Is AGI biggest factor for EFC?

Paying for College
1

Im trying to understand the main determining factor of a family’s EFC. It appears money in a 529 does impact the EFC but not nearly as much as AGI. Is there an “understood” AGI amount where the “need” level goes to zero? Does the FAFSA output just feed into a particular school’s formula to determine your “need”?

Also if you have $80k in a 529 for your student when they plan to start college (which is planned to be used equally over 4 years, ~$20k per yr), does the school expect that money to be spent immediately if the EFC is say 35k per year? Meaning, from the parents perspective the “need” is $35k-$20k or 15k per year. Does the school see no “need” in the first year since $80k is “available”?

2

Cc south…I would suggest you look at a net price calculator for a college of interest to you.

Schools have varying formulas for determining need based aid. Some schools guarantee to meet full need, and others do not. So your question about income and need level really can’t be answered uniformly for all colleges.

There are some very generous and competitive schools that also meet full need. Some provide need based aid for families with incomes in the over $150,000 range. But that is the exception.

In addition, your need is also based on the cost of the college. For example, you might not have any need at a school with a total cost of $20,000 a year, but you could,have a lot of need at a school that costs $60,000 a year. Of course…that doesn’t mean your need will be met.

The main driving force behind the EFC per fafsa is the family income.

3

Yes, AGI is the biggest factor, student and parent. Below is a link to the fafsa formula for determining federal EFC. Schools are only required to use fafsa efc for federal aid eligibility. Some state aid programs use fafsa efc too. For their own aid, schools can do whatever they please. Schools that use fafsa efc for their own aid are generally schools that provide less aid. Schools with the best aid use CSS profile or their own finaid forms which ask for more detailed info than fafsa. For their own aid schools can determine your need any way they like. That’s why the suggestion to run net price calculators at each school of interest is the best way to get an estimate of aid.

For the fafsa formula, parental assets. including 529 balances. are added to efc at about 5.64% of the value after an asset protection allowance which is in a table at the link.

http://ifap.ed.gov/efcformulaguide/attachments/090214EFCFormulaGuide1516.pdf

4

Thanks, I completed a NPC for a school ($55k/yr) that meets “need” and the result was we were full pay. Even though 529/cash and income would not be enough to cover EFC. I reran NPC as if my wife was not working and our EFC dropped $25k to $30k. Thanks for info, I’m early in the process and have a few years before DD#1 starts school just trying to understand the impact of income and how “need” is determined.

5

Are you saying your income is less than $55,000 a year (total…yours and your wife)?

I’m not sure how you would get a family contribution that exceeds your income…unless you have HUGE assets.

I will guesstimate here…but if your family contribution came out to $55,000 for the year…your gross income would need to be in the $150,000 to $200,000 a year range, I would guess.

Did you make a mistake on the numbers on the NPC? Did you put parent assets in the student section (student assets are assessed at 20%)? Did you list your balances in retirement accounts as assets? Did you a misplace a decimal point on a number?

In the vast majority of cases, family contribution does not exceed annual income.

6

No the COA is $55k/yr. In the second scenario the EFC dropped from $55k to ~$30k. Your AGI numbers are accurate.

7

Yes…but you can’t just eliminate your wife’s income unless she plans to quit work.

In your post above, you said your EFC exceeded your income plus the 529 savings. It was above the cost of attendance of $55,000.

What I’m saying is…that is not a likely scenerio…at all. Unless you have a gazzilion dollars in that 529. 529s are only assessed at 5.6% of value for fafsa EFC calculation purposes.

8

Sorry I meant that the annual EFC would be exceed what we plan to spend annually from DD#1 529 plus what we could afford to pay out of our monthly income.

And yes scenario 2 was considering wife quitting work.

9

Save as much as you can in 529 would be a very good idea!

10

The school computes your family contribution based on your income and assets…and they determine what they expect you to pay…not what you think you can pay.

Like I said…with a family contribution of $55,000 a year (with both parent incomes considered) your total income is very high…like more than $150,000 a year.

If you are thinking that having your wife quit work is a good idea, please think again. There are many considerations. First…most colleges don’t meet full need…so less income won’t necessarily net you more aid. Second, this takes your wife out of the work force, and therefore decreases her seniority and income prospects for the future. Third, you have no guarantee that your kiddo will get accepted to a school that meets full need.

