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Need Analysis & Professional Judgment. Understanding the EFC. What you will learn. Definition of need analysis Factors that make up the EFC calculation and why they are important Understand the 3 Federal Formulas Learn what is Professional Judgment

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what you will learn
What you will learn
  • Definition of need analysis
  • Factors that make up the EFC calculation and why they are important
  • Understand the 3 Federal Formulas
  • Learn what is Professional Judgment
  • Understand various types of professional judgment decisions and how they are related to the EFC and Needs Analysis
what is need analysis
What is need analysis?
  • Definition: The process of determining the student's Expected Family Contribution (EFC) based on the formula established by Congress. Also known as Federal Need Analysis Methodology and Federal Methodology.
guiding principles
Guiding Principles
  • Primary responsibility to pay for education rests with the student and parents/family
  • Family is expected to contribute to the extent it is able
  • Families must be evaluated in an equitable manner
expected family contribution
Expected Family Contribution
  • Definition: Measure of how much the student and his or her family can be expected to contribute to the cost of the students education for the year. The EFC is calculated according to a formula specified in the law.
what comprises the efc
What Comprises the EFC?

EFC Federal Formula

  • AGI
  • Eligible to file a 1040A or EZ
  • Federal Means Test
  • Dislocated Worker

Worksheets A, B, and C

  • Dependent
  • Independent w/no dependent(s)
  • Independent with dependent(s)

Total Income

  • AGI
  • Wages Earned
  • Untaxed Income
  • Additional Financial Information

Income Protection:

  • Taxes Paid
  • House Hold Size
  • Number in college
  • State and other Tax allowance

Protection of Assets

  • Age of Student (if independent)
  • Age of Older Parent
efc is needed to calculate need
EFC is Needed to Calculate Need

Cost of Attendance



  • The EFC determines:
    • Pell eligibility
    • Room for need versus non-need-based aid
three efc worksheets
Three EFC Worksheets
  • Worksheet A
    • For dependent students
  • Worksheet B
    • For independent students without dependents (other than a spouse)
  • Worksheet C
    • For independent students with dependents other than a spouse

For 11-12 EFC worksheets, go to IFAP: (pages 51-77)

the efc formulas
The EFC Formulas
  • There are 3 different EFC formulas
    • Regular Formula: Takes BOTH income & assets into account
    • Simplified Needs Test (SNT):Takes only income into account
    • Auto-Zero EFC: Student’s EFC is automatically zero
simplified needs test
Simplified Needs Test
  • How does a student qualify for SNT?
    • Must have income (AGI/wages) of $49,999 or less


Answer Yes to one of the following:

    • Be eligible to file a 1040A or 1040EZ
    • Qualify for a federal means test benefit
    • Be a dislocated worker
auto zero efc
Auto-Zero EFC
  • How does a student qualify for Auto-Zero?
    • Must have income (AGI/wages) of $23,000 or less


Answer Yes to one of the following:

    • Be eligible to file a 1040A or 1040EZ
    • Qualify for a federal means test benefit
    • Be a dislocated worker

Only dependent students or independent students with child or dependents other than a spouse qualify for an auto-zero EFC. (EFC Formula Worksheets A &C only)

federal means test benefits
Federal Means Test Benefits
  • Supplemental Security Income (SSI)
  • Temporary Assistance for Needy Families (TANF)
  • Special Supplemental Nutritional Program for Women, Infants & Children (WIC)
  • Food Stamps
  • Free Reduced-Priced School Lunches
what is a dislocated worker
What is a Dislocated Worker?
  • Was terminated or laid off from employment or received a notice of termination or layoff;
  • Is unlikely to return to a previous occupation; and
  • Is eligible for or has exhausted unemployment compensation, or is not eligible for compensation because, even though employed long enough to demonstrate attachment to the workforce, he or she had insufficient earnings or performed services for an employer that weren’t covered under a state’s unemployment compensation law; or
  • Was terminated or laid off from employment or received a notice of termination or layoff as a result of any permanent closure of, or any substantial layoff at, a plant, facility, or enterprise;
  • Is employed at a facility at which the employer made a general announcement that it will close;
  • Was self-employed but is now unemployed due to economic conditions or natural disaster; or
  • Is a displaced homemaker
is the applicant eligible to file a 1040a or 1040ez
Is the Applicant Eligible to File a 1040A or 1040EZ?
  • Required to file a long form (1040) if
      • $100K or more of wages (line 7)
      • Alimony received (line 11)
      • Business (line 12)
      • Capital gain or loss (line 13 only if schedule D is required)
      • Rental property (line 17)
      • Farm (line 18)
      • Itemized deductions (line 40)
      • Homebuyers credit (line 67)
  • Eligible to file a 1040A or EZ
    • If there are capital gains/losses but a Schedule D isn’t required, then a 1040A is fine
apply your knowledge

