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Financial Aid algorithms and attributes


Replies to: Financial Aid algorithms and attributes

  • shpgrlshpgrl Posts: 12 Harvard Champion
    edited May 2013
    Thank y’all for replying this post.

    Cool beans, GolfFather! That’s a cool chart. It also leads me to Troy’s article and his interview with Bill Schilling. Thanks!
  • electronblueelectronblue Posts: 7
    edited May 2013
    Considering some schools have topped 60K, why does golfather's link indicated no financial aid with an EFC above 43K?
  • shpgrlshpgrl Posts: 12 Harvard Champion
    edited May 2013
    1, He's using the National Average College Costs

    $16,000 The national average cost of a 2 year public college, commuting students not living at home
    $12,000 The national average cost of a 4 year public college with in-state tuition
    $42,000 The national average cost of a 4 year private college

    2, Red in the table means "NOT ELIGIBLE at 2 year public, 4 year public, or 4 year private colleges". The first red EFC is $43,335 (> $42K) which is the output from $180K AGI, 1 child.

    It didn't say one wouldn't qualify 4 year elite college or not (the most selective and most expensive colleges nationwide, at $56,000 per year). Still it gives us a really good idea about EFC on AGI only.

    But I know what you mean. Wish we could retire and send our kids to college (not!)
  • entomomentomom Super Moderator Posts: 86
    edited May 2013
    Why would anyone use a general EFC chart like this when all colleges now provide individual NPCs?

    That chart doesn't account for differences between college formulas, assets and other factors; nor does it determine for the proportion of the grants, loans and WS in the package. All of these are taken into account in the NPCs. Since NPCs are not always good estimates (eg. rental property, small business owner), imagine the accuracy, or lack thereof, of this one-size-fits-all EFC chart.

    If you've got a better tool, why not use it?

    Edit: I see on another thread that Golffather, who posted the chart, got the same results from it and NPCs for various schools. That's great, but it's also one set of financial/family circumstances. I have seen enough differences in FA packages from schools, that the small amount of time it takes to run the NPCs is well worth the effort IMO. Unless you're feeling lucky :rolleyes:.
  • GolfFatherGolfFather Posts: 28
    edited May 2013
    Yes, many schools might be different and yes many families have their own circumstances.
    The chart I linked to is just a tool, to be used like any other tool.

    I think it is most helpful as a wake-up call to many families who are starting out in this process … and should realize … hey, we’re a family whose yearly income is let’s say $175,000 and has only one child at a time in college … need-based aid is probably extremely unlikely to happen.

    I think the chart is most helpful to families at the opposite ends of the economic spectrum.
    Yes, in the middle it gets more complicated.

    As always, YMMV.
  • cptofthehousecptofthehouse Posts: 252
    edited May 2013
    Shpgrl, what you are proposing to do would be wonderful. The NPCs have made it possible to get some clarity in financial aid. However, the process is not all written in stone and depending how much a school wants you, is where it starts to get fuzzy, and no fast rules can be given.

    Right now the financial aid process is heavily based on income in a given year. If that year happens to be a low year for unusual reasons, doesn't much matter. if your family is getting a one time payout for something, you have to ask for professional judgement to get the amount excluded or at least mitagated, or your need will be inflated. I've known families who have had their kids take a gap year or the year off because they got no where with financial aid in such situations. About the only exception I've ever seen is when there is money going directly for an essential medical process, and I mean directly. Even then, it's not an easy go. So, yes, the income is hit hard.

    As for assets, the amount of assets used for FAFSA, and most schools use something close to this is 5.6% over the exclusion allowance (determined by age of older parent and family size) for the parents and 20% with no exclusions for the student. Where schools differ that there is a list of other things that PROFILE schools want from the balances in the qualified deferred plans to the value of ones cars, collections, cash values of insurance and certainly the assets in any sibling accounts. Also most schools want the home equity value of the primary resident, something FAFSA does not include. Schools vary from no cap on this value to capping it to 1.2X income to not including it at all. Schools do not care about debt at all. Too bad if you owe money. The exception is anything that is liened as that value would be lessened by the lien. If you have a second home, a yacht, a plane, and it's all liened, none of this counts as assets. But if you own a home worth $100K, say and it's paid for, but you owe $100K in bills, school loans from other kids' colleges,, they are not offset. Sometimes medical bills owed can offset assets on a one time basis, and I've seen a school do that. But they expect that asset to be liquidated and used towards those bills and next year they were looking for that.

