<p>I was doing the college board EFC calculator, and I did not see any questions on the monthly credit debt parents are carrying.</p>
<p>I see it in another calculator, called the parent debt calc. Where is the monthly credit debt considered when calculating the EFC?</p>
<p>I'm wondering the same thing. I've talked to my college counselor, and he told me it is somewhat taken into consideration, but only on an individual basis.</p>
<p>In my case, I'm in a middle-class ($110,000 a year combined) family, but I have a parent with a gambling addiction (undergoing counseling) who basically gambled away my entire college savings, and then much, much more.</p>
<p>Credit card debt is not considered but housing debt is. So if you own a house and refinance to pay off the credit card debt, that will reduce your equity (assets in profile) and, if your mortgage home interest increases, that would decrease taxable income (if you itemize). Result = lower assets and income = lower efc</p>
<p>For FAFSA and federal aid, consumer debt (such as credit card, auto etc) is quite specifically not considered and cannot be included even in a special circumstances adjustment (as it is considered a choice). For FAFSA Mortgage debt for the primary home is not really considered either as the primary home is not included as an asset for FAFSA. Debt that is considered to reduce asset values is debt against a particular asset - for instance a for stock account that has a debt against it the value is the value of the account less the debt. Note that it reduces the value of the asset - the payments do not reduce the income that is available for the EFC.</p>
<p>For FAFSA there is an income protection allowance based on number in family - income over that is considered available and debt is not taken into account.</p>
<p>how can they POSSIBLY develop a number that they expect a family to contribute if they do not consider ALL impairments on income?</p>
<p>the EFC would be impossible to deliver. It would be a meaningless number.</p>
<p>I must be missing something.</p>
<p>eg</p>
<p>i make 100 dollars.</p>
<p>I owe 20 for my mortgage, and 20 for my credit cards.</p>
<p>All I have left is 60 for taxes and such.</p>
<p>so 10 for taxes </p>
<p>say 20 for food.</p>
<p>my efc cannot be more than 30 in this case. It is all I have.</p>
<p>BUT what I am sensing is that they might say my EFC is <em>50</em> in this example.</p>
<p>implying more loans I guess.</p>
<p>
[quote]
BUT what I am sensing is that they might say my EFC is <em>50</em> in this example.
[/quote]
</p>
<p>For FAFSA, EFC is based on a percentage of income and a percentage of assets. I think it is 20% of income and 5.6% of assets. If you make $100, your EFC would be no more than $20 plus 5.6% of your assets. EFC does not take much into account on the family expenses side of the equation. The state you live in is consider, to a small extent, and the number of people in your family is considered.</p>
<p>Taxes are allowed as a reduction of income. Then there is a certain amount of income protection based on the number of household members and the number in college - for instance 4 in the household 1 in college = $23,070 income protection for 2007/2008. This income protection is considered to allow for coasts such as rent/mortgage/food. Then of the remaining income 22 - 47% goes to the EFC (the percentage increases as the income increases). This is for parents income - students is simpler - $3000 protected income then 50% goes to EFC.</p>
<p>Parent Assets also have a protected amount (in addition to certain assets being excluded primary home, 401Ks' IRAs) which varies according to the number of parents and the age of the older parent (single parents get a raw deal with @ 40% of the asset protection a couple gets). Anything over the protected amount @5.6% goes to the EFC. There is no student asset protection and 20% of student assets go to the EFC.</p>
<p>I am one of those people who needs to know how things work. If you are curious to know more the formula can be found here
<a href="http://www.ifap.ed.gov/efcinformation/attachments/0708EFCFormulaGuide1120.pdf%5B/url%5D">http://www.ifap.ed.gov/efcinformation/attachments/0708EFCFormulaGuide1120.pdf</a></p>
<p>Yes, It's a rude awakening to discover too late what the government thinks a family can contribute to a college education. A single parent with a middle class income is doomed. </p>
<p>And if you already have debt, you're doubly doomed.</p>
<p>What ever you do - never take on a second job to pay for the EFC, the government will just say, "thank you" and raise your EFC the next year, and then I guess you'll need a third job to pay both the EFC and your debt obligations.</p>
<p>I love this clarification from money-zine:</p>
<p>
[quote]
Debt Service and Financial Obligations</p>
<p>The Federal Reserve also reports what is called the household debt service ratio or DSR. This measure tells us the ratio of all debt payments to disposable income. Unlike payments to credit cards, this statistic measures the debt load associated with basic living expenses such as owning a car and home. As of July 2006 consumer spend roughly 14% of their disposable, after tax income, to pay their mortgages obligations, personal loans and car loans.</p>
<p>The financial obligations ratio measures the amount of consumer debt in the DSR but adds to this measure such things as car lease payments, rental properties, property taxes and homeowner's insurance. As of July 2006, this financial obligations ratio stood at 18.06% for homeowners and 25.18% for renters. What this data tells us is that the typical homeowner spends around 18% of their disposable income just to own their homes and cars, while renters spend over 25% of their income on these same types of debts.
