<p>Prior to filing my 2007 taxes, I filled out the FAFSA for my child who will be a freshman in Sept. Now that my taxes have been completed, I went back into my FAFSA and made the necessary changes. One of the changes had to do with the amount of money that was paid into a retirement account (I'm sorry I don't know the number, but it was one of the questions from Worksheet B). This added approximately $5000.00 to the original amount I had submitted for that question.
Anyway, all of the other information stayed the same as when I first filled out the application. When I received my EFC, it has increased by $3000.00. I don't understand why this happened. Can someone explain it to me?</p>
<p>Contributions to retirement accounts are not allowed to reduce income for financial aid purposes. The AGI on your tax return is the income after non taxable retirement contributions. FAFSA adds the contributions back to the AGI for purposes of calculating the EFC.</p>
<p>I think of it as an assumption that a portion of money available for deposit into a retirement account is available, and should be redirected, to pay for education. Given your numbers, the amount of your retirement deposit that is expected to be spent on education is 60%.</p>
<p>An increase of 5K income won't result in an increase of 3K on the EFC-- more like an increase of $300. Something else is going on.</p>
<p>Was your initial estimated income under 50K, and when you added back the retirement contribution it went over 50K? That could make a big difference---</p>
<p>If the income is fairly high the $5000 could make as much as 2350 difference to the EFC as the maximum % of available income taken is 47%. :eek: But part of the 3000 must be coming from elsewhere.</p>
<p>From table A6 of the EFC formula (parents contribution from AAI)</p>
<p>
[quote]
$27,801 or more $7,519 + 47% of AAI over $27,800
[/quote]
</p>
<p>The additional $5000.00 of retirement money was added to the amount of child support received for the year, which I had originally submitted. The child support amount did not change; only the retirement money amount was added.</p>
<p>Was the original reportable income between 45 and 50K, and the resulting income between 50K and 55K after the retirement money was added back in?
Something else is going on.</p>
<p>The original income was somewhere between 60 and 63K. (I don't have the forms right in front of me, so I'm using memory.) The retirement contributions were added on to that figure, (plus child support received, which was only around 3000). What do you mean when you say something else is going on? Should I be worried about something?</p>
<p>I think sblake is saying that the $5000 retirement contribution would not account for a 3000 difference in EFC. </p>
<p>There is thing called simplified needs where an AGI of $49,999 or less causes all assets to be disregarded under the EFC formula so if you originally entered a figure under that amount then increased it over that it might cause a larger than expected increase in EFC. However if you originally showed $60,000+ in income this would not apply.</p>
<p>The $5000 in contributions could contribute up to 2300 to the increase in EFC - you must have made some other changes to get a 3000 change.</p>
<p>how do you know where your income falls in terms of the maximum %? and do they go by AGI--or taxable income?</p>
<p>There is a formula they follow. You have to follow the formula - takes AGI, adds certain non taxable income (such as SS payments, child support, non taxable IRA contributions), deducts others (such as taxable grants/scholarships and work study), deducts fed taxes and an allowance for ss tax and State taxes to get available income (AI), Deducts an allowance for protected incomes, adds a percentage of unprotected assets to get adjusted available income (AAI)then goes to a table to get the EFC.</p>
<p>Her is a link to the formula - have fun</p>
<p>Thank you for your answers swimcatsmom. As I mentioned before, I don't have the exact figures in front of me as I write this, but the increase was approximately $3000, but definitely not more than that amount. No matter. The fact that the EFC changed from the original amount (because of money I must save for my retirement) is what is hard to swallow.</p>
<p>I feel your pain, speechy! Until the past few years, H had a great retirement plan through his employer. When the corporation decided to change the retirement plan (after H had been there almost 30 years), we suddenly found our retirement underfunded. We really "need" to put money into our retirement plan ... we ain't spring chickens, you know! However, the assumption is that we have that money available first for educational costs. It stinks, but it's the way it is.</p>