SSG_Need_Analysis_final_040416_mj_dk

NASFAA University Self-Study Guide: Need Analysis

Lesson 5 Glossary

Annual Education Savings Allowance (AESA): An allowance under institutional methodology (IM) which
protects a set amount of annual income in recognition that a family must save for the educational expenses of
younger children while sending older children to college.

College Board: A nonprofit membership organization dedicated to promoting excellence and equity in
education through programs for K–12 and higher education institutions, and by connecting students to college
success and opportunity. It also serves the education community through research and advocacy on behalf of
students, educators, schools, and colleges.

Cost of attendance (COA): Costs the student is expected to incur during the period of enrollment, including
but not limited to tuition, fees, room, board, books, supplies, transportation, and miscellaneous personal
expenses. The COA usually is calculated for a full academic year.

Cumulative Education Savings Allowance (CESA): An IM allowance that recognizes a family’s need to save
towards postsecondary education costs. The allowance protects an amount of assets equal to the amount the
family would have accumulated if it had saved a specified percentage of its income each year for each child.

Emergency Reserve Allowance (ERA): An IM allowance which protects an amount of parental assets equal
to six months of average family expenses, holding them in reserve for such possible occasions as family
illness, medical emergencies, or unemployment.

Expected family contribution (EFC): Estimate of a family’s ability to contribute toward postsecondary
educational costs, derived by a formula known as Federal Methodology (FM) for awarding Title IV federal
student aid and a formula known as Institutional Methodology (IM) for awarding institutional aid.

Financial need: The difference between the institution’s COA and the family’s ability to pay (i.e., EFC). Ability
to pay is represented by the EFC for federal need-based aid and for many state and institutional programs.

Institutional methodology (IM): A formula developed by the College Board, in conjunction with financial aid
administrators and economists, to measure a family’s ability to contribute toward a student’s educational costs.
IM is used at the discretion of individual institutions and in addition FM to award nonfederal, institutional
student financial aid funds (e.g., grants and scholarships).

Low Income Asset Allowance: An IM allowance which protects the assets for low income families, taking into
account that they may need to liquidate their assets in order to cover basic living expenses.

Professional judgment (PJ): The authority provided under the Higher Education Act of 1965, as amended for
financial aid administrators to exercise discretion and deal with unique circumstances affecting individual
students on a case-by-case basis in a number of specific areas of federal student aid administration.

© 2016 NASFAA Need Analysis: Lesson 5 149

NASFAA University Self-Study Guide: Need Analysis

This page intentionally left blank.

150 Need Analysis: Lesson 5 © 2016 NASFAA

NASFAA University Self-Study Guide: Need Analysis

Lesson 5 Answer Keys

Quick Quiz 1

1. What is the primary reason that institutions use IM in addition to FM?
Many financial aid administrators believe IM is a more thorough and accurate assessment of a
family’s ability to contribute toward educational costs and, therefore, a better way to ration limited
institutional resources (i.e., grants, scholarships, and loans) among eligible students.

2. Fill in the IM formula for determining a dependent student’s parents’ total income below:
AGI/Taxable income

+ Untaxed income
+ Business, rental, and other taxable losses

– Income exclusions

= Total parents’ income

3. What are some of the advantages of home ownership, indicating why home equity is included in the
IM calculation? (check all that apply)

 Mortgage interest deductions
 Home equity loans
 Lower total percentage of income spent on housing
 All of the above

4. If two children are enrolled in college, the IM formula expects the family to pay what percentage of
the parent contribution for each child?

 10%
 25%
 50%
 60%

© 2016 NASFAA Need Analysis: Lesson 5 151

NASFAA University Self-Study Guide: Need Analysis

Quick Quiz 1 (cont’d)

5. For the dependent student’s contribution in the IM calculation, what percentage of the student’s net
worth is used to arrive at the student’s total contribution from assets?

 10%
 20%
 25%
 50%
 75%

6. What is the Cumulative Education Savings Allowance and what does it recognize?
The CESA is an allowance that recognizes a family’s need to save towards postsecondary
educational costs for all children in the family. The allowance protects an amount of assets equal to
the amount the family would have accumulated if they had saved a specified percentage of their
income each year for each child. In doing so, it protects parental savings for the college expenses of
all children in the family while still assuming that family savings are available for financing an
education.

