<p>EFC= $28K, family of 4 income in $90's, life-time non-retirement savings $50K...</p>
<p>Also, appears FICA/Medicare taxes in not included in tax expense.</p>
<p>Sounds about right.</p>
<p>As I recall, the FICA taxes do get considered by the formula-- although it may be something the formula calculates itself based on your earnings, rather than a figure you input.</p>
<p>If you want to see what's contributing most to your EFC, run the numnbers through the calculator at FinAid. It will break it down for you. The majority of the EFC in your case is likely from parents' income. The savings might be contributing a couple grand.</p>
<p>Savings don't contribute much to EFC... I think I remember hearing that only a tenth of savings can be counted into EFC.</p>
<p>Not really true--</p>
<p>With the Federal Methodology (FAFSA), a full 35% of a Student's savings get added to the EFC. This can be a HUGE tactical mistake when planning for college.</p>
<p>Parent's get an asset allowance, which varies depending on number in the family and age of the older parent. It's typically around 45K or so. Below that, nothing comes from savings. Above that, parent's assets get nailed at 12%. </p>
<p>So let's say a family has saved 20K in a student's account, and they also have 100K tucked away in a non-retirement savings account. With a typical asset allowance, they will contribute 7K (student) + 8.25K (parents) = $15.25K toward the EFC from assets alone. </p>
<p>Then add income contributions to that.</p>
<p>On the other hand, if the same family had placed all their 120K savings in the parent's name, their contribution from assets would only be 9K-- and their aid package would potentially be $6,250 higher.</p>
<p>Third scenario-- if they'd socked half of that savings into a retirement account, their contribution from savings would only be $2,250 -- and their financial aid would potentially be $13,000 higher than in the original example.</p>
<p>Assets do matter. Where you put them matters a lot.</p>
<p>I just double checked -- FICA/Medicare taxes do get deducted automatically, based on your answers to the questions: "Fathers income from work" and "Mother's income from work". The formula's calculate the taxes you paid based on that input, and deduct them from your available income.</p>
<p>Thanks for the replies. Obviously, the EFC is requiring the parents to pay out of future earnings, beyond 4 years, etc, overwise it would never work out. I guess the EFC is projecting out future wages.
Basically, it looks like the younger the parents are, the more future earnings that will be calculted into the EFC.</p>
<p>Your EFC is recalculated every year to account for future earnings increasing or decreasing, correct?</p>
<p>Your EFC is largely based on the assets and income for the previous year. The only thing considered in the future how close the oldest parent is to retirement. When you file your finaid applications for the upcoming year, you will be listing current assets and the income and interest income from 2005....not the future. Colleges assume that income from the previous year, and assets "could" be tapped for college expenses for the upcoming year. If you wish to be considered for need based aid in subsequent years, you will file the same forms again (FAFSA and in some cases Profile). Your EFC for upcoming years will be calculated based on the income and assets for the year prior to the one you are applying for. The only future thing that is "considered" is the closeness of retirement for the oldest parent, because most folks have greatly reduced and fixed income once they retire. The finaid folks do not use a crystal ball and the future to determine your finaid. They use the current and past.</p>
<p>Yes-- recalculated every year. But not to account for future earnings, really-- it's recalculated based on previous year's earnings.</p>
<p>So kids entering September for the 06/07 will be offered financial aid based on '05 income, and assets on the date the FAFSA/Profile is filed.</p>
<p>The following year, their sophomore year starting 9/07, the financial aid will be based on '06 income.</p>
<p>The base income year (perhaps the most important year) is the calendar year that starts January of their junior year in High School.</p>
<p>ack! sniped by thumper. :)</p>
<p>that should be right, i have a friend her household is also 4 and her parents income is in 90gs, and she said shes not getting any aid so i guess that makes sense</p>
<p>Is the value of the home included in the EFC? I just did an EFC calculation and it did not ask me for how much equity we have in the home. However, I had read on CC that some schools do look at home equity when calculating EFC.</p>
<p>Micromom,</p>
<p>The schools that look at home equity are most likely the ones requiring the Profile as well as the FAFSA. If your schools do not need the CSS Profile, your home equity is usually not taken into account. I say "usually" because some school have their own financial aid information form that asks for this information, and they can consider it when looking at the financial strength of the family.</p>
<p>Thanks momofthree. I am just starting to look into all of this stuff - my son doesn't apply until next year. I looked up CSS pofile in the old CC board. Not knowing what it was, I found this description by Thumper useful:</p>
<p>"The CSS Profile is another way for colleges to assess student need for financial aid. Some colleges require it to be filed in addition to the FAFSA. The colleges to which you apply should indicate whether or not they require the Profile (some do and some don't). If they require it, you must send it. They will not process your aid application without it if it is required. If they do not require it, they will not review it if you send it. To my knowledge, all colleges require the FAFSA for need based aid. Also, some schools have their finaid questionnaires."</p>
<p>Any thoughts if one should pay off a sizeable mortgage? Thanks again.</p>
<p>Using liquid assets (savings, or CD's, etc) to pay down debt is a good strategy in terms of financial aid, as lowers the assets that get assessed. Using assets to pay down a mortgage involves a number of variables, though-- whether your assets exceed the asset allowance, what your income is (and whether you'd be eligible for aid at all), whether you're applying with Profile or just FAFSA, and if applying with Profile, whether your target schools cap home value at 2.4 times income, and the amount of your current equity. Lots of stuff going on here.</p>
<p>Best to play with the calculator at FinAid and see how various scenarios play out and affect the EFC.</p>
<p>sblake7, thanks for the advice. I will look up son's target schools and see if they are FAFSA schools, Profile schools or both.</p>