    Be aware that very few school guarantee to meet full need. Any time you use NPCs from a school that does not guarantee to meet full need and/or does not meet everyone's full need , and that has significant merit awards in the mix, the chances increase that you are not going to get accurate results. Take a look at Fordham University, for example. The driving numbers for how much you get from that school are your SAT/ACT scores and your grades, to a lesser degree, once they are above a certain threshhold. They do not give much need. They tend to push the merit. But the awards are not guaranteed by formula, the way U Alabama's are, where you can be sure to get a certain award at a certain thresh hold. Depends on how many student apply with the numbers for which they are targeted to fund.

    Enrollment management is big with a lot of schools too which makes it difficult to see in the numbers. If you have school that has $50K left to distribute, the school would do better giving 9 kids with need of $5K or less the funds and meet full need for them and give the kid with the $50K plus need the same $5K. Statistically, they have met full need for 90% of that group, which looks pretty danged good, unless you are applying to that school with high need, You see where the overall statistics can be flawed for an individual. But if you are a student with very high stats, come from a state that is not well represented and the school want national representation, you're a male at school struggling to maintain a 40/60 M/F ratio, declaring a major the school is trying to push,....well any or a number of those factors could mean you will get your $50K need fully met, but not most of those kids in that category. That's the way a lot of schools work. The process is holistic, in that you can't predict how it's going to go, as it depends on who else is in the applicant pool. Things change drastically from year to year. A couple of schools like UPitt and UTulsa , which once upon a time good bets for merit aid without having to go too high into the test scores, are now danged competitive for merit aid. So as fast as one gets a formula going, it can become outdated and even obsolete.

    You have to also keep in mind that schools do not want to discourage applicants either so their NPCs often tend to be generous. Anything unusual is not addressed in the formula, partly because it would make the formula unwieldy and also because they want to use their own professional judgement. That's where family businesses can be a true wild card. Some posters here have had their businesses taken into account in a way that their kids did fine with fin aid. Some not so. It all depends on what deductions are put back into salary and how the business assets are counted.

    I have a friend who got zip, zilch, zero from Harvard for his son, though family income was modest by Harvard fin aid standards, and he would have gotten close to a full ride, except that his income was derived from rental properties He bought them cheap and managed them himself, doing most of the repairs and renos on them. They were not only the source of his family income, but his retirement cache as well. As far as Harvard was concerned, he could sell a building and pay for all four years of school that way. But then that would permanently diminish his income by quite a bit since there would not be that stream of income from there. They were not impressed with his argument and would not budge.

    There are so many other factors in the mix, for fin aid, which is why I hesitate for those for whom a few thousand, even a few hundred dollars makes a big difference in quality of life, when they are trying to decide whether to go ED or not. The inability to compare and/or negotiate can make a big difference in packages. You just might get X to reduce or waive that student contribution if Y did so. That means that much in loans a student does not have to take or a family has to somehow squeeze out of an income that is not meeting family needs already. Maybe a family can somehow beg, borrow, scrub Port a pooties to get the $5K a school says they have to pay, and it does seem ridiculous to turn it down from a top school ED, but it possible that student could end up with a surplus of $5K at another school instead when comparing (some schools will not include PELL in the award, and as an entitlement on can get that on top of full aid). There are a lot of factors at play when it comes to clutch time, and with ED you have no negotiating room.

    So that's why a model is difficult to put together in terms of predictions. There is a lot of situational judgement that goes into an aid package.
  • rmldadrmldad Posts: 16
    edited May 2013
    I have always been impressed with some of the details that CC experts are able to provide, so I will throw this question out...

    Has anyone reverse engineered the formula for specific schools using the NPCs and some common basic assumptions?