If your income is so high that need based aid is out of reach, you should consider what your kiddo needs to do to,qualify for merit aid at schools where it is offered. That is not income dependent.

Read the links in this thread:

http://talk.collegeconfidential.com/financial-aid-scholarships/1678964-links-to-popular-threads-on-scholarships-and-lower-cost-colleges.html#latest

11

Thanks just looking at hypotheticals at this point. DD is also a student athlete which in some ways complicates things. It adds another component of finding the right fit/match. The D1 in the example would be a great fit academically and probably athletically but financially maybe not. Normally money is not expected in her sport past possibly 25%. Lots of good instate flagships but will not be an athletic match.

12

What is your AGI?

13

Also, do you own a business, or are you self employed?

14

Are there younger siblings with 529 accounts?

15

@thumper1 no. @Madison85 yes

16

I believe the 529 accounts for all the sibs are counted on the oldest one’s fafsa, aren’t they?

Ok…I’ll stick my neck out. If your gross income is well over $150,000 a year, you likely won’t qualify for need based aid at the vast majority of colleges.

17

Right, the 529 for all siblings are counted as the parents’ asset for the oldest one’s (and subsequent) FAFSA. So if there are 3 kids each with $80k, that’s $240k in assets at 5.6% or about $13k added to each kid’s EFC, assuming various other factors.

18

You seem to understand parts, which makes following your questions a little challenge. It will help to find a book or web site that runs through it all.

I found it useful to run the Ifap (above) because it gave me understanding what’s considered. Other than that, the exact school formulas are proprietary. Closest view you can get is by running NPCs for all the considered colleges.

No, they don’t usually tap the the full 529-type asset, out of the gate. But yes, it’s a numbers game. whose names are each of the 529s in?

“Meet need” - usually, the phrase to look for is “meet full need.” The schools we applied to used both Fafsa and the CSS profile. Schools come up with their estimate of your Family Contribution and remaining “need.” Then, they piece together FA. At that point, you have to take a good, rational look at the fine print. Eg, some meet need by adding in a student loan (which is not aid. It helps but it is neither a grant, nor self help like work study or the student contribution from summer earnings.)

“Qualified” retirement plans don’t usually count, you need to know if yours are QP.

Thumper has a valid point on the wife quitting. You drop your own operating income. Plus, our colleges asked for the tax return in the year the kid applied, plus the prior year, then a projection of the upcoming. (Eg, for current seniors, 2015 and 2014, a projection for 2016.)

So really, wife would be out her income for 2+ years just to apply for freshman aid. Since you reapply annually, then she couldn’t earn much while Kid 1 is in college. That can be a big loss, just to get FA.

All this is why you should be looking at schools that offer merit aid.

19

??
You’re going to expect that your wife quit her job for the many years that all of your kids are in college? What will that do to her future career aspects? her retirement?

If you’re going to expect that your wife quit during all those years, are you prepared to FULLY SUPPORT her if you were to later divorce since her career was seriously stalled just so that you could get financial aid???

What if your kids don’t get into schools that “meet need” (since most schools do not meet need?)

One alternative…If you don’t want to pay full price, then look for schools that will give your kids large merit scholarships.

Another alternative…since you are suggesting that you don’t need your wife’s income to live on, then from this moment on, save 100% of her income into the 529 accounts.

BTW…you seem to be really wanting schools to ignore your income and only use what’s in the 529 accts.

20

Unless I’m reading this wrong…the family contribution the NPC gave the parent was in excess of what they WANT to pay annually. To be honest…what a family wants to pay has no bearing on the financial aid calculation.

Another thing to remember…the FAFSA formula assesses the 529 plans at 5.6% or so to be added to the EFC. But for schools using the Profile or their own form, the school could expect a much larger contribution from those accounts. After all, they are set up for college costs.

To the OP, there are many folks with those incomes above $150,000 a year who are surprised when their family contribution is much larger than they wanted to pay.

Another thought…if your wife not working reduces your EFC by $20,000 or so, she is likely earning enough to pay a good portion of college costs. So right now…put the money in the 529 accounts. Then when the kid starts college, use your wife’s current income to pay college costs only (since you don’t seem to think you need it for daily living expenses). You won’t be the first person to do this!