<p>I am a bit perplexed.........</p>
<p>Does anyone know what percentage is used in calculating EFC with respect to parental assets and income? </p>
<p>Are contributions made to a 401K Plan in the current year considered income?</p>
<p>How does the asset protection allowance of $71,000 for parents 65 years old and older work exactly?</p>
<p>Our EFC (no adjustment for asset protection) comes out to 13% of:
AGI;
401 contributions; and
checking/savings account balances.<br>
Child will have no siblings in college next year (#3 graduating this May) and had no income in 2011.</p>
<p>Thanks for any clarification and input.</p>
<p>an EFC of 13% is quite low. Many EFCs are typically 20% - 33% of income…unless income is lowish. </p>
<p>Is this for a household of 3 with one in college? (I’m guessing that the other children don’t count as they are graduates.)</p>
<p>Haven’t you done this before with your other children? It sounds like you’re doing this for the first time.</p>
<p>Yes, retirement contributions for the year are added in as income.</p>
<p>Asset protection means that that amount is not assessed for college contribution. So, any non-retirement savings/investments that you have that is beyond the protected amount will be assessed at about 5.6 % (I’m not sure if that’s the exact number, but it’s close). Retirement savings has to be actual retirement accts, not regular accts that will be for retirement.</p>
<p>
</p>
<p>Income is ESTIMATED at 20%-30% of gross income (that is an ESTIMATE). Assets are assessed at about 5.6% but there is an asset protection allowance.</p>
<p>
</p>
<p>If you are completing a FAFSA for 2012-2013 school year, contributions to any pretax retirement plan (401K are pretax) for 2011 ARE added back as income.</p>
<p>
</p>
<p>If that is the asset protection allowance, any assets OVER that amount are the ones used to calculate the 5.6% that will be used.</p>
<p>
</p>
<p>How did you get an EFC without the “adjustment for asset protection”? That adjustment is INCLUDED in the formula that calculates the FAFSA EFC. You don’t do anything extra to make that happen.</p>
<p>
</p>
<p>This just means that there is no one to “share” that EFC.</p>
<p>If there is an older child, what did THEIR EFC look like?</p>
<p>Thank you for your replies!</p>
<p>mom2collegekids and thumper1:</p>
<p>Yes it is for a household of 3 with one in college since the one graduating in May starts his job on August 12th. Of the remaining two one son is in grad school and the other is working.</p>
<p>Yes I have done this before but always in conjunction with the PROFILE; the EFC seemed surprisingly high under the circumstances this year.</p>
<p>I correctly assumed retirement contributions for the year are added to income. In my calculation I ignored the Age 65 plus Asset Protection Allowance of $71,000 however. I added our assets and income together and took 5.6% of the balance to arrive at our EFC which was 13% of the total. Taking into account the Age 65 Plus Protection Allowance makes it 15.7%. Other than our home equity which they don’t count our only asset is the cash in our checking and savings accounts. I guess I misunderstood that it’s 5.6% of assets and 20%-30% for income. I was under the assumption it was 5.6% of both numbers-WISHFUL thinking! If I take 30% of our income plus 401K contributions this year and 5.6% of our assets minus 71,000 I come very close to the EFC FAFSA calculated. I had just hoped since my husband and I are 57 and 66 that they might take that into account relative to our income stream and not make us give up 30% of our income. I guess we should retire so we have no income?</p>
<p>Last year’s EFC’s for #3 and #4 were confusing to me as well but due to some major medical issues our family has been challenged with going back to 2003 I never had the time to pursue it and make sure I understood it.</p>
<p>We worked hard to save and be able to put our four sons through private colleges with minimal aid; I am glad we only have 3 years left of it come this May because it has definitely been a struggle with out-of-pocket medical expenses consistently at 30%-33% of AGI! This is the first son to attend a private non-PROFILE school (the PROFILE does take medical expenses into account). It’s too bad that our calculated EFC is more than the cost of attendance by about one dollar and that the financial aid office does not care about extenuating circumstances relative to our extremely high medical bills.</p>
