2. Do FM needs analysis together, then talk about it Review/revisit the EFC Formula Guide Discuss PJ in the context of knowing the calculation If we have time: Look at regulatory changes to FM EFC data elements over time If we have time: Discuss IM practices and anything else we feel like talking about

4. Dependent Student Case Study: Let’s dive in!

5. Scarlett White is a cheerleader enrolled as a senior at Huron High School in Ann Arbor. Her brother Jesse will be a college Junior at Wayne State University, where he studies chemistry. Brother Alphonso is entering 7th grade, and sister Holly will again be in elementary school. Scarlett is the aid applicant for this case study.

6. The parental AGI for 2014 was $83,821. Dad (Walter White, pharmaceutical executive and former high school chemistry teacher), age 52, earned $199,214 in wage income, and mom (Skyler, age 46, financial executive and car wash owner) earned $163,277. A massive net loss from Line 17 of their Form 1040 (Vamonos Pest LLC; Los Pollos Hermanos Partners; A1A Car Wash S-Corp) largely accounts for their reduced AGI. They filed a Form 1040 and itemized their deductions, with a federal tax paid of $6,021. Walt and Skyler claimed all 4 children as 2014 tax exemptions. They are careful money managers despite their IRS paper losses, and have budgeted exactly $2015 for Scarlett’s 2015-2016 educational expenses.

7. Walt and Skyler claimed a 2014 IRA deduction in the amount of $2000. They also claimed a Hope Educational credit for Jesse in the amount of $1500. Due to an earlier divorce agreement, Walt paid out $6000 in 2014 child support to one of his ex-wives. As parents they reported $1,941 in savings, $78,257 in combined 529 savings plans for all 4 kids, and $10,885 in a money market fund. Scarlett did not file a 2014 tax return, and listed earned wage income of $1821. She had $5 in her savings account on the day she filed her FAFSA.

9. 1.Parent’s 2014 AGI: 83821 2.a. Father’s work income 199214 2.b. Plus Mother’s work income 163277 Equals total Parent work inc. 362491 3. Parent’s taxable income 83821 4. Untaxed income: 2000 5. Taxable and Untaxed 85821 6. Less offsets to income 7. Equals Total Parent Income 78321

10. 8. 2014 U.S. tax paid 6021 9. State/other tax (TableA1) 3133 10. Father’s FICA (Table A2) 10143 11. Mother’s FICA (Table A2) 9622 12. Income Protection Allowance (T. A3) 34310 13. Employment Expense Allowance 4000 14. Total Allowances: 67229 Total Income (from line 7) 78321 Minus Total Allowances 15. Equals Available Income (AI) 11092

11. 16.Cash & Savings 1941 17. Net Worth of Investments 89142 18. Net Worth Business/Inv. Farm 0 19.Adjust. Net. W. Business/Farm (A4) 0 20. Net Worth (sum 16, 17, 19) 91083 21.Edu. Savings/asset protect. (A5) 33500 22.Discretionary Net Worth (20-21) 57583 23. Asset Conversion rate (multiply by.12) 24. Contribution from assets 6910

12. Parent’s Available Income (line 15) 11092 Plus Asset Contribution (line 24) 6910 25. Equals Adjusted Available Income 18002 26. Total contrib. from AAI (Table A6) 4030 27. # in college (exclude parents) 2 28. Equals Parent Contribution 2015

14. 29.Student AGI 0 30.Student’s work income 1821 31.Taxable income 1821 32.Untaxed income: 0 33.Total, taxed/untaxed 1821 34.Less offsets to income 0 35.Equals Total Income 1821

15. 36.Student tax paid 0 37.State/other tax (Table A7) 55 38.Student FICA (Table A2) 139 39.Income Protection Allow. 6310 40.Allow. for Parent Neg. AAI 0 41.Total allowances 6504 Total Income (line 35) 1821 Less Total Allow. (line 41) 6504 42. Equals Available Inc. (AI) 43. Assessed at.50 0 44. Equals Student Cont. from AI 0

