1. Understanding Need Analysis and Calculating the EFC Financial Aid 101 David Mahoney, Bates College October 10, 2008

2. Agenda Overview of need analysis formula Expected family contribution (EFC) Discussion of financial need and cost of attendance Case study and EFC calculation

3. Need Analysis Overview/Financial Need Need analysis –Overall process of determining a student’s financial need and eligibility for certain programs. –Calculates the EFC EFC is a measurement of a family’s ability to contribute toward education cost.

4. Need Analysis Overview/Financial Need There are three basic formulas: Dependent student Independent student with no dependents Independent student with dependents other than a spouse

5. General elements of need analysis: Income Number of dependents Number of family members attending college Assets Marital status of the student Age of older parent of a dependent student Additional expenses incurred Income and asset protection allowance Education savings and asset protection allowance Need Analysis Overview/Financial Need

6. What’s not included: Parent and/or student debts Whether or not a student lives with his or her parents

7. Need Analysis Overview/Financial Need Income Protection Allowance Allows for the most basic living expenses Varies by household and number in college Developed using Bureau of Labor Statistics (BLS) for a low standard of living and adjusted for the Consumer Price index (CPI)

8. Need Analysis Overview/Financial Need Formula Variations: - Simplified Needs Test (SNT) Parent or student (if independent) eligible to file IRS form 1040A or 1040EZ OR Recipient of benefits from needs-tested benefit programs AND Income less than $49,999 - Auto-Zero Same as SNT, but earned income must be under $20,000

9. EFC Overview What is the EFC? The Expected Family Contribution (EFC), is defined as a measure of the student’s (and the student’s parents’, if applicable,) ability to pay for college.

10. EFC Overview The EFC is not: The student’s bill for tuition and fees

11. EFC Overview How can I estimate my EFC? EFC worksheets FAFSA4caster www.fafsa4caster.ed.gov Other online estimators www.collegeboard.com

12. EFC Overview How the EFC is created Student files the FAFSA FAFSA data is calculated Student receives a Student Aid Report (SAR) School receives an ISIR The EFC will be displayed on both the student’s SAR and school’s ISIR

13. EFC Overview There’s no EFC on my Student Aid Report! Sometimes, the EFC is not calculated Failure to sign the FAFSA is the most common reason an EFC was not calculated Both the SAR and ISIR will indicate any errors or omissions

14. EFC Overview The EFC is used as a tool in awarding: Federal Pell Grants Other Federal Grant Programs, such as ACG State Grants Institutional and other need-based aid

15. EFC Overview Some students may have more than one EFC. Federal Methodology (FM) - Used for most types of aid - Always used when determining eligibility for federal programs Institutional Methodology (IM) - Determined by forms such as the CSS Profile - Used by some schools to award scholarship aid

16. Cost of Attendance The Cost of Attendance, or COA, is an estimate on what school will actually cost for a student. Tuition and Fees Books Room and Board Transportation Other

17. Need Equation: Cost of Attendance - Expected Family Contribution = Financial Need Financial Need

18. Why is need important? Certain programs are need based Need based programs are only available to students with demonstrated need Need may not equal financial assistance at all schools

19. Case Study Maria is a dependent student from Maine. She is an only child whose parents had an Adjusted Gross Income (AGI) of $52,400 in 2007. Both parents work and most of their income is derived from their wages. Maria earned $4,000 in 2007 working hard at part-time and summer jobs and worries that her earnings will substantially increase the amount her family will be expected to pay for college.

20. 0 52,500 100 0 52,400 50,000 52,400 24,000 26,000

21. 4,684 3,150 1,836 1,989 19,150 8,400 3,300 34,109

22. 52,500 34,109 18,391

23. 15,000 35,000 0 0 50,000 43,400 792 6600

24. 18,391 1 4,460 19,183 792 4,460

25. 4,010 4,000 4,010 0 0 0 0

26. 0 160 306 0 3,546

27. 4,010 3,546 464 232

28. 1,200 0 0 240

29. 4,460 232 240 4,932

30. Questions?