FAFSA EFC calculations not subtracting Coop Earnings

Paying for College
1

My daughter’s FAFSA EFC is much higher than we expected. I am the non custodial parent.

Mother’s Income =~ 24K, mom assets low enough to not matter.
Daugther’s Income =~ 10K coop earnings (44f fafsa)
Daughetr’s unearned income =~ 6K (money I gave her from my 529 plan with her as beneficiary)

household size 2, children in college 1.

So EFC should be close to zero since Mom’s contribution should be around zero, and
students contribution should be around zero since her Total Income should be 10K+6K-10K(coop) = 6K which is less than the Allowances. Only EFC contribution should be about 20% of student savings.

Instead it seems like fafsa is not subtracting the 6K coop, and is using student income as 16K.
In fact if I plug in 16k into the formula provided here:
https://ifap.ed.gov/efcformulaguide/attachments/071017EFCFormulaGuide1819.pdf

I arrive at exactly the EFC reported by FAFSA. >2500

I suspect it is not common for the student income to be lower than student allowances. So they assumed something was wrong and decided to ignore and not subtract coop earnings. Useless to call fafsa, they say formula is correct, that mistake is on this side. Not helpfull at all.

Any comments from the experts?

2

Doesn’t the mom qualify for any means tested benefit? Is she able to file a 1040A or 1040EZ form?

Is her income really below $24,000?

If she meets the qualifiers in my first sentence…and her incime is below $24000…I believe she would qualify for auto $0 EFC…and her assets would not be counted…and your kid’s income not counted either.

I could be wrong…but I think that is the case for auto $0 EFC.

@twoinanddone ??

3

Actually I think her income from work is a little bit over 25000. But that she did some Uber on the side (which brings in some real income, but results in a tax loss) bring total income down to 24000. And also due to these things on the tax, had to file 1040.

So basically not a auto $0 EFC

4

Meant to say
Instead it seems like fafsa is not subtracting the 10K coop, and is using student income as 16K

in first message

5

The IRS data retrieval tool brings over the AGI and income earned from work. But the FAFSA doesn’t know where the income is from.

There is a question in the FAFSA that asks about income from co-op. It’s question 44f.

Did she list her $10,000 from co-op earnings there and it should be subtracted from total income?

https://fafsa.gov/fotw1819/help/faadef46.htm

6

Exactly - the question about the co-op earnings is key. That is something she should be able to go in & update.

7

Total income on her tax return is $16,000?

Or is it $10,000 and you are counting the $6,000 from your 529 as her income on FAFSA, but it’s not taxable income?

If this is money paid on student’s behalf in 2016, then I think it should be reported in untaxed income, not unearned income.

See whether reporting the $6,000 in question 45f changes anything.

https://fafsa.ed.gov/fotw1819/help/faadef22.htm

8

So is the $10,000 co-op earnings her only earned income for 2016?

AGI should then be $10,000
Earned income $10,000
question 44f: $10,000
question 45f: $6,000

So then student income should be less than student income protection allowance.

9

yes:
AGI is $10,000
Earned income $10,000
question 44f: $10,000 (coop)
question 45f: $6,000 (529 plan money from me)(reported in untaxed income, i misspoke before calling it unearned)

EFC should use total income as 6K,
but the EFC seems like it is being calculated with 16K .

10

Acutally she reported
question 45j: $6,000 (529 plan money from me)(reported in untaxed income, i misspoke before calling it unearned)

Not 45f as was suggested above, 45f is also transferred from IRS.
so repeating 6K was reported on 45j

11

Do the calculations by hand to see if there is a difference with & without the co-op earnings: https://studentaid.ed.gov/sa/sites/default/files/2017-18-efc-formula.pdf. It is possible that the situation is such that the student’s contribution from Available Income is the same with or without the co-op earnings being taken into consideration. This could happen when the student’s contribution from AI ends up negative … because 0 is used in that case, rather than a negative number.

12

She doesn’t have to report the $6,000 from your 529 account on her tax return, right?

So why would that number come over from the IRS?

And yes I posted above to report $6,000 529 money from non custodial parent as untaxed income in question 45 f.

But the COOP income should be the one coming over from the tax return and then it gets subtracted from total income in question 44 f.

13

Sorry, yes you are right. It is 45 j that the $6,000 student support from you is reported.

I don’t understand why the FAFSA doesn’t subtract the coop income.

