<p>I was under the impression that the AGI (adjusted gross income) is considered as the income when figuring out the EFC. But when I use the EFC calculator in college baord, I saw my 401K contribution (untaxed income) was added right back as the total income, which is basically the gross income. Is this right? Did I miss anything? Here is an example (sample numbers) using the calculator from college board. Do the number below make sense?</p>
<p>Adjusted gross income (AGI) / taxable income $ 100000
-------------Total untaxed income / benefits + ** $ 25000 (401K savings are added back) **
-------------------------Income adjustments - 0
-------------------------------Total Income = **125000<a href="gross%20income%20before%20401K%20savings">/b</a></p>
<p>Allowances
U.S. income tax $ 15000
State and other taxes + 11250
F.I.C.A. + 7650
Medical/dental expense allowance + 0
Employment allowance + 3970
Total Annual Education Saving Allowance (AESA) + 1900
Income Protection Allowance (IPA) + 29810
Total allowances = 69580
Available income = 55420
Parents' contribution from income = 16821</p>
<p>Any contributions to retirement accounts are added back to income and are treated as available income used in calculating the FAFSA EFC. </p>
<p>The balance in the retirement account is not a reportable asset. But income cannot be reduced by contributing to a retirement account during the years you complete FAFSA, so that years contributions are added back to the AGI in the formula.</p>
<p>The income used IS the adjusted gross income, but the pretax retirement savings is added back, because it is technically income that is available to you and it is a choice to fund retirement instead of using it for college expenses. </p>
<p>The other adjustments to income are not added back in. For example, if you were self employed the employer half of self employment tax is deducted, as is any self employment health insurance, student loan interest, tuition and fees deduction, HSA deductions etc.</p>
<p>Is there anything we can do about the fact that my husband and I both are REQUIRED to participate in our 403b (just like 401k but for government employees)? I am required to contribute 7.5% of my income and my DH (because he is over 50) is required to contribute 10%. Furthermore, neither of us is allowed to borrow money from the plan for any reason (including education or down payments on a home). We are both employed at a university.</p>
<p>In case you are wondering, I am 100% sure these are the rules. We have both inquired about ceasing participation with the HR department and that is not an option for anyone. </p>
<p>Since these funds are not available to us, and won’t be available until my DH retires in 11 years, it seems like they should be left out of the income calculation. Anyone have any experience or advice?</p>
<p>Mandatory contributions to employer-sponsored retirement plans are not reported. Look at the instructions … the FAFSA instructions specify which box/letter combinations on the W2 are reported. Box 14 non-elective contributions are not reported (per the verification guide).</p>
<p>Ah, yes. Thank you Kelsmom. After a closer look at our W-2’s, I see that the mandatory contributions aren’t reported as wages, so I didn’t report them on FAFSA. But, what about the CSS profile? How are these contributions reported there?</p>
<p>Scubasue- I actually called my daughter’s first choice college about the 403b issue as we are in the exact same situation as you. They said that they understand the whole TIAA CREF thing as they use it themselves, and to leave it off. Actually, they said that if you included it by mistake they would take it off. Not to worry!</p>
<p>Protected income allowance is based on the number in family and the number in college. Nothing to do with actual income. Purely family size. </p>
<p>Allowances for federal taxes are based on actual taxes from the tax return. Allowances for FICA and state taxes are based on tables in the EFC formula and % combined with income (from work for FICA) within the EFC formula tables.</p>
<p>How unfair fafsa is. Contributions to a 403b are not added back in for total income calculation but 401k contributions are. So all the government workers can save for their retirement and maintain a lower efc, but us poor slobs who only a have a 401k to contribute to must have a higher efc. Yet we both need to save for retirement as social security will not be sufficient to survive on.</p>
<p>Another gripe I have is that fafsa does not take into consideration where the family resides. A salary of 80,000(family of four) in different parts of the country provides for different standards of living.</p>
<p>Would it make you feel better, testtaker1, to know that Federal Government employees, except those hired before the switch from the CSRS system to the FERS system, have the same retirement contribution situation? We have elective contributions into what is basically a 401K.</p>
<p>But I completely agree about the cost of living issue. I don’t expect an adjustment based on the cost of MY house (that’s my choice), but how about an overall adjustment based on the median home price (which also affects rental prices) or some similar index? Obviously, $80K goes further in Akron than in San Francisco. And the government knows this, because they offer “locality pay” to federal employees to adjust for it. (Of course, they don’t do it perfectly–Baltimore gets the DC locality pay.)</p>
<p>Don’t worry, folks. In couple years or so, the way the proposed changes are coming down the pike … it will all be irrelevant. Aid is going the way of grants to those who EARN the least INCOME (and I am talking low income here). Loans are on the road to becoming unsubsidized. The simplification of the FAFSA so many crave will be here. You just might not like the outcome. If you are interested in the future of financial aid, make sure you follow the education news. Google “proposed changes to EFC formula” every so often to see the latest in discussion & debate at the federal level. If you don’t agree with what your elected representatives are proposing … CONGRESS controls the formula … talk to them.</p>
<p>Remember that private colleges have control over their own money. If you think they should do things differently with institutional funding, contact the individual school.</p>
<p>Deskpotato how about when you work for a large company that provides a pension, such as National Grid, Verizon, AT&T…etc. The company does all the contributing and you collect the pension after a certain number of years of employment. In addition to pension benefits some companies provide excellent health care benefits. When you factor in these two major items your total income in reality is several thousand dollars higher than what your w2 states. FAFSA should allow a certain amount of money to be set aside for retirement without being penalized. We pay out of pocket $140.00 week for healthcare benefits and our deductibles are quite high. Also the county in which I live is rated 9th in the nation for the highest property taxes vs total income. I am just completely frustrated by the entire process.</p>