Apply your knowledge!

Which EFC Formula?

income protection allowance
Income Protection Allowance
  • Ed automatically protects a set amount of income varied by household size and number in college (called IPA)
    • Food 30%
    • Housing 22%
    • Transportation 9%
    • Clothing/Personal Care 16%
    • Medical 11%
    • Other consumption 12%
  • US Taxes Paid
    • Also considers state & other taxes
ipa worksheets
IPA Worksheets

This example is from Worksheet A (dependent students)

asset protection allowance
Asset Protection Allowance
  • Asset Protection: Dept of Ed automatically protects a set amount of assets based on Independent Student or Parents’ Age of a Dependent Student
    • The older the student or parent, the greater the amount of assets protected – due to anticipated retirement
asset protection table
Asset Protection Table

Note: Dependent students have no protection of assets.

apply your knowledge21

Apply your knowledge!

Matching Exercise of EFC Terms

final thoughts on need analysis
Final Thoughts on Need Analysis
  • A myriad of elements go into the EFC!
    • You can’t “guesstimate” what someone’s EFC would be just by asking income information
  • Having a strong foundation of the EFC will assist with your understanding of the following:
    • Professional Judgment
    • Verification Elements
apply your knowledge23

Apply your knowledge!

2012-2013 Manual EFC Calculation

professional judgment
Professional Judgment

It’s Your Decision!

what is professional judgment
What is Professional Judgment?

Section 479A in the HEA authorizes us to use PJ

examples of pj situations
Examples of PJ Situations
  • Adjusting EFC data elements
    • Losses of Income
    • Additional Expenses
  • Performing a Dependency Override
  • Parent Refusal to complete a FAFSA and refuses to provide financial support
  • Adjusting Cost of Attendance components
efc elements that can be adjusted
EFC Elements that CAN be Adjusted
  • AGI
  • Wages Earned
  • Taxes Paid
  • Number in household
  • Number in College
  • Additional Financial Information
  • Untaxed Income
  • Asset information
  • Dislocated Worker Status
  • Dependency Status
    • Only for dependent to independent
first rule of pj is
First Rule of PJ is…
    • A school must exercise PJ on correct applicant data before processing PJ to ensure accuracy
    • A school must wait until a corrected ISIR returns before processing PJ only for students who were selected for verification and processor determined a correction is needed
types of documentation
Types of Documentation
  • Types of documents you may wish to collect
    • Tax returns
    • W2s
    • Last pay stubs
    • 3rd party documents
    • Legal documents
    • Letter from employers
types of losses of income
Types of Losses of Income
  • Losses of Income
    • Unemployment or income reduction
    • Death of parent/spouse
    • Divorce of parent/student
    • Loss of child support
    • One-time lump sum payout
  • See GEN-09-04
  • Additional Expenses
    • Extended family support
      • Such as nursing home expenses
    • Unusual medical/dental expenses that exceed 11% of the IPA
    • Unusual non-discretionary debt that exceeds 12% of the IPA
    • Private school costs for children in elementary or high school

How could some of these factors affect a student’s EFC?

medical expenses example
Medical Expenses Example
  • Let’s say you have a dependent student whose parents experienced an annual medical expense totaling $5,000. After reviewing the ISIR you notice the following:
    • HHS: 4
    • Number in College: 1
    • EFC = $2972
    • AGI : $59,123
    • IPA: $25,210

How much of the $5,000 exceeds 11% of the IPA?

