Understanding the EFC New Aid Officer Workshop 2013
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Angelika Williams Assistant Director of Financial Aid and
Scholarships Texas State University
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Definition of Need Analysis Factors that make up the EFC
calculation and why they are important The various federal formulas
Types of professional judgment decisions and how they are related
to the EFC and Need Analysis What is Professional Judgment Types of
PJ
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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.
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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
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Definition: Measure of how much the student and his or her
family can be expected to contribute to the cost of the students
education for the year. The EFC is calculated according to a
formula specified in the law.
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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 AGI 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
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Cost of Attendance (minus)EFC Need The EFC determines: Pell
eligibility Room for need versus non-need-based aid
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Formula A 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 13-14
EFC worksheets, go to IFAP:
http://ifap.ed.gov/fsahandbook/attachments/1314AVGCh3.pdf
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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: Students EFC is
automatically zero
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How does a student qualify for SNT? Must have income
(AGI/wages) of $49,999 or less AND Be eligible to file a 1040A or
1040EZ OR Qualify for a federal means test benefit program OR Be a
dislocated worker
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How does a student qualify for Auto-Zero? Must have income
(AGI/wages) of $24,000 or less AND Be eligible to file a 1040A or
1040EZ OR Qualify for a federal means test benefit OR Be a
dislocated worker Only dependent students or independent students
with dependents other than a spouse qualify for an auto-zero
EFC.
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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
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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 werent covered under a states
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
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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) Itemized deductions (line 40) Health
Savings account deduction (line 25) Eligible to file a 1040A or EZ
If there are capital gains/losses but a Schedule D isnt required,
then a 1040A is fine
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Which EFC Calculation?
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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
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This example is from Worksheet A (dependent students)
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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
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This example is from Worksheet A (dependent students)
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Matching Exercise of EFC Terms
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A myriad of elements go into the EFC! You cant guesstimate what
someones 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 (coming next) will help a student
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Its Your Decision!
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Section 479A in the HEA authorizes us to use PJ
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Adjusting Cost of Attendance components Adjusting data elements
used to calculate EFC Direct changes to EFC is not permitted
Performing a Dependency Override Establishing eligibility for a
dependent student to receive Unsubsidized Stafford if parent
refuses to complete FAFSA and support student
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AGI Wages Earned Taxes Paid Number in Household Number in
College Additional Financial Information Untaxed Income Asset
information Dislocated Worker Status Federal Benefit Programs
(i.e.- SNAP, WIC, TANF, etc.) Dependency Status Only for dependent
to independent
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DOCUMENT! Keep in mind that all special circumstances must be
verified first to ensure you start with accurate data Types of
documents you may wish to collect Tax returns W2s Last pay stubs 3
rd party documents Legal documents Letter from employers
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Losses of Income Unemployment or income reduction Death of
parent/spouse Divorce of parent/student Loss of child support
One-time lump sum payout See GEN-09-04 Additional Expenses Extended
family support Such as nursing home expenses Unusual medical/dental
expenses that exceed 11% of the IPA Unusual non- discretionary debt
that exceeds 12% of the IPA Private school costs for children in
elementary or high school How could some of these factors affect a
students EFC?
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Hands on example: Lets say you have a dependent student whose
parents experienced an annual medical expense totaling $5,000. The
student has 4 in the household and 1 in college. How would you
calculate how much of the $5,000 exceeds the 11% of the IPA?
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Authority given for dependency overrides HEA Section
480(d)
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Any student who answers No to all the dependency questions is
dependent even if student is self-supporting Students who have
extenuating circumstances can request an FAA to consider a
dependency override Requires documentation to the validity of the
extenuating circumstances Personal statement Letters from
professionals Remember: DOCUMENT, DOCUMENT, DOCUMENT! Per CCRAA,
Schools have the authority to accept the dependency override that
was performed and approved by another school without additional
documentation.
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Factors to consider Abandonment by parents Unable to locate a
parent after reasonable attempts Situations of abuse
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None of the following examples merit a dependency override: 1.
Parents refuse to contribute to the student's education 2. Parents
are unwilling to provide information on the FAFSA or for
verification 3. Parents do not claim student as a dependent for
income tax purposes 4. Student demonstrates total
self-sufficiency
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Laura is a first-time freshman living with her grandparents.
She is not under legal guardianship, but she has been living with
her grandparents since she was 5 when her father left the country.
Her mother died when she was 2. She has had no contact with her
father since she was 5 and neither has her grandparents, although
he sent a check out of the blue when she turned 18 for $5,000.
Would you consider Laura independent? Why or why not?
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FAAs may use professional judgment to determine if a dependent
student may be offered unsubsidized Stafford loans without parental
data on the FAFSA To do this, FAAs must verify: Parent no longer
provides financial support Parent refuses to file the FAFSA FAA
must collect a signed statement from the parent affirming the above
while also certifying that they will not provide support in the
future (Include the date support ended.)
Additional mortgage/rent charges Unusual car repair or
transportation costs Dependent care costs Computer/Laptop expenses
Unusual medical/dental expenses not covered by insurance
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A PJ is award year specific and cannot carry forward from year
to year unless subsequent request & documentation are received
You cannot directly change an EFC You cannot make changes to the
EFC formula You may not establish automatic categories of special
circumstances. All PJ must be conducted on a case by case basis. PJ
cannot be used to circumvent the law PJ cannot be used to waive
student eligibility requirements PJ cannot make an Independent
student dependent
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Match that PJ! Case Study
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Understanding the complexity of the EFC makes you an effective
FAA! You have the authority to use professional judgment so use it
(with proper documentation)
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2013-2014 EFC Formula Guide
http://ifap.ed.gov/ifap/byAwardYear.jsp?type=efcformulaguide
http://ifap.ed.gov/ifap/byAwardYear.jsp?type=efcformulaguide
2013-2014 FSA Handbook, Application Verification Guide, Chapter 5,
Special Cases DCL: GEN-09-04, GEN-09-05, GEN-11-04, GEN-11-15
NASFAA 2010: Electronic Handout: Special Populations: Tips for
Completing the FAFSA NASFAA 2009: Q&A from Dependency Status:
Its not the Riddle of the Sphinx Webinar