<p>You can submit a special circumstances request to your son’s college with regard to the high medical expenses. HOWEVER, you do need to understand that these are not automatically granted. It is at the discretion of the college to review these and the determination of what to do (if the college does review this) is done on a case by case situation.</p>
<p>I am VERY confused by your paragraph above detailing how you computed your EFC. Did you actually complete the FAFSA? If so, the computation is done FOR YOU…you do not have to consider the asset allowance for the older parent, you do not do any of the calculation at all. You simply enter the numbers from your 2011 tax return into the right spots on the FAFSA. Then the calculations are done based on what you have entered.</p>
<p>
</p>
<p>What does this mean? Your assets are tapped at one rate…and your income at another. You do NOT add them together…at all…anywhere.</p>
<p>I really am perplexed by your query. You say your EFC seemed “surprisingly high”. How so? What was your income? Your INCOME is what primarily drives the EFC…assets are included but only over the allowed amount…and than at 5.6% of their value.</p>
<p>13% of your net income seems to be a very LOW efc to me…but that is me speaking. If your income is on the low income side, this could be accurate. BUT if you are a middle income earner…it is a very low %age, in my opinion.</p>
<p>I’m confused. Are you saying that your EFC is only 13% of your income yet you’ve been able to pay for private colleges for your sons with minimal aid…and your EFC is the same price as child #4’s private school?</p>
<p>I’m confused because the OP keeps saying THEY did these computations. Please clarify…did you actually DO a fafsa?</p>
<p>
Explain net income to me. Our EFC is less than 10% of our AGI but I assume you mean a different value for income.</p>
<p>The percentage of income (after income protection allowances) that goes toward the EFC increases as income increases. At the low end it is around 22% (remember this is after allowances ), at the high end it is around 47%</p>
<p>Someone with a low income may have less than 13% of their income go to the EFC because of the protection allowances. Someone with a high income will have more. </p>
<p>Percentage of unprotected (parent) assets that goes to the EFC is 5.6%.</p>
<p>
The EFC formula does actually add them together in a way. It takes Income after allowances and adds 12% of unprotected assets to that figure to get adjusted income. The adjusted income is what the percentages above are applied to (which is how the maximum of 5.6% of parent assets comes about - 47% of 12% = 5.64%).</p>
<p>So when you say net income you are referring to AAI (Adjusted Available Income)? That would make sense as ours is around 27%.</p>
<p>I wouldn’t refer to the AAI as net income. The AAI is AGI, less any allowances, plus 12% of unprotected assets. I would not consider that net income at all. </p>
<p>At a guess, I would think that when people refer to net income in this forum, they are really referring to AGI (adjusted gross income), as that is the number from the tax return that is reported on FAFSA. Net income isn’t really used in FAFSA.</p>
<p>In our experience…our FAFSA EFC was about 28% of our NET income (not what was on the FAFSA…but what our NET…before taxes income was). </p>
<p>The %age of money allocated varies depending on your actual income (AGI) on the FAFSA. As Swimcatsmom pointed out…the higher your income…the larger the %age.</p>
<p>But back to the OP…did you actually DO a FAFSA…or are you speculating on your EFC based on using the formula?</p>
<p>The percentage of income (after income protection allowances) that goes toward the EFC increases as income increases. At the low end it is around 22% (remember this is after allowances ), at the high end it is around 47%</p>
<p>Someone with a low income may have less than 13% of their income go to the EFC because of the protection allowances. Someone with a high income will have more. </p>
<p>=============</p>
<p>I can understand that someone with a lower income would have a lower percentage go to EFC. But, the OP says that they’ve paid for private schools for their older kids with little FA…so that seems odd for someone with a lowish income.</p>
<p>
</p>
<p>Retirement income is included in the FAFSA calculation also.</p>
<p>^^^</p>
<p>Very true…and since it sounds like this is a FAFSA only school, so having less income might mean having to scramble to cover a big gap.</p>
<p>MOST colleges do not meet full need. It’s not JUST FAFSA only schools that gap students. The number of colleges that meet full need is a very small %age of the 3000 or so colleges in this country.</p>