1. 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

2. Lesson 1: Introduction to Need Analysis

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

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

5. 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

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

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

8. 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

10. Lesson 2: The Regular Formula

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

12. 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

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

15. 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

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

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

18. Asset Exclusions

19. Asset Exclusions

20. 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

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

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

24. 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

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

27. 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

29. Lesson 3: Simplified Formulas

30. 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

31. 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

32. 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)

33. 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

34. 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

36. 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

37. 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

39. Lesson 4: Recalculating the EFC

40. 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

41. 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

42. Sample ISIR

43. 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

45. 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

46. 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

48. 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

49. 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

50. 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 =

51. 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

52. 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, month EFC
̶ 10, month EFC
= Summer EFC

53. 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, month EFC
̶ month EFC
= 7,217 Fall/Winter/Spring EFC

54. 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

55. Lesson 5: Institutional Methodology

56. 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

57. Formula Differences: FM vs. IM

58. Formula Differences: FM vs. IM

59. Formula Differences: FM vs. IM

60. Formula Differences: FM vs. IM