1. Understanding the EFC New Aid Officer Workshop 2017
Need Analysis:
Understanding the EFC
New Aid Officer Workshop 2017
Rachael Fournier
Associate Director of Financial Aid
UT-Arlington

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
Boeing 737, First flight: April 9, 1967

5. Expected Family Contribution (EFC)
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.
ATM : “The world's first ATM debuted at Barclay's Bank in London on June 27, 1967”

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:
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?
The Flying Nun: Premiered September 7, 1967

8. EFC is used 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 Formula B Formula C
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 17/18 or 18/19 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, or less
AND
Be eligible to file a 1040A or 1040EZ OR
Qualify for a federal means test benefit program
Be a dislocated worker
FAFSA on the Web has a threshold question that will cause the asset questions to be skipped when the student seems eligible for the simplified formula or an automatic zero EFC. But in some instances, such as when using a paper FAFSA, a student who qualifies for the simplified formula will provide asset information. In those cases the CPS will calculate two EFCs: one using the assets and one excluding them. The EFC from the simplified formula (which excludes assets) is called the primary EFC and is printed on the front of the student’s SAR, while the EFC from the full calculation is called the secondary EFC and is printed in the FAA Information section.

12. Auto-Zero EFC How does a student qualify for Auto-Zero?
Must have income (AGI/wages) of $25, or less
AND
Be eligible to file a 1040A or 1040EZ OR
Qualify for a federal means test benefit
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
LUNAR ORBITER 3
Launched: February 5, 1967
A person need not have received the benefit for an entire year; receiving it at any time in the base or prior year qualifies. Also, an FAA may use professional judgment (PJ) to count a benefit if a person did not receive it during those 24 months but is receiving it now.

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)
Health Savings account deduction (line 25)
Itemized deductions (line 40)
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
See IRS Publication 17 page 7:
1040 – must use if there is income that cannot be reported on a 1040A or 1040 EZ – i.e. alimony, business/farm, capital gain or loss/rental property; itemized deduction on Schedule A
A foreign tax return counts as an IRS Form 1040, while a tax return for Puerto Rico, Guam, American Samoa, or the Virgin Islands counts as a Form 1040A or 1040EZ.

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 $25,000 AND
Anyone counted in the household sized received a means-tested federal benefit during 2015 or 2016.

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
30% food
22% housing
9% transportation
16% clothing
Before adjusting for an unusual expense, consider whether it is already covered by the IPA. Mention later during this presentation - PJs

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
Student 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
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
You may be asking yourself, “Why learn to do this”? The FAFSA does this for us.

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
EFC Formula Guide ts/071416EFCFormulaGuide1718.pdf

28. Associate Director of Financial Aid
Questions?
Rachael Fournier
Associate Director of Financial Aid
UT - Arlington