16. 45.Student cash, etc. 5 46.Student investments 0 47.Student bus./farm 0 48.New Worth (sum 45-47) 5 49.Assessed at 20 percent 1 50.Contribution from assets: 1 Parent Contribution (line 28) 2015 Plus Student AI Contrib. (line 44) 0 Plus Student Cont. from assets 1 51.Equals Overall EFC 2016

18. 1. Dependent Student, Regular 2. Dependent Student, Simplified 3. Independent, without Dependents other than a Spouse, Regular 4. Independent, without Dependents other than a Spouse, Simplified 5. Independent, with Dependents other than a Spouse, Regular 6. Independent, with Dependents other than a Spouse, Simplified 7. Auto Zero

19. If you know how the FM EFC formula works, you can efficiently respond to “what if” questions and utilize appropriate Professional Judgment

20. Medical/Dental costs: 11% is already in the IPA “I saved a lot, so I won’t get financial aid” “I lost my job, so I will get more aid…right?” “We now have 2 in college, so our aid will double, right?” “We took money out of our IRA…please help us, this is not our real income from work!” “We are saving for our grandchild…should we put the money into an UGMA?” My parent just died…will I get more aid?”

21. College Cost Reduction and Access Act of 2007: “CCRAA” “HERA” Higher Education Reconciliation Act of 2005

22. HERA increased the income protection allowance for dependent students from $2,200 to $3,000 CCRAA increased this further: AY2009-2010 - $3,750 AY2010-2011 - $4,500 AY2011-2012 - $5,250 AY2012-2013 - $6,000 AY2013-2014 - $6,260 Now: $6310

23. Effective July 1, 2009, CCRAA changed the definition of “total income” by excluding: Welfare benefits Earned Income Credit Special fuels credit Excluded foreign income Untaxed Social Security benefits Additional Child Tax credit

24. Former language: “…an orphan or ward of the court or was a ward of the court until the individual reached the age of 18…” Current language: “…was an orphan, in foster care, or a ward of the court, at any time when the individual was 13 years of age or older…”

25. CCRAA added additional categories: “…is an emancipated minor or is in legal guardianship as determined by a court of competent jurisdiction…” “…has been verified during the school year in which the application is submitted as either an unaccompanied youth who is a homeless child…or as unaccompanied, at risk of homelessness, and self-supporting…

26. HERA added “qualified education benefit” to the definition of assets. CCRAA addressed the ownership of these accounts: Student asset if owned by Independent student If a dependent student, the asset is considered the parent’s whether the owner is the student or parent

27. CCRAA made a change to the eligibility standards impacting the simplified needs test and the Auto Zero calc eligibility The Act added a new category of eligibility – dislocated workers (& displaced homemakers). The dislocated worker was defined in the Workforce Investment Act of 1998. Sometimes a big impact – assets ignored

28. CCRAA changed the qualifying standard: Income limit moved from $20,000 to $30,000 Directed ED to adjust this limit annually based on increases in the CPI But, this has subsequently been tinkered with, and for 2015- 16, the limit is now down to $24,000

29. http://ifap.ed.gov/efcformulaguide/attachments/090214EFCForm ulaGuide1516.pdf This is annually updated, the worksheets and tables you used today are right out of the guide Lots of definitions (i.e. Dependency, Simple Needs, Auto Zero, needs-tested benefits) are in there All the different hand calculation worksheets are there for different FM formulas

30. Many privates, some publics, often using the CSS Profile There is a cost involved for filers, with some waiver exceptions Non Custodial Parent (NCP) data can also be requested Home equity is considered; significant number of formulaic differences relative to FM

31. When “compelling budgetary concerns” make overall higher EFC’s desirable When your institution believes all students are best served by a more realistic assessment of family financial strength When another filter is helpful to sort out families who by any reasonable definition should likely not be grant eligible As an avenue to simply get Non Custodial Parent (NCP) data Your answer here: ____________

32. Institutional aid applications (sometimes for both needs analysis and scholarships) Cherry picking some CSS Profile outputs Running parallel processing, using CSS Profile calculation data within PC spreadsheet or other software Calculating need for international students Other?