Transcript New FA Professionals Training Seminar

Need Analysis
Basic Principles:
o Students and their families are primarily
responsible for the funding of a student’s
educational expenses, to the extent possible.
o Federal, State and institutional financial aid
funds awarded to the right students, in the
correct amount.
Need Analysis
Operational Principles:
o Federal Methodology is intended to measure the ability
of the student and his/her family to contribute to the total
cost of a college education.
o Only after the family’s ability to contribute has been
measured will need-based financial aid be used to pay for
postsecondary education.
Need Analysis
Definitions:
o Cost of Education
o Financial Resources
o Estimated Family Contribution
The first step in Need Analysis is to find the
Estimated Family Contribution
Need Analysis - Dependent
Information Needed for Federal Methodology:
o Student Income
o Student Assets
o Parent(s) Income
o Parent(s) Assets
o Number of People in the Household
o Number of Children in College
Need Analysis Components
Student Income Components
o Work
o Investment Income
o Benefits
o Untaxed Income
Need Analysis Components
Student Asset Components:
o Checking
o Savings
o Trusts
o Real Estate
o Investments
o CA$H
Need Analysis Components
Parent Income Components
o Custodial Parent and Spouse
o Work Income
o Investment Income
o Additional financial information
o Question #43 and #91
o Untaxed Income
oQuestion #44 and #92
Need Analysis Components
Parent Asset Components:
o Checking, Savings Balances
o Investments (excluding retirement savings)
o Real Estate (excluding home equity)
o“Adjusted” Business Equity (excl. family farm)
o CA$H
Need Analysis Components
Parent Household Size Components:
o Parent(s)
o Dependent Children
o Grandparents
o Anyone else receiving more than ½ of their support from
the parents living in the household
Need Analysis Components
Number in College Components:
o Dependents attending college at least ½ time in one term
during the academic year
o Parents are excluded
o The school attended must be eligible for federal student aid
o Military Academies and Some Religious Schools
o Non-accredited schools
Need Analysis Components
Other Data Components – Reductions to EFC:
o Taxes Paid
o Federal Income Tax
o State Specific Allowance
o FICA (Social Security Tax)
o Savings Allowance (age of older parent)
o Child Support Paid (not on tax return)
o Federal Work Study income
Need Analysis Formula
The formula in a nutshell…
o Incomes minus taxes and other allowances
o Equals available income
o Add in a portion of assets (after protecting some)
o Factor in the cost of living based on family size
o How much is left is “contribution”
o Divide contribution among number in college
Need Analysis Formula
Terms you should know…
o Income Protection Allowance
o Base Year
o Available Income
o Adjusted Available Income
Need Analysis Variations
o Simplified Needs Test – Lower income families are
not required to report assets, and assets are not
considered.
o Automatic Zero EFC - Very low-income families
qualify for a zero EFC and the need analysis calculation
is unnecessary.
o Designed to simplify the aid process and make
application easier for these families
Simple Needs Test
Eligibility…
o Parent Adjusted Gross Income is $49,999 or less AND
o Tax Return filed was the 1040A or 1040EZ OR
o anyone in the household received benefits under a meanstested federal benefit program during the “base year” or the
year preceding the base year (2009 and 2010) OR
o the parent is a dislocated worker.
o Result – Assets not considered in Need Analysis
Automatic Zero EFC
Eligibility…
o Parent Adjusted Gross Income is $31,000 or less, AND
o Tax Return filed was a 1040A or 1040EZ OR
o Received benefits under a means-tested federal benefit
program during the “base year” and or the year preceding the
base year (2009 and 2010) OR
o The parent is a dislocated worker
o Result – EFC is automatically ZERO
Need Analysis - Independent
Independent Student Formula:
o Parent Income and Assets not included or
considered.
o Need Analysis Formula is similar in structure, but it
contains fewer steps… (obviously)…
Independent Student Criteria
Who is considered “Independent”…
o Undergraduates are considered to be “dependent”,
without regard to the reality of the individual
student’s circumstances unless:
o 24 (as of 12/31/11 for 2011-2012)
o Married (before completing the FAFSA)
o Provide more than half of the support of a child
 Continued on next slide 
Independent Student Criteria
Who is considered “Independent”…
o Orphan or ward of the court
o Placed in foster care after turning 13 years old
o Adopted after turning 13
o U.S. military veteran or currently on active duty
o Emancipated Minor
o Homeless or at risk of homelessness
o Made Independent by Professional Judgment
(but that’s another topic for another module)
Independent Student Formula
Independent students without
dependents (other than spouse):
o Treated like a dependent student in many ways
o Income is treated harshly
o Assets treated harshly
Independent Student Formula
Independent students with dependents
(other than spouse):
o Treated like parents of dependent student
o Income protection
o Asset protection
Questions ???
o Remember that this is a system designed by Congress. It is not
supposed to make sense…
o Therefore any question that begins with the word “Why…”
cannot be answered logically
o If you are from Brooklyn, “Hows Come…” means the same
thing as “why”…