Trying to understand the EFC

Paying for College
21

You clearly don’t understand the basics here (or your frustration has clouded your ability to understand).

The FAFSA formula counts parent assets at a maximum of 5.64% toward the FAFSA EFC, after an asset protection allowance is used.

Despite the confusing language, the FAFSA EFC (Expected Family Contribution) does not govern how much your student can expect to pay to attend any college. The primary purpose of the “EFC” number that the FAFSA formula spits out is to determine whether or not the student qualifies for federal aid (and in some states, state aid). How much institutional aid, if any, that a student is offered is hardly ever linked to the FAFSA EFC.

This is a ridiculous comparison. Every college lists on its website its no-kidding cost of attendance (COA). Pick 10 hospitals in your state and try to figure out how much each of them will charge for the same standard procedure. You can even try using the same CPT code to help standardize the research. Good luck with that.

22

@granolakrunchr

Are you talking here only about the FAFSA EFC with two kids in college, plus an additional $200,000 in assets?

If so, I still say, you made a mistake someplace. If you add $10,000 to your FAFSA EFC from 2019-2020 for one kid, that would take you to about $41,000. Divide by two and you would have $20,500 or so for each kid per FAFSA (which as @BelknapPoint notes really has no bearing on your out of pocket costs at the colleges).

If this is a FAFSA comparison, I stick with my first comment. There is a mistake in your FAFSA someplace.

Was any of this inheritance money your kids’? Anything in their accounts? That is assessed at 20% for FAFSA purposes.

Any chance you put this asset in your student section for the kids?

For FAFSA only…something isn’t right…unless there is something else you are omitting in the income or asset info here.

23

There is a critical difference between pointing accusatory fingers at “myth” versus accepting one’s own faulty assumptions. Unfortunately, some of this is the latter.

Agree with @Sybylla that it’s curious the inheritance was hinted to be small, barely useful.

And, “BelknapPoint for the win, Alex.” OP is confusing how this works. If FA is a major concern and also minimizing use of the inheritance, he or she needs to bone up on terms, percents, policies, and differences between different entities’ formulas. Then find other college targets.

24

My suggestion is that allowing “the second kid could go free to a state school that wants him for merit” is the absolute BEST idea.

That kills all frustration. You don’t have to wonder why this EFC is not what that EFC is not what someone assumed it might be. If the private schools are too expensive, the solution is the free state school.

25

I’m really hoping the OP will clarify, but the post seems to be talking only about the FAFSA EFCs as indicated on the current SAR.

If that is the case…the OP either goofed somewhere on the FAFSA , or there is additional financial data we don’t know about.

26

Thanks guys, I really appreciate everyone’s kindness in explaining this to me, and your gracious comments about my post. The last official word from the school is that yes, they want the inheritance, and that’s why the increased EFC, despite my lower income. We don’t do itemized deductions because we don’t have enough; you have to spend more to save when it comes to itemizing. We had hoped to use the inheritance for retirement, but that won’t be happening. If you think that’s a grand retirement, I guess we’re coming from different places!

Yes, kid could do a cheap public college as suggested, but I’ve seen many top students unhappy with that choice, since they’re underchallenged and have few peers at their education level. Kid has 4.3 gpa, 1540 SAT, 9th in their Hs class. I’ve heard some students talk about public universities as just an extension of high school, and they really hate it. All they get is a piece of paper, not a challenging education. In this case, Free kittens are only sort of free. I’m sure that quality issue has been well debated elsewhere on CC! So, based on our values, and because we can, we will probably give up some of our retirement on this one.

I still maintain that the formula for calculating family contribution should be accessible to the applicant, and it isn’t. No, not quite the same as mysterious medical costs charged after the fact, but the final college price calculation is still a secret and that sucks. Both are highly negotiable- medical costs and college costs - but it’s challenging to know the outermost limits. They have the big advantage, in both cases. Yes, as posted earlier in the thread, profile schools can assess your situation however they wish, and you don’t get to know how they did it.

One more clue I managed to get from the school is that they are also looking at my retirement contributions, so because I save a lot, that’s being considered an available asset too. Not the money already saved, presumably, but my annual contributions. Lots of factors are going into their offer, and I don’t have access to it. I have some of the numbers, but they have an analysis of those numbers which isn’t given to me. Again, I think secrecy sucks. I want to see the actual math. Seems fair to me.