    For Harvard, this would be a relatively straightforward process since their NPC is so simple. The key data points are where the breakpoints occur and what the percentages are for certain ranges. For example (these are my invented numbers for illustrative purposes only), the assets have a 0% rate for Net Worth values of $0 through $50k then change to 2% for Net Worth values of $50k through $100k and so on. Similarly, for incomes in certain ranges, Harvard actually published the break points and percentages.

    I would think a spreadsheet with verifiable numbers for a range of highly selective universities would be an incredibly powerful tool - and I believe this is what the OP was looking for. Of course, the complexity of the spreadsheet would increase exponentially with the various factors specific schools incorporate, but I would be interested if someone has a draft of an attempt at such a document.
  • cptofthehousecptofthehouse Posts: 252
    edited May 2013
    I'd like to see these things, but I think they will take cooperation from the colleges themselves, but many of them do not reveal their formulas, and many have a lot of give and pro judg built inot them. It's also a dynamic model that not only changes from year to year, but within a given admissions season and even from student to student.There doesn't have to be any fairness in the formulas, and exceptions can be given for any reason, like "we really want this student, so give her as much a we can". Going by averages can results that pertain to no one.
  • arabrabarabrab Posts: 9
    edited May 2013
    Someone did a nice job figuring out how home equity played into the picture at a number of colleges. (Some colleges include home equity, some don't, some do up to certain limits.)

    Three cautions about using the EFC chart --
    1. Don't use your AGI without adding back any contributions you made to retirement plans. You may have an AGI of $100K on your taxes, but if both parents contributed a total of $30K to 401K plans, FAFSA is going to view that as an income of $130K. Most Profile schools will as well. This throws almost every estimate off.

    2. These charts usually assume "average" assets. I think that they're probably assuming that your non-retirement assets excluding your family home are around $50K. If you have a lot more than that in assets, or your child has assets, the contribution will be much higher. This particularly bites families who own rental properties, a share in a vacation home, or a business owned 50% or less. (50.01% owned by the family and the business value isn't counted as an asset.)

    3. Despite these need calculations, the vast majority of colleges do not meet your full need without loans. You are likely to be "gapped" by most colleges, some more than others. I've seen students at our state flagship (a pricey one) with EFC's in the 15K range get offered no help other than Direct (Stafford) loans even though the cost of attendance is around $28K. Not even work study.
  • cptofthehousecptofthehouse Posts: 252
    edited May 2013
    Considering fewer than 75 colleges out of nearly 3000 in the country meet full need (and those schools define what they consider need is), putting a comprehensive list that serves most students is not going to happen. At many schools, it 's sometimes as simple as whether the fin aid officer gets to your app in time for any money to be left that determines what you get.
  • notrichenoughnotrichenough Posts: 39
    edited May 2013
    1. Don't use your AGI without adding back any contributions you made to retirement plans.
    2. These charts usually assume "average" assets.
    GolfFather's chart assumes no retirement plan contributions, no itemized deductions, and no assets.

    Retirement contributions can raise your EFC by up to 47 cents of every dollar you contribute. Itemized deductions raise your EFC by up to 47% of your incremental tax rate times the deduction.

    That chart doesn't mention state taxes, which lower EFC, nor does it say anything about how income is split between the parents, which can affect the FICA credit once gross income gets over $113,000.

    So that chart might provide a very rough approximation of EFC, but it can be off by a lot depending on your situation.

    The FAFSA formula is not complicated, you are far better off to take 30 minutes and work through the EFC formula guide, which will tell you *exactly* what your EFC is:

  • shpgrlshpgrl Posts: 12 Harvard Champion
    edited May 2013
    "Why would anyone use a general EFC chart like this when all colleges now provide individual NPCs?"

    Why not?!
    Some people just want to use the tools. Others want to know how things work and the logic behind the tools. Some people are happy with the number they get and settle with that. Others want to reduce their EFC in order to get aids or get more aids. I’m the one likes to know the how things work in general and always ask why. To each his own.

    I’m at the learning stage and playing stage (playing as in financial planning). In my post, I said I wanted to learn more about financial aid. NPC doesn’t help me. It gives me a number and it doesn’t tell me the story behind it. I can’t see different scenarios easily without multiple tries. Knowing the possible basic formula would help me.
  • shpgrlshpgrl Posts: 12 Harvard Champion
    edited May 2013
    THANKS, NOTRICHENOUGH!! You won an award!

