<p>I've been at at-home parent without an income. My husband works full-time. We've been wondering how much our EFC will increase if I go back to work when our kids are both in college. I was doing some "what-if" scenarios with the FAFSA forecaster, and was surprised to discover that if I added a very modest income for myself (between $10,000 and $15,000), our EFC actually went down - totally unexpected. Can anyone please explain that?</p>
<p>I am surprised it would go down actually. You do get slightly more allowances when there are 2 parents working - where there are 2 parents and only one works there is a 0 allowance for “employment expenses”, but where both parent work there is an employment allowance of 35% of the lesser earners income up to a maximum of $3500. There would also be allowances for FICA taxes on your earnings, and for federal and state taxes. But even with all the allowances the remaining income would still be higher. For instance if you earned $10,000 you would get an additional allowance of $3500 for employment expenses, $765 for FICA, then allowances for federal tax (depending on your tax rate) and for state taxes (depending on your state). Even if you working bumps you into a higher tax bracket I would still expect your EFC to be higher. </p>
<p>It honestly sounds like some sort of glitch. Which forecaster were you using?</p>
<p>Hmmm - I’m not sure how it would be possible for your EFC to go DOWN, but when I did the numbers myself a year or so back (using the charts in a book I’ll recommend below), I found that if I went to work and earned $10K (gross), our EFC would go up (IIRC) around $1000 - 1500. (I did mine a while back, using last year’s EFC formula. Below, I’ll use the current formula)</p>
<p>The FAFSA uses an “Employment Expense Allowance” when both parents work. 35% of the lesser of the two incomes, up to a maximum of $3500, is excluded from income.</p>
<p>So - if you’re in the 25% marginal income tax bracket, and made $10,000, I’ll do the math (can’t find the piece of paper where I worked this out in detail for different incomes, but I’ll do a quick “back-of-the-envelope calculation”):</p>
<p>10000 gross
minus $3500 (the max Employment Expense Allowance) which FAFSA excludes from income
minus $2500 in income taxes (which FAFSA excludes)
minus 7.65% in FICA, times 10000 = $765
minus state income tax (FAFSA uses 3% for our state tax rate, which is a huge underestimate since we pay a high sales tax rate even on groceries and our marginal state income tax rate is 5.5%) so for us, 3% X $10000 = $300</p>
<p>so, for FAFSA purposes, we would have an increase in “available income” of $10000 - 7065 =2935. For incomes above a fairly modest level, FAFSA assesses available income at 47%.
So - our EFC would increase by 47% of 2935, or $1379.
FYI, the details of the EFC formula for the 2010-2011 academic year are here:
<a href=“http://ifap.ed.gov/efcformulaguide/attachments/111609EFCFormulaGuide20102011.pdf[/url]”>http://ifap.ed.gov/efcformulaguide/attachments/111609EFCFormulaGuide20102011.pdf</a></p>
<p>Your numbers will vary, depending on what income level you’re starting from (your spouse’s income), your marginal Federal income tax rate, the state tax rate that FAFSA uses for your state (given in the link above). Even if FAFSA assessed your available income at a lower rate (see table on bottom of page 19 in the link), and your marginal Fed tax rate and state tax rate were lower, I can’t figure out a scenario where the EFC would go DOWN, when your income has gone UP. hmmmm…</p>
<p>I’ll calculate now how much money we’d actually have <em>in our pockets</em> if I went to work and made $10K – the Fed income tax and FICA numbers above would be the same. Our state in real life would take $550 in state income tax.
Sooo -after taxes I’d have 10000 -3315 or $6685. FAFSA would increase our EFC by 1379 - I’d still be ahead by $5306. Of course, family expenses DO increase when both spouses work (which is why FAFSA includes an employment expense allowance) - there are travel expenses, work clothes, lunches out, possibly more restaurant meals or fast food when both spouses feel too exhausted to cook, etc. I’d try like h*** to keep those extra expenses to a minimum so I’d have as much of that $5300 as possible! </p>
<p>Once you make more than 10K and so used up the max Employment Expense Allowance, you get to “keep” less of the money you make (percentage-wise) , since the 47% FAFSA assessment will kick in at a relatively lower percentage of your income. (For me, if I made $15K gross, my EFC would go up by $2891, $20 K would be $4404 increase in EFC)</p>
<p>I HIGHLY recommend the book “Paying for College Without Going Broke”, which explains all this stuff and more, and includes the actual current FAFSA and Profile formulas (like the FAFSA link above). Well worth the price. The sooner parents read it the better, because you can do things before your “base year” to increase your eligibility for financial aid.</p>
<p>[on edit - crossposted with swimcatsmom – it took me quite a while to write all that. 
]</p>
<p>Thanks so much for the tips and the reading recommendations. I will plan to spend some time with that information. This is the forecaster I used: <a href=“http://www.fafsa4caster.ed.gov/[/url]”>http://www.fafsa4caster.ed.gov/</a>. I put in $8000, $10,000, and $15,000 as my income, and each time I got a lower EFC. I will continue with the research your recommended.</p>
<p>I was a stay-at-home parent and went back to work part-time when the kids went to college. Our EFC went up, but not by much.</p>
<p>There is an income protection allowance for a 2-wage earner family. If you do a hand calculation, you will see the table for it. I believe it may actually be possible for an EFC to go down when the second income is quite low - but that is just a guess. </p>
<p>The problem with playing with the EFC calculator is that you might not estimate the taxes paid correctly - so your EFC may come out different than it will be with “real” numbers.</p>
<p>Here is my take on this subject: ANY income is better than NO income. I went back to work full time 2 years ago and our EFC went way up. BUT … I use my entire income for the kids’ school costs, and I can better afford the costs now that I make about 3 times what I earned in a part time job. Even with an increased EFC, we are better off in the long run.</p>
<p>No, I don’t have money to update my home, or to get a new car, or to go on vacation. But we can pay for school without loans.</p>
<p>
</p>
<p>This should be a sticky, to show all those kids who come on here and whine about how their life sucks because their parents make too much money and they wish they were orphans or had parents on full disability or something.</p>