27

It’s no secret that voluntary contributions to qualified retirement plans are reportable on FAFSA and Profile as untaxed income for the reporting year. It’s right there on FAFSA (questions 44.a for students and 92.a for parents) and Profile for evryone to see. You don’t need to pry a clue from any college financial aid person to figure this out. And the qualified retirement account values are not considered an available asset.

The FAFSA EFC formulas are right here:

https://ifap.ed.gov/efcformulaguide/attachments/2021EFCFormulaGuide.pdf

As I hope you understand, institutional need-based aid at the vast majority of schools that provide this kind of aid is not based on FAFSA. While the methodology is not nearly as transparent as FAFSA, asking the right questions in the right way will usually give you a pretty good idea what kind of income and assets are considered and to what degree. And easily available Net Price Calculators can often give you a heads-up on how much aid will be available before an application is even completed, assuming that accurate data is entered.

Interesting that you were using an expected inheritance as part of your retirement plan. Until the death occurs and/or the decedent’s estate is settled, there’s no guarantee that one penny of inheritance money will be coming your way. It’s a good thing that you are doing a lot of saving for retirement on your own.

28

What schools did you apply to?

Did you use your WUE options? Your real beef so far is Vassar, a private profile school. Union has given you a nice package, you said, and your state school is almost free. When did the inheritance money become your actual property? After you made the list? Do you feel ALL publics are bad? Or just yours? Where is your oldest kid?
What is the major?

29

Re: publics. " I’ve seen many top students unhappy with that choice, since they’re underchallenged and have few peers at their education level."

That’s a bit of myth, too. Another assumption. It depends on the university, of course. Even moreso, the program (major) one chooses. When we were looking, I ran across this comment: Where do you think top kids go, when they’re turned down by HYP, et al? Well, yes. Plenty matirculate at solid state schools, where they maintain a high bar, activate further, engage in the conversation and grow.

That includes “4.3 gpa, 1540 SAT, 9th in their Hs class.” In fact, kids with more than the stats, with many challenging experiences they voluntarily took on, some record of impact outside the high school’s walls.

There’s an expression on CC, “special snowflake.” It refers to viewing one’s kids in isolation. College won’t be high school.

Agree about the ifap link. It covers line by line of the Fafsa and when I did it, came within maybe $25 of the auto SAR.

The “job” of finding the right colleges for a kid includes many factors. It pays to replace assumptions with some due diligence. Not just relying on what one “heard” or thinks or wants.

30

Adding: if one wants the college to underwrite some (or lots) of the costs, why shouldn’t parents be expected to contribute from income and assets? How does one expect them to say, “Go ahead and spend as you wish, save it for retirement, we’ll cover you?” It’s their money you’re asking for.

The only protection is to get those funds earmarked for retirement into a “Qualified Retirement Plan,” aka QRP. In advance. This is an example of info one can also get by doing the research/googling. Why not try?

31

I wouldn’t say that schools are “highly negotiable” in terms of cost, they apply their rules equitably to each applicant. Each applicant (and their family) have highly variable financial situations which can lead to differing financial aid results.

It is really important for families to take the time to figure out what the family can (and is willing to) pay for college at the beginning of this process. And build a college list with that firm budget as a backbone. While I would never tell a family how they should prioritize the schools their child applies to and/or attends - if you don’t have the money (or desire) to be full pay, then something’s gotta give.

I say this as a person who is considered ‘full pay’ by any college/university. I am not willing to pay full price for any college experience. When we looked at colleges, those COA pages were in fact exactly what I knew we would be expected to pay without our children getting merit awards. That meant that even though our child has the stats to attend colleges that “meet full need” (like Vassar), those were tossed out as impractical to apply to as I didn’t want to spend $75-80k a year for a college education.

I know other families on this board who are also ‘full pay’ that have happily decided to be ‘full pay’. That is a choice as well. If you don’t like what Vassar expects you to pay, there are other schools out there which will give you a better ‘deal’ on price. Your choices aren’t constrained to Vassar v. your state’s public schools. Your child still has time to find other options.

32

Every year kids go away to schools (that are higher ranked or LACs). And many transfer back to a school closer to home for many reasons. But the merit aid they were offered as high school seniors is then gone.

My D was first in her class with high GPA and scores, she found plenty of peers at her instate public university. Her school has the top pharmacy program in our state, that’s what she cared about, the merit scholarship allowed her to go there and minimize debt.

33

How did the school know this was an inheritance? It would have been considered an asset like any other asset. It’s not like you list inheritances separately as…inheritances. They are part of the balances in your bank accounts…and they are counted.

Did you list the Inheritance as income? @BelknapPoint how would the FAFSA form…or even the school…know this $200,000 was an “inheritance”.