[/quote]
</p>
<p>including our property taxes and ins- we spend about 40% of our after tax income on housing related expenses ( we don't have car loans or credit cards)
However we were still able to come up with the EFC
for our first child anyway.</p>
<p>Consumer debt (i.e. credit card debt, gambling debt, car payments, personal loans that are not mortgage loans) are not considered in the financial aid equation. Housing debt IS considered. Consumer debt is considered a choice.</p>
<p>idic:</p>
<p>a reasonably good summary of the 'whys' to the formulas starts on page 49. And, yes, there is a lot of 'unfairness' in the system, particularly the advantage of having multiple kids in college at the same time (vs. being spaced 4 years apart). Current fafsa law was rewritten by Congress ~1988, so you can write to your Senator for adding consumer debt.</p>
<p>I should have also added to the earlier post, that our housing expenses were a smaller percentage of our after tax income * before*we refinanced to access equity to pay for college as expected :p</p>
<p>blubayou, thanks for the info and the link. I will try to wade through it and understand it.</p>
<p>The college financial aid laws are as of <strong>1988</strong>?</p>
<p>A TON has changed since then. Specifically, cost of ALL college - public and private - growing at a rate MUCH HIGHER than regular folks' incomes.</p>
<p>Let's be straight , too:</p>
<p>A loan is NOT meeting need</p>
<p>IT IS DEFERRING</p>
<p>The piper needs to still be paid. Else, Our children will go off the cliff. Our country is our children, and not the Lenders. Let's do what is best for our country's future and change the law to be more sane.</p>
<p>I have constructed a spreadsheet version of the FAFSA formula that makes it much easier to construct multi-year, what-if scenarios, such as what if my spouse gets a job, what if I get a 2nd job. What if I draw upon assets to pay off the car loan early. A second job looks good in year 1, but has consequences in year 2 and beyond.</p>
<p>Even so, many schools don't use FAFSA or require supplemental information and use their own formula. Many schools use Financial Aid software, such as PowerFAIDS, which performs "need-analysis calculations using both Federal Methodology (FM) and the College Board's Institutional Methodology (IM)."</p>
<p>having an older parent helps lower the fafsa too when all other things are the same.</p>
<p>I'm in the worst place, single parent, 1 child, 46 years old</p>
<p>My net take home pay was about half of my AGI after all the glorious deductions. FAFSA didn't care that my city wage tax is 4%. No place to add that in. Fafsa didn't care that I have a 17 year old CAR. </p>
<p>My EFC is about 40% of my take home pay. Goodbye savings, hello working till I'm 70</p>
<p>
[quote]
having an older parent helps lower the fafsa too when all other things are the same.</p>
<p>I'm in the worst place, single parent, 1 child, 46 years old
[/quote]
</p>
<p>So true - I understand the logic of older parents getting a little higher asset protection because they have less time left in the workforce to make up what they spend on college. But I can see no logic whatsoever in the massive drop in asset protection for a single parent - who on earth came up with the idea that a single parent needs less than half the asset protection that 2 parents need? That's probably the most inequitable part of the EFC formula (in my opinion).</p>
<p>fafsa asset protection allowance tables</p>
<p><a href="http://www.fafsa.com/fmtables.htm%5B/url%5D">http://www.fafsa.com/fmtables.htm</a></p>
<p>who on earth came up with the idea that a single parent needs less than half the asset protection that 2 parents need? That's probably the most inequitable part of the EFC formula (in my opinion</p>
<p>I agree- I also don't understand the logic of assets that are needed for a self employed small business, being assumed to be available for EFC- ( or at least that is how I understand it , from reading responses by those in that situation)</p>
<p>Seriously, the single parent cost of living isn't THAT much lower than a married couple. My health insurance costs are at the family rate (I would pay the same with a husband and 5 kids as I do for just me & my son). </p>
<p><a href="http://www.fafsa.com/downloads/EFC/0708EFCFormulaGuide.pdf%5B/url%5D">http://www.fafsa.com/downloads/EFC/0708EFCFormulaGuide.pdf</a>
page 19</p>
<p>44200 for 2 parents or 17900 for 1 parent. at age 46</p>
<p>***??? 2 parents is worth 246% more asset protection than 1 parent. I would really like to see how the braintrusts came up with that number!</p>
<p>and why does that chart start at age 26. How many 26 year olds have college age students???</p>
<p>Thanks for posting the asset protection tables - they really are inequitable to single parents.</p>
<p>I posted this on another thread but it seems relevant here. I'm a single mom, I have very high mortgage interest payments and live in a high tax state (California). The numbers aren't pretty:</p>
<p>Adjusted gross income: $80,000
Mortgage interest: $60,000
Property taxes: $20,000</p>
<p>Net income is negative. However, since FAFSA takes the AGI as available income (hah!), my EFC is around $20,000. I have two boys in high school and will be saying good-bye to all of my savings in the next 6 years. It's a good thing I have IRAs and a 401k, and fortunately I have no debt other than my mortgage.</p>