So it’s been a few weeks since my last blog post. I apologize for the delay, but I have been busy with Spring Break, conferences, travel, and other meetings. Now that I’m back, though, let’s dive in to the calculation.

Now it’s time to begin part one of the breakdown of the individual formulas to determine your EFC, and we begin with parent contribution from income. Parental income is really the single largest source of your expected contribution, and serves as the foundation for our analysis of your families circumstances. What I will try to do here is address the core way in which the Federal Methodology treats parents’ income, and you can feel free to ask any questions which I will then answer for you about the methodology.

The contribution from parent income is broken into three different pieces:

1. Determining the parents’ total income,
2. Figuring out allowances against the income, and
3. Subtracting the allowances from the total income to determine the available income.

I’ll tackle these one step at a time.

For the starting income figure, we take the parents’ adjusted gross income figure as reported on the bottom on the first page of the tax return (for simplicity, I will assume that we are talking about a family with two parents; at the end of this process I will do another post explaining the differences for divorced / separated families). Also keep in mind that tax returns have changed dramatically in 2018, but for the sake of this analysis, we are using 2017 returns (for the 2019-20 application year).

To the AGI, we add non-taxable income (which can include a wide variety of income sources – some are child support received, tax-deferred contributions to retirement programs, tax-exempt interest, etc). [For a more complete list, you may want to look at questions 94a to 94i on the FAFSA application for the appropriate sources].

Next we remove from parent income any items listed as income exclusions on questions 93a to 93f of the FAFSA (child support paid, combat pay, education tax credits, etc).

We add the AGI plus the non-taxable income and subtract the income exclusions to come up with the total income.

Now on to allowances against income. There are five main areas:

1. US Income Tax Paid – we use the actual income tax paid by your parents as reported on the FAFSA, and as documented by the copy of your tax return,
2. State Taxes Paid – for this calculation, we use a table to determine how much of your Total Income should be protected to cover state and local taxes,
3. FICA or Social Security Taxes – again, for this line we allow a deduction based on a formula against wages earned from any employment to cover taxes paid to the Social Security system,
4. Employment allowance – for families where both parents are working (or, in a single parent household, where the parent is working) a deduction to allow for the cost of having no one at home (based on a formula and capped at a very low value), and
5. Income Protection Allowance (IPA) – this is meant to be an offset to protect families with particularly low income to protect the entirety of their income before any contribution is expected (even in part) from them.

The difference between total income and total allowances is set aside as Available Income (we will come back to this number later).

So, lots of information, and I’m sure this will generate many questions, so ask away!

I love to sing.

It helps that I sing fairly well (or at least I like to think I do), but I do love to sing.

As for what I sing, it varies from Broadway show-tunes to Abba to Air to Eminem (I have a pretty eclectic taste in music).

And I belong to a choir. My group practices every Wednesday night.

Last Wednesday night in rehearsal, I was thinking about what to put on this blog as we were working on harmonies for one particularly difficult song, and it hit me! The perfect image! Singing in 4 part harmony.

So why is it the perfect metaphor? Well, just like in music you need 4 parts to make up the whole (S, A, T, B), in financial aid, you need four parts to make up the whole as well (PC-I, PC-A, SC-I, SC-A).

So, enough with the metaphor (I feel like I have beat it to death) and on to what I mean.

The Expected Family Contribution is made up of four components:

1. Parent Contribution from Income
2. Parent Contribution from Assets
3. Student Contribution from Income
4. Student Contribution from Assets

(Do note that if you are from a divorced or separated family, there may also be a Non-custodial contribution from income and assets — see my last post for more information on who is considered to be your parent).

What I thought I would do in the coming days is spend a little bit of time on each of these 4 components and answer some questions about each one, providing some information that will help you understand how we conduct our business.

But for today, I need to tackle one issue before we can even get started, and that is the question of who is considered to be an independent student, therefore not requiring a parental contribution of any variety.

There are different rules for FAFSA vs. CSS Proile, so let me tackle the Federal rules first. If you meet any of the following 10 criteria, then you are considered to be an independent student (for Federal purposes only) and do not need to fill out parental information on the FAFSA (although some colleges may ask you to):

1. You will be 24 by January 1, 2020 (if you are applying for financial aid in the 2020-21 year; each year this moves forward one year).
2. You are married.
3. You are a graduate student.
4. You are currently on active duty in the U.S. armed forces.
5. You are a veteran of the United States armed forces.
6. You have children who will receive more than half of their financial support from you.
7. You have a legal dependent of your own (other than a child or spouse) who lives with you, and for whom you provide more than 1/2 of their support.
8. Since you were 13 years old, you were either in foster care, both of your parents were deceased, or you were a dependent or ward of the court.
9. You are an emancipated minor (as determined by a court in your state of legal residence), or someone other than your parent or step-parent has legal guardianship of you.
10. You are an unaccompanied youth who is homeless, or you are self-supporting and at risk of being homeless as determined by your high school, the director of an emergency shelter, or the director of a runaway or homeless youth basic center.

If any of these are true, then you are an Independent student for Federal aid purposes.

For institutional aid, the rules may be different. You should ask your college if they have different rules for their own financial aid (for example, some may not waive parental information for their own grants or scholarships for students who are over 24).

Also, it is important to remember that the financial aid process measures a family’s ability to pay, not willingness to pay, so whether a parent is or is not willing to make a contribution has no bearing to whether they need to complete the applications.

That is not to say that there are never situations where colleges would waive parental contributions (how is that for a double negative?), but they are rare and handled on a case-by-case basis. The issues would need to be egregious for us to consider them. You should talk to your financial aid counselor if you feel your situation might qualify to be considered this way. In these cases, the financial aid officer will likely require a letter from you and some kind of third-party documentation to explain your situation and may, if they decide, make you independent.

Look next time for more information on the parent contribution from income.