dependency overrides unsubsidized stafford eligibility

Dependency Overrides & Unsubsidized Stafford Eligibility


Authority given for dependency overrides HEA Section 480(d)

dependency overrides
Dependency Overrides
  • Any student who answers no to all the dependency questions are dependent even if student is self-supporting
    • Students who have extenuating circumstances can request an FAA to consider a dependency override
    • Per CCRAA, Schools have the authority to accept the dependency override that was performed and approved by another school without additional documentation.
dependency overrides35
Dependency Overrides
  • Requires documentation to the validity of the extenuating circumstances
      • Personal statement
      • Letters from professionals
  • Factors to consider
    • Documented, prolonged estrangement
    • Unable to locate a parent after reasonable attempts
    • Situations of abuse
dependency overrides36
Dependency Overrides

None of the following examples merit a dependency override:

  • Parents refuse to contribute to the student's education
  • Parents are unwilling to provide information on the FAFSA or for verification
  • Parents do not claim student as a dependent for income tax purposes
  • Student demonstrates total self-sufficiency
you be the judge
You be the Judge…
  • Laura is a first-time freshman living with her grandparents. She is not under legal guardianship, but she has been living with her grandparents since she was 5 when her father left the country. Her mother died when she was 2. She has had no contact with her father since she was 5 and neither has her grandparents, although he sent a check out of the blue when she turned 18 for $5,000.
  • Would you consider Laura independent?
    • Why or why not?
unsubsidized stafford eligibility
Unsubsidized Stafford Eligibility
  • FAAs may use professional judgment to determine if a dependent student may be offered unsubsidized Stafford loans without parental data on the FAFSA
  • To do this, FAAs must verify:
    • Parent no longer provides financial support
    • Parent refuses to file the FAFSA
    • FAA must collect a signed statement from the parent affirming that the above while also certifying that they will not provide support in the future
you be the judge39
You be the Judge…
  • Hector is about to be a freshman at Best Ever Community College in the city of Fairview. Hector lives at home with parents in Fairview. Hector’s parents charge him room and board for living in their home. Hector’s parents do not carry him on their health and auto insurance policies. Hector asks his parents to complete the parental part of the FAFSA and they refuse.
cost of attendance adjustments

Cost of Attendance Adjustments

Budgets, budgets, budgets!

standard coa components
Standard COA Components
  • Tuition & Fees
  • Books & Supplies
  • Room & Board
  • Transportation
  • Personal Expenses
types of adjustments to consider
Types of Adjustments to Consider
  • Additional mortgage/rent charges
  • Unusual car repair or transportation costs
  • Dependent care costs
  • Computer/Laptop expenses
  • Unusual medical/dental expenses not covered by insurance
  • Unusual Debt
  • Stafford loan fees (if applicable)
  • Nursing Home Expenses
  • Elementary/Secondary Private Tuition
what you cannot do in a pj
What you Cannot Do in a PJ
  • A PJ is award year specific and cannot carry forward from year to year unless subsequent request & documentation is received
  • You cannot directly change an EFC
  • You cannot make changes to the EFC formula
  • You may not establish automatic categories of special circumstances. All PJ must be conducted on a case by case basis.
  • PJ cannot be used to circumvent the law
  • PJ cannot be used to waive student eligibility requirements
  • PJ cannot make an Independent student dependent
test your knowledge

Test your knowledge!

Match that PJ & Case Studies!

wrapping up
Wrapping Up
  • Understanding the complexity of the EFC makes you that much more effective of an FAA!
  • You have the authority to use professional judgment so use it (with proper documentation)
  • 2012-2013 EFC Formula Guide
  • 2012-2013 FSA Handbook, Application Verification Guide, Chapter 5, Special Cases
  • DCL: GEN-09-04, GEN-09-05, GEN-11-04, GEN-11-15
  • NASFAA 2010: Electronic Handout: Special Populations: Tips for Completing the FAFSA
  • NASFAA 2009: Q&A from Dependency Status: It’s not the Riddle of the Sphinx Webinar
comments questions


Erika Cox & April Gonzales, University of Texas at San Antonio