CALCULATING AN EFC FEDERAL METHODOLOGY FEDERAL METHODOLOGY Method

CALCULATING AN EFC FEDERAL METHODOLOGY

FEDERAL METHODOLOGY Method for assessing ability to pay consists of two steps: § Measuring a family’s financial strength § Assessing a portion of family’s financial resources as being available to contribute toward educational costs

FEDERAL METHODOLOGY Methodology used to calculate expected family contribution (EFC) Classifies students according to one of three models: § Model A: Dependent student § Model B: Independent student without dependents other than a spouse § Model C: Independent student with dependents other than a spouse

TYPES OF FORMULAS Each student model has two formulas: Regular Simplified

REGULAR METHODOLOGY DEPENDENT STUDENT EFC COMPONENTS Parents’ contribution (PC) consisting of: § Contribution from parents’ available income § Contribution from parents’ assets Student contribution (SC) consisting of: § Contribution from student’s available income § Contribution from student’s assets

REGULAR METHODOLOGY INDEPENDENT STUDENT EFC COMPONENTS Contribution from student’s (and spouse’s) available income Contribution from student’s (and spouse’s) assets

SIMPLIFIED FORMULA OR SIMPLIFIED NEEDS TEST Dependent Student Parent’s Combined AGI or earnings from work < $50, 000 and either (1) the parents were not required to file an IRS Form 1040, (2) one of them is a dislocated worker as defined in the Workforce Investment Act or (3) anyone counted in their household size received a meanstested federal benefit during 2011 or 2012. Independent Student’s and spouse’s (if married) combined AGI or earnings from work < $50, 000 and either (1) the student and spouse were not required to file an IRS Form 1040, (2) one of them is a dislocated worker as defined in the Workforce Investment Act or (3) anyone counted in their household size received a means-tested federal benefit during 2011 or 2012. Assets not considered

AUTOMATIC ZERO EFC If certain criteria are met no calculation is performed, EFC automatically is set to zero but is limited to: § Dependent student parents’ combined AGI (for tax filers) or combined income earned from work (for non-filers) is $24, 000 or less, and either (1) the parents were not required to file an IRS Form 1040, (2) one of them is a dislocated worker as defined in the Workforce Investment Act of 1998, or (3) anyone counted in their household size received a means-tested federal benefit during 2011 or 2012. § Independent student with dependents other than a spouse student’s and spouse’s combined AGI (for tax filers) or combined income earned from work (for non-filers) is $24, 000 or less, and either (1) the student and spouse were not required to file an IRS Form 1040, (2) one of them is a dislocated worker as defined in the Workforce Investment Act of 1998, or (3) anyone counted in the household size received a means-tested federal benefit during 2011 or 2012. Independent students with no dependents other than a spouse do not qualify

FACTORS THAT AFFECT EFC Number in Household §Number in College Taxed and Untaxed income §Taxes paid Investments Number of wage earners

FEDERAL METHODOLOGY CHARACTERISTICS Base-year income is used § 2012 is base year for 2013 -2014 Allowances protect portions of income and assets Distributes available family resources among all family members (other than dependent student’s parents) attending postsecondary schools EFC calculated for nine-month enrollment period

David, Melanie’s Step-dad CASE STUDY Refer to description of case study in packet Hand calculate an EFC for Melanie for 9 months Review results Melanie Ann, Melanie’s Mom

ROUNDING RULES FOR CALCULATING AN EFC Carry all calculations to three decimals Round resulting amount to nearest whole number. 001 to. 499 rounded down. 500 to. 999 rounded up