14

It might be … but if the student contribution from AI is negative & gets counted as 0, it might seem like it’s not getting subtracted out. It isn’t subtracted directly from the income. If you look at the formula, you’ll see that it’s toward the end of the formula, where the student contribution from AI is calculated.

15

For those who understand EFC calculations. It should be pretty obvious that a parent with 24K income and student with 6K effective income should result in close to 0 EFC.

The only way for EFC to be > 2500 is for student income to be much higher.

This seems to be a mystery, my daughter will work with fafsa and the finaid office.
I promise to come back and unravel it for all who are helping.

I basically suspect the following:
1 - coop income in line 44f not getting subtracted before being fed to EFC calculations.

maybe they dont expect total income < allowances when regular income is above a certain threshold, and it is erroring out. I know my daughter said something looked wierd in 44f, like it showed the 10k on the SAR, but seemed ambiguous while on the website. Also as soon as she submitted the fafsa, it did not give her an efc, it gave the following message:

"Estimated Expected Family Contribution (EFC)=

We cannot calculate an Expected Family Contribution (EFC) until your application is processed."

But then a few days later the SAR came back with the high EFC.

I used the spreadsheet that was posted here
http://talk.qa.collegeconfidential.com/financial-aid-scholarships/2027522-fafsa-spreadsheet-for-dependent-students.html#latest

It shows EFC of almost zero, with the correct input data.
If I zero out coop earnings, i get exactly what the FAFSA SAR shows.

16

@NonCustParent

I’m going to ask the elephant in the room question.

If you are the non-custodial parent…how is it that you are looking at the custodial parent FAFSA form?

Does your former spouse receive any spousal support in addition to income?

17

Several questions and observations.

  1. If your ex wife's AGI was indeed $25,000 or less, then did anyone in her household receive federal means tested benefits in 2016 or 2017? Like free/reduced lunch, SNAP, etc? That would be another way to qualify for auto zero EFC.
  2. your D's coop income was from 2016 and was reported on her 2016 tax return? The 529 money you gave her was also given to her in 2016?
  3. How much were your D's assets? Roughly, you don't have to give exact amounts.
  4. I agree that if the mom made around $25,000 and even if auto zero EFC would not apply, her available income (AI) for FAFSA EFC calculation would be very small (or zero or negative) because of federal, state, soc sec tax deductions, income protection allowance and employment expense allowance.
  5. I do not agree that the student portion of FAFSA EFC would be $2,500 if the coop income of $10,000 was not subtracted. If total income was $16,000 and then federal, state, soc sec tax were deducted, and income protection amount of $6,570 was deducted, then available income would be about $8,000, so student's contribution from AI would be 50% of that, so around $4,000.

Then added to that would be the 20% student contribution from assets.

Did your D go through her SAR and check if she entered all the numbers correctly in the right places?

18

no elephant. Non adversarial.

I am better at dealing with these things than ex-wife who is a foreign born.

No spousal support anymore, had that long time ago.

the 6k I gave my daughter I consider continuation of child support in my mind. But I give it directly to my daghter instead of giving it to my ex-wife. Do same for other kids.

19

regarding mommdc points

1 - Prior to 2016, ex-wife earned more, in 2016 she did not work for 1/2 of the year. that is why income was low. I guess she never considered herself poor to get means tested benefits. she made more again in 2017.

2 - yes

3 - end of year assets were $500 → 20%=$100

4 - yes, actually negative.which affects item 5 below

5 - disagree, Total allowances > 10500 (taxes paid + state tax allaowance+social security allowance+6570+allowance for parents negative AAI) So 16000-10500 = 5500, and 50% of that is $2750. I had just rounded that to > 2500.

I am pretty sure everything in the SAR is what was intended.

20

Ok. Of course I don’t know all of the details, and which state applies and such.
The mom must have had lower income or higher federal and state taxes than I estimated. I assumed she filed HOH and claimed your D and qualified for EIC, but if D had $10,000 coop income and spent that on her school expenses (assumed because her savings balance was only $500), then mom might not have been able to claim her on taxes, or claim HOH or EIC.

Hopefully your D can get this corrected through FAFSA help or the school can do a correction on their end since they should know of her coop.

Also the assets are not end of year assets. Unless your D did the FAFSA then.
Asset balances are reported as of the day the FAFSA is submitted.