1. Harvard Summer Institute on College Admissions
Financial Aid 102
Harvard Summer Institute
on College Admissions

2. F. Duane Quinn Financial Aid Specialist

3. Sally Donahue Griffin Director of Financial Aid Senior Admissions Officer Harvard College

4. Agenda Brief Review of 101 Calculation of the Family Contribution
Institutional Vs. Federal

5. Theory (traditional)
Parents and students are responsible for financing education costs......…
Up to their ability.

6. Theory (traditional)
The student and her family will benefit the most from higher education and should pay for it......
Borrowing
Saving
Working
Financial Aid should offer students Access and Choice to higher education

7. Eligibility
Cost less Family contribution = Eligibility for aid

8. New for current year, “Prior/Prior”
In past family reported income from year just ending
Often “estimated” tax information, then correct after taxes completed
will use tax data from prior year (2015) filed taxes
FAFSA available October 1: Not January 1
Colleges may alter filing deadlines

9. Determining the Family Contribution
The Eligibility Index (EFC)
Several variations
We will concentrate on Dependent Student
Theoretical Approach
Contrast the Federal Methodology to the “Institutional Methodology”

10. 1. Determining the Eligibility Index (EFC)
Total Parent Income Taxable
and Non-taxable for tax year last filed
minus Taxes Paid (Fed. State and Local)
minus Employment Allowance
minus Income Protection Allowance ($27,540 4/1)
minus Title IV Exclusion
equals “Available Income”

11. 2. Total Parental Assets
Cash, Savings and Checking plus Other Real Estate / Investments (home?) plus Business Value (100 or more employees / adjusted) plus Farm Value = “Total Net Worth” less “Education Savings / Asset Protection Allowance (Age 50 = $21,200) times 12% Asset Conversion Rate

12. 3. Determining Parent Share of EFC
“Available Income”
plus “Income Supplement”
= “Adjusted Available Income”
times Conversion Percentage
divided Number Attending College
= Eligibility Index from Parent(s)

13. 4. Determining Student Share of Index
Total Student Income
less Taxes and FICA paid
less $ Protection Allowance
times 50%
= Index Available From Income
Total Student Assets X 20%
= Index Available from Student Assets

14. 5. Final Step add “Eligibility Index from Parent’s Income and Assets”
plus “Eligibility Index- Student Income”
plus “Eligibility Index- Student Assets*
equal “ELIGIBILITY INDEX” (EFC)

15. Asset Impact on EFC An example: 4 in the family, 1 child in college:
Family A
Family B
Family C
Combined Parent Income
$75,000
Combined Parent Assets $0
$150,000
EFC
$7,819
$10,208
$14,438
Difference
$2,389
$6,619
There is a generous parent asset protection allowance factored into the EFC formula.
While assets (current value of savings, checking accounts, investments, and reportable businesses and farms) are considered in the financial aid formula, assets have minimal impact to the EFC, as it is primarily an income-driven formula
Having saved for college or having other assets that you can use to help pay for college is a good thing; it gives families options for paying the balance due
Families in the audience who have saved for college should feel good about it!
All 529 plans are considered assets in the parents’ name and are treated in the same manner as every other parent asset.
Parents have to list the 529 assets for ALL children, because the beneficiary (the child) can be changed, so one child could hypothetically end up using all 529 plans
In this example:
An additional 75K in savings only increases the EFC by $2,389
An additional 150K in savings only increases the EFC by $6,619
Remember this is parental assets (up to 6%) while student assets would be assessed at a higher rate (20%)
Numbers were calculated using the U.S. Department of Education’s Federal Methodology
Based on Federal Methodology: Courtesy of MEFA (Massachusetts Educational Financing Authority)

16. Income Impact on EFC An example: 4 in the family, 1 child in college:
Family A
Family B
Family C
Combined Parent Income
$75,000
$100,000
$150,000
Combined Parent Assets
$50,000
EFC
$8,798
$17,245
$32,803
Difference
$8,447
$24,005
The EFC formula can be heavily income-driven
Income (all income, from taxable and non-taxable earnings and other sources) is assessed at a higher rate in the financial aid formula than assets
EFC can change from year to year when income increases due to a raise, etc.
In this example:
An additional 25K in income increases the EFC by $8,447
An additional 75K in income (from $75,000) increases the EFC by $24,005
Colleges don’t tell families how to meet their EFC. For example, with family B, the college wouldn’t require the family to use any of their reported assets for education expenses. This is an option the family may choose
Reminder, the EFC is determining how much the family can absorb in educational expenses over time. In many cases, families using multiple resources, which we will discuss later
Families should not use these charts to calculate their own EFC; instead they should utilize EFC calculators
Numbers were calculated using the U.S. Department of Education’s Federal Methodology
Based on Federal Methodology: Courtesy of MEFA (Massachusetts Educational Financing Authority)

17. Federal Vs. Institutional Methodology
Income = AGI from tax return
Medical, dental, tuition costs upon appeal
Institutional
Does not recognize losses in taxable income
Expenses collected on PROFILE

18. FM Vs. Institutional Methodology
Federal
No credit for educational savings
Income and Assets combined to calculate EFC
Institutional
Credit (per child) for future higher ed. expenses
EFC from Income and EFC from Assets

19. FM Vs. Institutional Methodology
Federal
Exclude home equity
No incentive to save for higher education (Some in recent act)
Institutional
Include home equity (with option to cap)
Incentive in (CESA) Cumulative Education Savings Allowance

20. FM Vs. Institutional Methodology
Federal
20% of student assets
EFC divided by # in college
Based upon BLS
Institutional
25% of student assets
60% for 2 45% for 3
Based upon CES

22. Eligibility
Cost less Family contribution = Eligibility for aid

23. Example of “Packaging”
COLLEGE “A”
cost $40,000
- F.C $ 8,000
= need $32,000

24. The Financial Aid Package

25. The Financial Aid Package
cost
$40,000
$ 8,000.
F. C.

26. The Financial Aid Package
cost
$40,000
need = $32,000
$ 8,000.
F. C.

27. The Financial Aid Package
cost
$40,000
grant = $25,000 meet full need
$ 3,000
work
$4,000
loan
$ 8,000.
F. C.

28. The Financial Aid Package
cost
$40,000
unmet need “GAP”
$5,000
grant = $20,000
$3,000
work
$4,000
loan
$ 8,000.
F. C.