1. Need Analysis Understanding the EFC ABC Workshop 2016 Rachael Fournier Assistant Director of Financial Aid University of Dallas rfournier@udallas.edu Karen Long Coordinator, Admissions & Financial Aid Texas Woman’s University klong@twu.edu

2. What you will learn  Definition of Need Analysis  Factors that make up the EFC calculation and why they are important  The various federal formulas  Fundamentals of calculating an EFC

3. What is Need Analysis?  Definition:  The process of determining the student's Expected Family Contribution (EFC) based on the formula established by Congress. Also known as Federal Need Analysis Methodology and Federal Methodology, or FM.

4. Guiding Principles Primary responsibility to pay for education rests with the student and parents/family Family is expected to contribute to the extent it is able Families must be evaluated in an equitable manner

5. Expected Family Contribution  Definition:  Measure of how much the student and his or her family can be expected to contribute to the cost of the student’s education for the year.  The EFC is calculated according to a formula specified in the law.

6. What Comprises the EFC? Basic EFC Formulas:  Dependent  Independent w/no dependent(s)  Independent with dependent(s) Factors of EFC Calculations:  AGI  Eligible to file a 1040A or EZ  Federal Means Test  Dislocated Worker Total Income:  AGI  Wages Earned  Untaxed Income  Additional Financial Information Income Protection:  Taxes Paid  Household Size  Number in college  State and other Tax allowance Protection of Assets:  Age of Student (if independent)  Age of Older Parent

7. What’s so important about the EFC?

8. EFC is Needed to Calculate Need Cost of Attendance (minus)EFC Need  The EFC determines:  Pell eligibility  Need versus non-need-based aid

9. Basic EFC Formulas  Formula A  For dependent students  Formula B  For independent students without dependents (other than a spouse)  Formula C  For independent students with dependents other than a spouse For 16-17 or 17/18 EFC worksheets, go to IFAP: Worksheets, Schedules & Tables

10. EFC Calculations  There are 3 special EFC Calculations  Regular Formula: Takes BOTH income & assets into account  Simplified Needs Test (SNT):Takes only income into account  Auto-Zero EFC: Student’s EFC is automatically zero

11. Simplified Needs Test  How does a student qualify for SNT?  Must have income (AGI/wages) of $50,000.00 or less AND  Be eligible to file a 1040A or 1040EZ OR  Qualify for a federal means test benefit program OR  Be a dislocated worker

12. Auto-Zero EFC  How does a student qualify for Auto-Zero?  Must have income (AGI/wages) of $25,000.00 or less AND  Be eligible to file a 1040A or 1040EZ OR  Qualify for a federal means test benefit OR  Be a dislocated worker Only dependent students or independent students with dependents other than a spouse qualify for an auto-zero EFC.

13. Federal Means Test Benefits  So exactly what is a federal means test benefit program?  Supplemental Security Income (SSI)  Temporary Assistance for Needy Families (TANF)  Special Supplemental Nutritional Program for Women, Infants & Children (WIC)  Food Stamps/SNAP  Free Reduced-Priced School Lunches

14. What is a Dislocated Worker?  Was terminated or laid off from employment or received a notice of termination or layoff;  Is unlikely to return to a previous occupation; and  Is eligible for or has exhausted unemployment compensation, or is not eligible for compensation because, even though employed long enough to demonstrate attachment to the workforce, he or she had insufficient earnings or performed services for an employer that weren’t covered under a state’s unemployment compensation law; or  Was terminated or laid off from employment or received a notice of termination or layoff as a result of any permanent closure of, or any substantial layoff at, a plant, facility, or enterprise;  Is employed at a facility at which the employer made a general announcement that it will close;  Was self-employed but is now unemployed due to economic conditions or natural disaster; or  Is a displaced homemaker

15. 1040, 1040A or 1040EZ?  Required to file a long form (1040) if  Wages are $100k or more(line 7)  Alimony received (line 11)  Business or Farm (line 12 & 18)  Capital gain or loss (line 13 if schedule D is required)  Rental property (line 17)  Itemized deductions (line 40)  Health Savings account deduction (line 25)  Eligible to file a 1040A or EZ  If there are capital gains/losses but a Schedule D isn’t required, then a 1040A is fine

16. Apply your knowledge! Which EFC Calculation?

17. Test Your Federal Formula Knowledge  Student is married with a child who they support more than 50%. Student and spouse AGI= $47,000, they reported $0.00 in assets, and marked yes to filling a 1040 however answered yes to being able to file a 1040 A or EZ, they answered no to all federal means test benefits, and no to being a dislocated worker – What is the correct formula?  F. Simplified Needs Test (SNT)/Model B

18. Which EFC Calculation?  The CPS will assign a _____ EFC to an independent student if:  The student’s and spouse’s combined AGI is $24,000 AND  Anyone counted in the household sized received a means-tested federal benefit during 2014 or 2015.

19. Income Protection Allowance  FM automatically protects a set amount of income varied by household size and number in college (called IPA)  Food 30%  Housing 22%  Transportation 9%  Clothing/Personal Care 16%  Medical 11%  Other consumption 12%  US Taxes Paid  Also considers state & other taxes

20. IPA Worksheets This example is from Worksheet A (dependent students)

21. Asset Protection Allowance  Asset Protection: Dept of Ed automatically protects a set amount of assets based on the age of independent students or parents of dependent students  The older the student or parent, the greater the amount of assets protected – due to anticipated retirement

22. Asset Protection Table This example is from Worksheet A (dependent students)

23. Apply your knowledge!

24. Dependent Student Example Parent Information  AGI: $67,000  Parent 1 Income: $37,000  Parent 2 Income: $30,000  Untaxed Income: $2,500  Taxes Paid: $4,916  Investment: $20,000  Savings: $5,000  # in college : 1  # in Household : 4 Student Information  AGI : $12,500  Income from work: $12,500  Taxes Paid: $853  Savings: $2,000

25. Why calculate an EFC?  Students do not know how it is determined  EFC perceived as the “gate keeper” for aid  Ex: “What is the maximum amount my family can make and still get Pell?”  Understanding how to calculate helps us explain how all pieces work together

26. Final Thoughts on Need Analysis  A myriad of elements go into the EFC!  You can’t “guesstimate” what someone’s EFC would be just by asking income information  Having a strong foundation of how the EFC works will help you know if a professional judgment will help a student

27. Resources  2016-17 EFC Formula Guide https://ifap.ed.gov/efcformulaguide/att achments/100615EFCFormulaGuide1617A ttach.pdf 2017-18 https://ifap.ed.gov/efcformulaguide/att achments/100615EFCFormulaGuide1617A ttach.pdf 2017-18  EFC Formula Guide  https://www.ifap.ed.gov/efcformulag uide/attachments/071416EFCFormula Guide1718.pdf https://www.ifap.ed.gov/efcformulag uide/attachments/071416EFCFormula Guide1718.pdf

28. Questions? Karen Long Coordinator, Admissions & Financial Aid Texas Woman’s University klong@twu.edu Rachael Fournier Assistant Director of Financial Aid University of Dallas rfournier@udallas.edu