Need Analysis Basic Principles: o Students and their families are primarily responsible for the funding of a student’s educational expenses, to the extent possible. o Federal, State and institutional financial aid funds awarded to the right students, in the correct amount.

Need Analysis Operational Principles: o Federal Methodology is intended to measure the ability of the student and his/her family to contribute to the total cost of a college education. o Only after the family’s ability to contribute has been measured will need-based financial aid be used to pay for postsecondary education.

Need Analysis Definitions: o Cost of Education o Financial Resources o Estimated Family Contribution The first step in Need Analysis is to find the Estimated Family Contribution

Need Analysis - Dependent Information Needed for Federal Methodology: o Student Income o Student Assets o Parent(s) Income o Parent(s) Assets o Number of People in the Household o Number of Children in College

Need Analysis Components Student Income Components o Work o Investment Income o Benefits o Untaxed Income

Need Analysis Components Student Asset Components: o Checking o Savings o Trusts o Real Estate o Investments o CA$H

Need Analysis Components Parent Income Components o Custodial Parent and Spouse o Work Income o Investment Income o Additional financial information o Question #43 and #91 o Untaxed Income o Question #44 and #92

Need Analysis Components Parent Asset Components: o Checking, Savings Balances o Investments (excluding retirement savings) o Real Estate (excluding home equity) o “Adjusted” Business Equity (excl. family farm) o CA$H

Need Analysis Components Parent Household Size Components: o Parent(s) o Dependent Children o Grandparents o Anyone else receiving more than ½ of their support from the parents living in the household

Need Analysis Components Number in College Components: o Dependents attending college at least ½ time in one term during the academic year o Parents are excluded o The school attended must be eligible for federal student aid o Military Academies and Some Religious Schools o Non-accredited schools

Need Analysis Components Other Data Components – Reductions to EFC: o Taxes Paid o Federal Income Tax o State Specific Allowance o FICA (Social Security Tax) o Savings Allowance (age of older parent) o Child Support Paid (not on tax return) o Federal Work Study income

Need Analysis Formula The formula in a nutshell… o Incomes minus taxes and other allowances o Equals available income o Add in a portion of assets (after protecting some) o Factor in the cost of living based on family size o How much is left is “contribution” o Divide contribution among number in college

Need Analysis Formula Terms you should know… o Income Protection Allowance o Base Year o Available Income o Adjusted Available Income

Need Analysis Variations o Simplified Needs Test – Lower income families are not required to report assets, and assets are not considered. o Automatic Zero EFC - Very low-income families qualify for a zero EFC and the need analysis calculation is unnecessary. o Designed to simplify the aid process and make application easier for these families

Simple Needs Test Eligibility… o Parent Adjusted Gross Income is $49,999 or less AND o Tax Return filed was the 1040A or 1040EZ OR o anyone in the household received benefits under a means- tested federal benefit program during the “base year” or the year preceding the base year (2009 and 2010) OR o the parent is a dislocated worker. o Result – Assets not considered in Need Analysis

Automatic Zero EFC Eligibility… o Parent Adjusted Gross Income is $31,000 or less, AND o Tax Return filed was a 1040A or 1040EZ OR o Received benefits under a means-tested federal benefit program during the “base year” and or the year preceding the base year (2009 and 2010) OR o The parent is a dislocated worker o Result – EFC is automatically ZERO

Need Analysis - Independent Independent Student Formula: o Parent Income and Assets not included or considered. o Need Analysis Formula is similar in structure, but it contains fewer steps… (obviously)…

Independent Student Criteria Who is considered “Independent”… o Undergraduates are considered to be “dependent”, without regard to the reality of the individual student’s circumstances unless: o 24 (as of 12/31/11 for ) o Married (before completing the FAFSA) o Provide more than half of the support of a child  Continued on next slide 

Independent Student Criteria Who is considered “Independent”… o Orphan or ward of the court o Placed in foster care after turning 13 years old o Adopted after turning 13 o U.S. military veteran or currently on active duty o Emancipated Minor o Homeless or at risk of homelessness o Made Independent by Professional Judgment (but that’s another topic for another module)

Independent Student Formula Independent students without dependents (other than spouse): o Treated like a dependent student in many ways o Income is treated harshly o Assets treated harshly

Independent Student Formula Independent students with dependents (other than spouse): o Treated like parents of dependent student o Income protection o Asset protection

Questions ??? o Remember that this is a system designed by Congress. It is not supposed to make sense… o Therefore any question that begins with the word “Why…” cannot be answered logically o If you are from Brooklyn, “Hows Come…” means the same thing as “why”…