Need Analysis: Federal and Institutional Methodology A NASFAA Authorized Event Presented by Nancy Ferguson Senior Assistant Director for Programs University of Georgia GASFAA Winter Workshop February 24, 2017

Lesson 1: Introduction to Need Analysis

Financial Need Cost of attendance (COA) – Expected family contribution (EFC) = Financial need

Cost of Attendance Tuition and Fees Room and board Books and supplies Transportation Miscellaneous personal expenses

Expected Family Contribution Measure of student’s and family’s ability to pay postsecondary expenses Measure family’s financial strength or wealth Assess a portion of family’s available financial resources

Evolution of Need Analysis 1643 Great Depression 1944 Early 1950s 1954 1957-Sputnik

Evolution of Need Analysis 1965-HEA 1972 1976 1986- Federal Formula 1992 2007

Underlying Principles of Need Analysis Primary responsibility Based on the family’s ability to pay Independent assessment Horizontal equity Vertical equity Snapshot Subject to professional judgment

Lesson 2: The Regular Formula

Federal Methodology Uses information provided on the FAFSA Used to calculate nine-month EFC Takes into account dependency status

Formula Models FM FORMULA Dependent Independent Model A Dependent Model B Independent No dependents other than spouse Model C Dependents other than spouse FM FORMULA

Allowances and Assessments Regular Formula Income Allowances and Assessments Equal Distribution EFC Assets

Regular Formula Model A EFC Allowances and Assessments Equal Distribution Parent Income Parent Assets Parent Contribution EFC Allowances and Assessments Student Income Student Assets Student Contribution

Allowances Against Income U.S. income taxes paid State and other taxes Social Security taxes Income protection allowance Employment expense allowance

Income Protection Allowance FM FORMULA Source: U.S. Department of Education’s 2015-16 Federal Student Aid Handbook (p. AVG-122)

Asset Exclusions

Asset Exclusions

Allowances Against Student Income U.S. income taxes paid State and other taxes Social Security tax Income protection allowance Employment expense allowance Allowance for Parents’ Negative AAI

Model A Regular Formula Parents’ contribution + Student contribution from available income + Student contribution from assets = Expected Family Contribution (9 month)

Regular Formula Model B EFC Student (& Spouse) Income Allowances and Assessments Equal Distribution EFC Student (& Spouse) Assets

Model B Regular Formula Student’s contribution from available income (AI) + Student’s contribution from assets = Contribution from AI and assets ÷ Number in college = Expected Family Contribution (9 month) FM FORMULA

Allowances and Assessments Model C Regular Formula Student Income Allowances and Assessments Equal Distribution EFC Student Assets

Model C Regular Formula Calculation identical to calculation of the parents’ contribution for a dependent student, except: Table values used to calculate state and local tax allowance and income protection allowance Asset conversion rate

Lesson 3: Simplified Formulas

Automatic Zero EFC – Who Qualifies? EFC automatically set to zero if parents meet certain federal tax filing and income criteria Automatic Zero EFC is not applicable EFC automatically set to zero if student meets (and spouse, if married) certain federal tax filing and income criteria Model A Model B Model C

Automatic Zero EFC: Status Criterion Independent student (and spouse, if married) or parent(s) of dependent student Filed or eligible to file 1040A or 1040EZ Filed income tax return required for: Puerto Rico, Guam, American Samoa, US Virgin Islands, Republic of Marshall Islands, Federated States of Micronesia, or Palau Not required to file any income tax return

Automatic Zero EFC: Status Criterion Independent student (and spouse, if married) or parent(s) of dependent student Supplemental Security Income (SSI) Temporary Assistance for Needy Families (TANF) Free and Reduced Price School Lunch Special Supplemental Nutrition Program for Women, Infants, & Children (WIC) Supplemental Nutrition Assistance Program (SNAP)

Automatic Zero EFC: Status Criterion Independent student (and spouse, if married) or parent(s) of dependent student Dislocated worker: Terminated or laid off, could qualify for unemployment compensation, and unlikely to return to a previous occupation Terminated as result of plant closure or substantial layoff Employer announced closure within 180 days Self-employed, but unemployed due to economic conditions Displaced homemaker

Automatic Zero EFC: Income Criterion PARENTS Tax Filer AGI ≤ $25,000 Independent student (and spouse, if married) or parent(s) of dependent student Nontax filer Total earned income ≤ $25,000

Simplified Needs Test – Who Qualifies? Student and parent assets ignored if parents meet certain federal tax filing and income criteria Student assets (and spouse, if married) ignored if meets certain federal tax filing and income criteria Model A Model B Model C

Simplified Needs Test: Income Criterion PARENTS Tax Filer AGI ≤ $49,999 Independent student (and spouse, if married) or parent(s) of dependent student Nontax filer Total earned income ≤ $49,999

