Federal Methodology Calculations & Professional Judgment

1. Federal MethodologyCalculations & Professional Judgment Jackie Copeland Assistant Director, Scholarships & Grants UNC-Chapel Hill Lisanne Masterson Director, Financial Aid Brevard College NCASFAA - November 2009

2. Federal Methodology • Is a method for assessing a family’s financial strength & the amount available to contribute toward education (EFC) • Classifies students as: • Dependent • Independent without dependents (other than spouse) • Independent with dependents (other than spouse) NCASFAA - November 2009

3. Federal Methodology Basics • Uses base-year income (e.g. 2009 income for the 2010-11 academic year) • A portion of student and parent assets are protected • Looks at the number in college (other than parents) • Based on 9-month enrollment period NCASFAA - November 2009

4. Federal Methodology Formulas • Automatic Zero EFC • AGI or Wages <$30,000 • If File, 1040EZ or 1040A (or eligible) • Qualify if dislocated worker or Federal means-tested benefit • Not applicable for Indp students without dependents • Simplified • AGI or Wages <$50,000 • If File, 1040EZ or 1040A (or eligible) • Qualify if dislocated worker or Federal means-tested benefit • Regular NCASFAA - November 2009

5. Expected Family Contribution Components • Student Contribution • Student Available Income • Student Assets • Parents’ Contribution (if dependent) • Parents’ Available Income • Parents’ Assets NCASFAA - November 2009

6. Factors That Affect The EFC • Number in Household • Number in College • Taxed and Untaxed Income • Taxes Paid • Investments • Age of Older Parent • Number of Wage Earners • Wages Earned NCASFAA - November 2009

7. Dependent Student FM • Total Income = AGI (or total income earned for non-filers) + Untaxed Income Worksheet • Additional Financial Information (Worksheet) NCASFAA - November 2009

8. Dependent Student FM • Total Allowances = US Tax Paid + State Tax Allowance + Social Security Allowance (Father) + Social Security Allowance (Mother) + Employment Expense Allowance (parent) + Income Protection Allowance ($3,000 for student) + Allowance for parents’ negative AGI (student) NCASFAA - November 2009

9. Dependent Student FM • Total Income - • Total Allowances = • Available Income (Student x .50) NCASFAA - November 2009

10. Dependent Student FM • Contribution from Assets Cash, Savings, Checking + Other Real Estate & Investments + Adjusted Business/Farm • Asset Protection Allowance (parent) x Asset Conversion Rate [.12 (p); .20 (ds & indp no dep); .07 (indp w/ dep)] NCASFAA - November 2009

11. Dependent Student FM • Parent Contribution Available Income + Contribution from Assets = Adjusted Available Income Use Chart to calculate PC Divide by # in college (excluding parent) • Student Contribution Contribution from Available Income + Contribution from Assets NCASFAA - November 2009

12. NOW…..Let’s Do A Hand Calculation!!! NCASFAA - November 2009

13. PJ Adjustments • Loss of Employment • Loss of Other Taxable Income • Loss of Untaxed Income • Divorce/Death NCASFAA - November 2009

14. PJ Adjustments • Dependent Care Costs(may adjust COA) • Private Primary/Secondary School • High Medical/Dental • Other Unusual Expenses(e.g. funeral, tax debt) NCASFAA - November 2009

15. PJ AdjustmentsPolicy & Procedures YOUR Policy & Procedures: • What situations merit a PJ • What documentation is needed • Who is authorized to make adjustments • How you calculate what amounts you will use • Where in the formula you make your adjustments NCASFAA - November 2009