Tags:
create new tag
, view all tags
Trying to find and understand the formula for FAFSA financial aid and the contribution expected of parents.

(extra) keywords: college, higher education

See:

Contents

Notes

Resources

See Resource Recommendations. Feel free to add additional resources to these lists, but please follow the guidelines on ResourceRecommendations including Guidelines_for_Rating_Resources.

Recommended

Factors Involved in the Federal Methodology Formula

Income and Related Data – The parent’s and student’s Adjusted Gross Income (AGI) are factored into the FAFSA formula. The number of people in the student’s household, the number of students in the family that will be attending college during the year, the amount of Federal income taxes paid, and amounts contributed to retirement plans are just a few examples of other factors involved in the formula. Adjusted Gross Income effects the EFC much like earned wages and miscellaneous income effect Federal income taxes.

Assets – It is important to know that there are assets that are assessable (counted) and those that are not assessable (not counted) in the Federal Methodology Formula. These non-assessable assets can be equated to a tax deduction on your Federal Income Tax Return. By positioning as many assets as possible into the non-assessable column, you family’s EFC will often be lowered.

Scholarships, grants, and tuition discounts are how colleges commonly label their funding – when, in fact, all of these monies are actually rate reductions off of the institution’s total cost of attendance. The vast majority of colleges are using these reductions to get the best blend of good students and paying customers. Their business approach is to get the family to pay as much as possible and still get the student to attend.

...

Exploring your educational options and keeping those options open can have a huge impact on your future. What you may be offered from one institution may be far different from what the next is willing to discount just to get you to attend.

  • (rhk) FAQ; ; ; —

  • (rhk) The CSS PROFILE Financial Aid Application; ; ; — worth reading to understand the differences between the (simple?) FAFSA and the "Institutional Formula", which generally calculates a higher contribution from the family

The PROFILE Institutional Methodology (IM) calculates an expected family contribution (EFC) which is different than the FAFSA's Federal Methodology (FM) used for virtually all federal and state grants, loans, and work programs. A college cannot require the PROFILE if a student is only interested in federal or state funds such as the Federal Pell Grant, SEOG grant, Stafford Loan, Perkins Loan, Parent Loans, state grants, or work-study.

Many students want to be classified as independent because their parents' financial information will not be considered in the need analysis formula which determines the amount and type of aid for which they may receive.

Although a student is "on their own" and pays his/her own rent and other expenses and is no longer claimed as a tax exemption by his parents, these conditions do not make a student independent for financial aid.

For 2003-04, federal regulations state that to be considered independent for financial aid, a student must meet one of the following criteria:

  • be born before 1-1-80;
  • be married;
  • have and support a child or other dependent;
  • be enrolled as a graduate or professional student;
  • be a qualified veteran of the U.S. military by 6/30/03;
  • is an orphan or was a ward of the court before age 18;
  • have very unusual personal circumstances that must be documented to an experienced financial aid administrator at your school (i.e., child abuse, etc.).

  • (rhk) Advice: Ask Dollar Bill; ; ; — IIUC, another financial aid consultant — worth reading, maybe even submitting any question (of general interest??) you might have

  • (rhk) Financial Aid 101 (University of Iowa, but probably applicable many places); ; ; —
There are certain expenses students incur that can increase their Cost of Attendance and thus increase the amount they can borrow, as long as they do not exceed maximum yearly limits. Such expenses include: family health insurance premiums, out of pocket medical/dental expenses, child care costs and other “dependent maintenance” expenses and certain car repairs. However, if your Cost of Attendance is increased, you will be borrowing from your unsub loan, adding to your total debt and accruing interest charges so this is something that should be considered in the context of your overall financial debt management plan. Your financial services advisor will be glad to answer any questions you have and help you determine how to best manage any unusual circumstances.

Your Academic Status Affects Your Aid Eligibility:

Around the same time you receive your award letter, you'll receive information on how dropping and adding classes impacts your satisfactory academic progress and your financial aid award. Be sure to read all of this information -- small changes in your course load or academic standing can make a big difference in how much aid you'll actually receive.

A typical family of four with one student in college, household earnings of $80,000 a year, $50,000 in home equity and $50,000 in nonretirement assets will be expected to contribute about $10,000 next school year under the FAFSA formula (used by most public colleges) and about $11,000 under Profile (used by most private colleges). A second child in college at the same time will cut those numbers to about $5,500 and $8,000.

Income matters more than assets in determining a family's wherewithal. Add $20,000 to the income in our one-student example, for instance, and the EFC jumps to about $18,000 under both FAFSA and Profile. But another $50,000 in your portfolio adds just $2,500 or so to your expected contribution. Student income and assets add considerably to the family total because students are expected to fork over 50% of their income and 25% to 35% of their assets.

...

There are a few things you can do to tip the equations in your favor:

  • Use the student's savings for an educational or other necessary expense, such as a computer for school.
  • Reduce the balances in your checking and savings accounts by paying bills and making needed purchases before you sign and date the aid forms.
  • Convert consumer debt, such as a car loan or credit card balance, to home-equity debt, which will reduce your contribution under Profile but not FAFSA.

  • (rhk) Financial Aid Estimation Form ; ; ; — a way to get an estimate of the aid you are qualified for (they claim not to keep any of the information you submit, of course there is always the danger of someone intercepting (sniffing) the data if submitted unencrypted over the Internet

  • (rhk) [[][]]; ; ; —

  • (rhk) [[][]]; ; ; —

Contributors

  • () RandyKramer - 17 Sep 2003
  • If you edit this page: add your name here; move this to the next line; and if you've used a comment marker (your initials in parenthesis), include it before your WikiName.

Revision Comment

  • %DATE% —

Page Ratings

Topic revision: r1 - 2003-09-17 - RandyKramer
 
  • Learn about TWiki  
  • Download TWiki
This site is powered by the TWiki collaboration platform Powered by PerlCopyright © 1999-2017 by the contributing authors. All material on this collaboration platform is the property of the contributing authors.
Ideas, requests, problems regarding WikiLearn? WebBottomBar">Send feedback
See TWiki's New Look