Lesson 4: Recalculating the EFC

Recalculating and Prorating the EFC EFC is distributed proportionately to a student’s actual enrollment EFC must be prorated for periods other than 9 months Does not apply to Pell Grant or IASG

Recalculating and Prorating the EFC Use of alternate EFC could result in double counting the student contribution Express periods of enrollment as full months School may round up or down to full month Cannot exceed 12-month EFC in a 12-month period

Sample ISIR

Double Counting of the EFC For enrollment greater than nine months: Student contribution does not change Only a parent contribution is adjusted Round up or down, but never exceed 12 months 9-month academic year + 10-week summer term 9-month student contribution 9-month parent contribution + additional contribution for 2 (or 3) months

Enrollment Periods Less Than Nine Months: Dependent Students Recalculate parents’ contribution Divide 9-month PC by 9 Multiply 1-month PC by enrollment Recalculate student’s contribution from available income Divide 9-month SC from AI by 9 Multiply 1-month SC from AI by enrollment Add results to student’s assets to obtain the EFC Add prorated PC to prorated SC from AI Add SC from assets

Enrollment Periods Less Than Nine Months: Independent Students Recalculate student’s contribution to obtain the EFC Divide 9-month SC by 9 Multiply 1-month SC by enrollment

Enrollment Periods Greater Than Nine Months Student’s contribution to EFC does not change No EFC adjustment for independent student enrolled for a period greater than nine months

Enrollment Periods Greater Than Nine Months: Dependent Students Determine alternate PC Add $4,940 to parents’ AAI Use Table A6 to determine alternate AAI Divide alternate AAI by number in college Determine PC adjustment Subtract 9-month PC from alternate PC Divide result by 12 and multiply by months of enrollment exceeding 9 Add PC adjustment to 9-month PC and 9-month SC from AI Add PC adjustment to 9-month PC Add result to 9-month SC from AI Regular Formula: add SC from assets

Total EFC for MORE than Nine-Month Enrollment = Calculation of Parents’ Contribution for a Student Enrolled MORE than Nine Months B1. Parents’ Adjusted Available Income (AAI) (from line 25) 53,395 B2. Difference between the income protection allowance for a family of four and a family of five, with one in college + 4,940 B3. Alternate parents’ AAI for more than 9-month enrollment (B1 + B2) =   B4. Total parents’ contribution from alternate AAI (calculate using Table A6) B5. Number in college ÷ B6. Alternate parents’ contribution for student (B4 ÷ B5) = B7. Standard parents’ contribution for the student for 9-month enrollment (from line 28) – 9,595 B8. Difference (B6 ̶ B7) = B9. Divide line B8 by 12 months ÷ 12 B10. Parents’ contribution per month = B11. Number of months student will be enrolled that exceed 9 × B12. Adjustment to parents’ contribution for months that exceed 9 (B10 x B11) = B13. Standard parents’ contribution for 9-month enrollment + B14. Parents’ contribution for MORE than 9-month enrollment = Student’s contribution from available income for 9-month enrollment (from line 44) + 333 Student’s contribution from assets for 9-month enrollment (from line 50) + 17 Total EFC for MORE than Nine-Month Enrollment =

Calculating EFCs for Summer Often optional for students School chooses award year from which student will be awarded Packaging depends on whether student will be enrolled: Summer only; or All or part of regular academic year + summer Avoid double-counting student contribution

Alternate Approach – Summer Trailer Example: Total enrollment = 12 months Alternate EFC for 12 months = 10,542 Fall through Spring 9-month EFC = 10,230 10,542 12-month EFC ̶ 10,230 9-month EFC = 312 Summer EFC

Alternate Approach – Summer Header Example: Total enrollment = 10 months Alternate 1-month EFC for Summer = 326 Fall/Winter/Spring/Summer 10-month EFC = 7,543 7,543 10-month EFC ̶ 326 1-month EFC = 7,217 Fall/Winter/Spring EFC

Monthly EFC Share Approach Monthly Share = Alternate EFC Total months enrolled Monthly Share X Number of months enrolled in summer = Summer EFC Fall-Spring EFC = Monthly Share X Number of months enrolled fall through spring

Lesson 5: Institutional Methodology

Factors Considered in Using Institutional Methodology Institution’s mission and enrollment goals Desire to distribute institutional resources more accurately Impact of student financial aid on student access, enrollments, and retention Competition among peer institutions and resources available to recruit qualified students Limited institutional resources available to assist in meeting students’ financial need

Formula Differences: FM vs. IM

Formula Differences: FM vs. IM

Formula Differences: FM vs. IM

Formula Differences: FM vs. IM