Regarding retirement…as noted, any contributions made to tax deferred retirement accounts in tax year 2018 will be added back in as income for financial aid purposes.

Please clarify this…are you talking about what the net costs are at each school…or are you only talking about the FAFSA EFC on each kids SAR. There is a difference. I still ask…are you talking ONLY about the FAFSA EFC, because if so, and what you wrote is the only financial info…then there is a mistake on the FAFSA form. The FAFSA EFC should have been less for each kid this year …more like in the $21,000 each range, and that’s including the inheritance money…unless you put that as income as well as asset. Is that what you did?

If you are referring to net costs…the Profile schools can ask for any %age of your assets they choose. They are asking for a portion each year.

Re: public universities. There are plenty of very smart kids going to public universities…plenty. The honors colleges at these schools are usually good with extra perks. Most public universities are large enough that your kid would never see another kid from their high school unless they wanted to.

But…you now have $200,000 that you didn’t previously have. If you give each kid $25,000 a year, that will make up the cost differential for college that you are concerned about.

Does kid two want to attend a college that meets full need for all accepted students? If so, for NEXT year, maybe you can spend down some of that inheritance before you file the 2021-2022 forms. Maybe pay off your mortgage.

34

@granolakrunchr

Please please answer my question regarding whether this is FAFSA EFC Numbers only…or Net costs the colleges calculated.

There is a difference. The colleges can use your assets any way they choose when computing your net costs. The FAFSA has the 5.6% or so limit on the assets.

Also…if the schools are Profile schools, your net costs would not be 50/50. They would be 60/60 at least.

35

The school would only know the $200k was an inheritance if OP mentioned it. I find it hard to believe that if OP said “$200k of the assets is from an inheritance,” the school replied “oh, in that case we’ll assess it at 100% instead of X%.”

36

Did you include the inheritance as other income on CSS Profile? It would then be hit with a higher % towards the parental expected contribution. If it is an asset, it would assessed at 5.6-9%, last I was told. FAFSA would hit it up at 5.6% but private schools can use any percentage they please, but it would still not be at what they assess income.

$200k would be $11,200 added to FAFSA EFC , or $5600 per student with two students. If Vassar’s CSS PROFile formula used the same percentage of asset of 5.6% as FAFSA , the $200k would likely have increased your parental EFC for the Vassar applicant by $6720, because many take 60% of the amount per student instead of half.

That’s not a huge difference from FAFSA.

I suggest you run the NPC again for Vassar, making sure you add back retirement contributions deducted from your income for tax purposes, and compare with other colleges on your students list and see if you are getting comparable numbers. Some colleges do not count home equity or cap it. If that is causing a spike in your expected contribution, then look at schools that in that category. But a $200k home equity would likely only add that $6720 to Vassars EC for a student. I’m curious how where you are getting large differences in FAFSA EFC and Vassar EC.

37

Also what is YOUR cost of the oldest kid, because some schools will want to know what you PAY. If you are not paying much for kid 1, a private school for kid 2 may well see that as $$ for kid 2. for e.g, with 3 in college, kid 1 costs me nada. I think a profile school might see that, and my magical 3 in school math becomes untenable when it is math for 2. The NPC doesn’t go into that depth IME of the few I bothered with. It did not ask what each kids’ COA was when it spat out the NPC number.

38

An inheritance is NOT income and not taxed as income. It’s an asset if it is in an account (savings, stock, etc) on FAFSA/CSS filing day. If it had been put into a qualified retirement plan, it would not be added back to income because it is NOT income.

39

I don’t think the last sentence here is correct. My understanding is that any money, no matter the actual source, that is contributed to a qualified retirement plan needs to be reported on FAFSA as untaxed income for the reporting year, unless there is some kind of exception that I am not aware of. I assume that Profile operates the same way, although I have not seen the actual Profile language in several years.

From FAFSA questions 44.a and 92.a (emphasis in bold added):

Payments to tax-deferred pension and retirement savings plans (paid directly or withheld from earnings), including, but not limited to, amounts reported on the W-2 forms in Boxes 12a through 12d, codes D, E, F, G, H and S. Don’t include amounts reported in code DD (employer contributions toward employee health benefits).

40

@BelknapPoint

Really appreciate all the sharing of helpful experience. A point of clarification, if I might: in your experience, would an inherited IRA asset need to be reported, either as income or an asset in the year inherited? By the time I needed to fill out forms, it was past the year of inheritance, so I think I did ok by not including it on the FAFSA. Thank you.