    Do you have a similar document for CSS profile? Thank you in advance.

    To summarize re EFC:

    1, Income first: use GolfFather’s chart.

    For those of you who cautioned about this EFC chart, thank you for reminding everyone that there are more into EFC.

    As notrichenough noted, that chart is not a general EFC chart. If you read the article in the link, it’s stated clearly in the article:

    The estimated EFCs in the table below do not take into account your assets, or if you itemize deductions on your tax return or make contributions to qualified retirement plans or receive any form of untaxed income. All of which can substantially increase your EFC.

    2, Asset second:

    CPT, thank you for the detailed information, especially all things number related (that could contribute to a formula). When people say every school is different or everyone’s circumstance is different, that doesn’t help me. (I know that already.) But any examples backed with numbers or names (school names) like you listed would definitely help!

    I also found similar numbers to echo what CPT stated. (it’s by the same author Troy Onink who published that chart). Of course, those are in notrichenough’s link.

    “Asset Protection Allowance & Reserve Emergency Allowance
    Both the federal and institutional aid formulas contain provisions to “shelter” some of the parent’s assets from being included in the aid analysis because parents need to have an asset safety net for what life throws at them, and should not be expected to be used to pay for college.

    The FM has what is called an asset protection allowance and the IM has an emergency reserve allowance. Essentially these two allowances give parents anywhere from $20,000 to $50,000 in non-retirement assets (cash, savings, checking, mutual funds, money markets, etc.) that they may have without those assets being expected to be used to pay for college.

    How Assets Decrease Aid Eligibility
    Under the federal (FM) and institutional (IM) need-analysis formulas, assets in the parents’ names raise EFC by as much as 5.0% (IM) – 5.64% (FM) of the total asset value whereas if the assets are owned by the student they can be counted as much as 20% (FM) – 25% (IM) toward the student’s EFC.

    However, students do not have an asset protection allowance (APA) and they are expected to contribute 20% of any reportable assets toward the cost of college.

    3, Other factors

    Go read notrichenough’s link.

    There are 20 or so tables. No I don't need them all. It will take me more than 30 mins to have a sense of it all. What fun!

    4, opposite ends (it’s also in notrichenough’s link)

    “The Simplified Needs Test & Automatic Zero EFC
    The good news is that parents with household income of $49,999 or below who can also file a 1040 A or 1040EZ tax return meet the criteria for the simplified needs test in the federal aid formula, and therefore neither the students or parent’s assets will even be counted in the aid analysis. In fact, with recent changes to simplify filing the FAFSA online, the filer (parent and student) may not even be presented with any asset questions if they meet certain criteria in previous questions. So the parents and student’s assets would simply be ignored in the formula.

    In addition, under the automatic zero EFC provision of the federal aid formula, parents with annual incomes of $31,000 or less that are eligible to file a 1040A or 1040EZ tax return get an automatic zero EFC.
    The dislocated worker provision in the federal aid formula provides that if a parent is a dislocated worker according to the definition below, and the parent(s) annual income is below $49,999, the parent’s and student’s assets will not be considered.”

    5. Appeal

    To early for me to worry about that.


    Before any of you tell me, I’m putting it out here first:

    “Keep it simple. Save and invest for maximum return first, and consider taxes and financial aid after that.”
  • notrichenoughnotrichenough Posts: 39
    edited May 2013
    Do you have a similar document for CSS profile? Thank you in advance.
    There is no such document AFAIK, because every school tweaks it differently.

    This might give you some useful information:

    There are 20 or so tables. No I don't need them all. It will take me more than 30 mins to have a sense of it all. What fun!
    Most likely all you need is the "Dependent Student" tables.
    The Simplified Needs Test & Automatic Zero EFC
    If you income-qualify but have substantial assets, it pays to pay *very* close attention to what will trigger you having to file a 1040, and arrange your situation so you won't have to file the 1040. For example even a tiny amount of capital gains can force you to have to file the 1040, dragging all your assets into play. FAFSA only of course.
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