<p>Hi,
I was filling out the FAFSA4caster, and noticed that we may be able to qualify for the 'simplified needs test' based on our income. We have a low family income (probably an AGI of $40,000 or less), but more substantial assets that may really reduce the need-based aid we can get when our daughter goes off to college next year. It would demand that I do some careful planning this year (No stock sales or other income that would require me to file a 1040 rather than the 1040a or -ez that the 'simplified needs test' requires), but I wonder if it would help us considerably to do this? With our low annual incomes, it would quickly deplete out life savings if we can't find a way to reduce college costs. Does anyone have experience with this 'simplified needs test'? If I'm not mistaken it looks like this would qualify us for a ZERO EFC, at least on the FAFSA. Would this automatically qualify us for a Pell Grant, would this help at all with School-based aid, or would most schools use another methodology (like the CSS/PROFILE) that would 'penalize' us for assets? Any advice would be appreciated!</p>
<p>You qualify for SNT with an AGI (or income from work if a nontaxfiler) of less than $50,000 AND you were ELIGIBLE to file a 1040A or 1040EZ OR someone in your family received a means-tested federal benefit during the past 12 months (social security, free/reduced lunch, TANF, WIC, or food stamps). If you meet these requirements, your assets will not be considered in the needs formula. You would most likely be eligible for Pell & the other grants that piggyback off Pell (ACG, SMART, FSEOG). You can find out by running the numbers through the calculator.</p>
<p>There are 2 separate needs tests. </p>
<p>The simplified needs test does not get you an automatic Zero EFC. It does mean that assets will be ignored in the EFC calculation. Retirement accounts and the primary home are protected. Over that there is a certain amount of asset protection in the EFC formula based on the number of parents and the age of the older parent. Anything over that @ 5.6% of assets go to the EFC. The simplified needs test for 2008-2009 requires an income of <$50,000 and that you file a 1040a or 1040ez. I don't think the <$50k limit is changing.</p>
<p>The other test is the for the automatic Zero EFC. For 2009-2010 this requires an income under $30,000 and the 1040a or 1040ez.</p>
<p>You do not sound as if you will qualify for the automatic zero EFC. The simplified needs may be beneficial to you depending on how high your assets are. For 2008-2009 the cut off for the Pell grant was an EFC of <4042. The maximum Pell was $4731 for a 0 EFC and gets lower the higher the EFC until you become ineligible at an EFC of 4042. Being eligible for the Pell may also make you eligible for other grants such as the ACG and a lower EFC may make you eligible for State grants. </p>
<p>These cut offs change annually so may be different for 2009-2010. The Pell EFC cut off actually went down in 2008-2009 even though the maximum EFC went up.</p>
<p>finaid has a calculator that is usually quite accurate
FinAid</a> | Calculators | Expected Family Contribution (EFC) and Financial Aid</p>
<p>But it has not been updated yet to reflect the changes for 2009-2010 . For instance the automatic zero EFC for 2008-2009 required, with other criteria, an income of <$20k while for 2009-2010 it will be <$30k. </p>
<p>Be warned there are a lot of things that may make you ineligible to file a 1040a or 1040ez. We missed out on it my daughters first year of school because my husband overpaid his State tax the previous year and the refund had to be reported on a 1040. Finaid has a list of things that may make you ineligible to file a 1040a or 1040 ez here
FinAid</a> | FinAid for Educators and FAAs | Simplified Needs Test Chart</p>
<p>Other good information to have about the FAFSA calculations (keep reading these forums -- you will be amazed at what you learn):</p>
<p>Married couples have an income protection allowance and the amount depends on the age of the oldest parents. I can't remember the exact figures (I am sure Thumper or swimcatsmom has a link:) but it is something like $60,000 before any assets are counted. </p>
<p>Assets in official retirement accounts (IRA, 401k, etc) are exempt.</p>
<p>Home equity is exempt.</p>
<p>So -- you won't realize much benefit from the simplified means test unless you have assets over $70,000 that are not retirement or home equity.</p>
<p>EFC formula for 2008-2009
<a href="http://ifap.ed.gov/eannouncements/attachments/0809EFCFormulaGuide.pdf%5B/url%5D">http://ifap.ed.gov/eannouncements/attachments/0809EFCFormulaGuide.pdf</a>
Asset protection table is table A5 on page 19</p>
<p>This will probably change for 2009-2010</p>
<p>Students do not have asset protection.</p>
<p>It does change for 2009-10. <a href="http://ifap.ed.gov/fregisters/attachments/FR05292008.pdf%5B/url%5D">http://ifap.ed.gov/fregisters/attachments/FR05292008.pdf</a>. This link details the changes to the federal methodology (for those of you who do it by hand!).</p>
<p>Question: if someone in your family (someone you claim as a dependent) receives social security (a federal means-tested benefit) but you file form 1040 (not 1040A or 1040EZ) are assets disregarded in EFC calculation? </p>
<p>Friend claims her elderly father as a dependent (she provides his support) and he receives social security.</p>
<p>How does she provide his support if he receives social security? He is receiving income. Many schools will not allow him in the household size. Is she legitimately able to claim him as a dependent on her tax return?</p>
<p>If a qualifying relative has less than $3,650 of taxable income, is a member of the household or meets the relationship test and the taxpayer provided over 50% of the support, the relative can be claimed as a dependent. (Nontaxable social security is not counted in considering the $3,650 limit).</p>
<p>For example, if this relative lives in a nursing home that costs $48,000 per year which is paid for by the taxpayer, then the taxpayer is most likely providing over half of the support.</p>
<p>The best way to know if the school will leave relatives in the household size is to ask. This can always be done anonymously.</p>