 6 • Wrap Up

3. Purpose • What is an EFC • An EFC is the calculated number determined based on information reported on the FAFSA • The EFC along with other data is used by the school to determine a student’s financial aid package

4. EFC Formulas • There are six different formulas used to calculate an EFC. The following items will determine which formula is used: • Dependency • Meets Simplified Needs or Auto Zero • Number of Dependents

5. Simplified Needs/Auto Zero • To qualify for simplified needs (SNT) • Dependent • Any parent’s means benefit question is yes, OR • Parent is a dislocated worker, OR • Parents filed or were eligible to file a 1040A/1040EZ, filed a 1040 but were not required to do so, or were not required to file any income tax return AND • If tax filer, P. AGI is $49,999 or less • If non tax filer, Father’s plus Mother’s Income is $49,999 or less

6. Simplified Needs/Auto Zero • Independent • Any student’s means benefit question is yes, OR • Student is a dislocated worker, OR • Student filed or were eligible to file a 1040A/1040EZ, filed a 1040 but were not required to do so, or were not required to file any income tax return AND • If tax filer, S. AGI is $49,999 or less • If non tax filer, Student’s plus Spouse’s Income is $49,999 or less • Auto Zero • Same requirements as SNT except dollar limit is $24,000 • For independent students, those without dependents other than a spouse cannot receive an automatic zero EFC

7. Formula Types Long Form Version 1: Dependent 2: Independent Without Dependents Other Than A Spouse 3: Independent With Dependents Other Than A Spouse Simplified Needs Test (SNT) Version 4: Simplified Dependent 5: Simplified Independent Without Dependents Other Than A Spouse 6: Simplified Independent With Dependents Other Than A Spouse Formulas 1 & 4 use both parent’s and student data Formulas 2,3, 5 & 6 use only student and spouse data

8. EFC Formula Primary/Secondary EFC Primary EFC is used for all federal student aid programs Schools use Secondary EFC for institutional aid awarding • If SNT is met, but long form data (asset info) has been completed then Secondary formula is 1, 2, or 3 • Signature Reject(s):If record only has signature reject(s), only the primary EFC is calculated and placed in the Signature Reject EFC • the school cannot pay on this record

9. EFC Formula • If record qualifies for Auto Zero EFC: • Primary EFC set to 0 • If long form data is present no Secondary EFC is calculated • Alternate EFCs • Eleven alternate EFCs are calculated for programs of shorter than or longer than nine months • Displayed under EFC1, EFC2, EFC3…..

10. EFC Formula • Each formula uses FAFSA data such as: AGI, household size, and number in college to calculate the EFC • Annually, information changes in the following tables: • Income Protection Allowance • Adjusted Net Worth of a Business or Farm • Education Savings and Asset Protection Allowances • Assessment Schedule and Rates • Social Security Tax Tables

11. Formula 1 - Example • Need the following items • Pre-populated FAFSA • EFC Formula Guide for formula A • EFC Worksheet • Note: Formulas in EFC Formula Guide are labeled differently than in this presentation • Formula 1 = A, Formula 4 = A Simplified • Formula 2 = B, Formula 5 = B Simplified • Formula 3 = C, Formula 6 = C Simplified

12. Parent’s Income 49780 21780 20000 49780 3600 53380 0 53380

13. Allowance Against Parent Income 399 3737 2278 1530 28670 4000 40614

14. Par Contribution - Available Income 53380 40614 12766

15. Parent Contributions from Assets 1790 1000 0 0 2790 38500 -35710 -4285 set to 0

16. Parents’ Contribution 12766 0 12766 2809 2 1405

17. Student Income 1600 1550 1600 0 1600 0 1600

18. Student Allowances Against Income 0 80 122 6260 0 6462

19. Stu Contribution from Available Income 1600 6462 -4862 .50 -2431 set to 0

20. Student Contribution From Assets 200 0 0 200 .20 40

21. Expected Family Contribution 1405 0 40 1445

22. FAA Access View

23. Formulas 2 to 6 • Quick Notes: • Formula 4 is the same as Formula 1 minus the parent’s contribution from assets • The other formulas (2,3, 5, 6) are for Independent students • Determine which formula by • Have dependents other than a spouse, and • Qualify for SNT or Auto Zero EFC • Use only information from student and spouse • Some EFC factors vary among the independent formulas: • Income Protection Allowance • Employment Allowance • Student Contribution from Income • Student Contribution from Assets

24. References • 14-15 EFC Guide: http://ifap.ed.gov/efcformulaguide/attachments/091913EFCFormulaGuide1415.pdf • 14-15 Financial Aid Handbook, Chapter 3: http://ifap.ed.gov/fsahandbook/attachments/1415AVGCh3.pdf • 15-16 EFC Formula Table Federal Register Notice http://www.gpo.gov/fdsys/pkg/FR-2014-05-30/pdf/2014-12569.pdf

25. QUESTIONS?