7. Under the IM formula, an institution may choose to expect a minimum student contribution.

 True
 False

8. Under IM, the standard income and asset protection allowances are updated annually and averaged
over the preceding three years based on data from the:

 Bureau of Labor Statistics
 Consumer Expenditure Survey

152 Need Analysis: Lesson 5 © 2016 NASFAA

NASFAA University Self-Study Guide: Need Analysis
Quick Quiz 2

1. Draw an arrow to match each of the following monthly maintenance allowances (MMAs) in the left-hand
column to each applicable individual in the independent student’s family from the right-hand column:

MMA Student’s Family Member

12-Month MMA Student
3-Month MMA Student’s enrolled spouse
3-Month MMA
3-Month MMA Student’s enrolled child
Younger nonenrolled child

2. Under IM, the independent student allowances against income might also include any other allowances
stipulated by the institution.

 True
 False

3. Fill in the IM formula for determining an independent student’s total net worth below:
Cash/Savings/Checking accounts

+ Real estate and investment equity

+ Business equity (including small businesses)

+ Farm equity (including family farms)

+ Home equity

= Total student’s net worth

© 2016 NASFAA Need Analysis: Lesson 5 153

NASFAA University Self-Study Guide: Need Analysis

Learning Activity: FM or IM or Both?
Referring to Lessons 2 and 5, fill in the table below with the letter of each expected family contribution
data element which is included in the FM calculation and in the IM calculation. Duplicate each letter
as necessary to reflect those data elements that are included in both the FM and IM calculations.

Expected family contribution data elements: IM Calculation
a. Taxable income a
b. Untaxed income b
c. Home equity c
d. Income protection allowance d
e. Investment farm equity e
f. Family farm which is family’s principal place of residence f
g. Cash/savings/checking accounts g
h. Elementary/Secondary school tuition allowance h
i. Real estate and rental properties i
j. Minimum student contribution j
k. Annual Education Savings Allowance k
l. Cumulative Education Savings Allowance l
m. Emergency Reserve Allowance (ERA) m
n. Low Income Asset Allowance n
o. Education Savings and Asset Protection Allowance (combined)
p. Monthly maintenance allowance p
q. Noncustodial parent contribution q

FM Calculation
a
b

d
e

g

i

o

154 Need Analysis: Lesson 5 © 2016 NASFAA

NASFAA University Self-Study Guide: Need Analysis

2016–17 Need Analysis Feedback Form

We appreciate your interest in our training materials and would like your feedback about their effectiveness. Please
complete the following evaluation form and email to [email protected]. You may also mail or FAX it to NASFAA,
1101 Connecticut Ave. NW, Suite 1100, Washington, DC 20036, attention: Dana Kelly, Chief Training Officer. FAX:
(202) 785-1487.

Your Name: (Optional)

I. Please check the type of institution you represent: (check all that apply)

 Public  Private  Proprietary

 Two year  Four year  Graduate/Professional

II. How many years of experience do you have as a financial aid administrator? (check one)

 Less than 1  1 to 2  2 to 3  3 to 5  More than 5

III. Using the following scale, please rate the content and effectiveness of the following aspects of the
self-study guide: (circle your response)
5 = Excellent 4 = Very Good 3 = Good 2 = Fair 1 = Poor N = Not Applicable

Aspect Feedback
Organization/structure of self-study guide 54321N

Self-study guide content 54321N

Quick Quizzes 54321N

Reflection Questions 54321N

Learning Activities 54321N

Resources 54321N

Visual Appeal 54321N

IV. Please indicate any training or conferences you have attended in the last two years: (check all that apply)

 NASFAA Conference  NASFAA Webinar

 Regional Conference  State/Regional Webinar

 State Conference  ED Webinar

 FSA Conference  ED Workshop/In-person training

 State/Regional Neophyte training  State Workshop

 Other Conference (please specify): ____________________________

 Other Training (please specify): ____________________________

© 2016 NASFAA Need Analysis 155

NASFAA University Self-Study Guide: Need Analysis

V. What features of the self-study guide did you find the most helpful?
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________

VI. What additional features would have made the self-study guide more useful to you?
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________

VII. Please use the space below for any other comments or suggestions you would like to make (feel free to attach
additional comments):
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________

156 Need Analysis © 2016 NASFAA

Congratulations on completing this

Self-Study Guide! What’s next?

Continue Your Learning. Earn Credentials. Differentiate Yourself.

Benefits to Learners: Benefits to Employers:
• Expand your financial aid knowledge. • F eel confident that your staff is trained to the highest
industry standards. A 90% pass rate is required to
• Improve your job performance and service to students. receive a credential in any topic.
• Provide tangible evidence of your knowledge to • P rovide your staff with the opportunity to grow
professionally, and ensure that employee training is
employers. consistent and measureable.
• Differentiate yourself from less qualified personnel.
• Give you and your organization a competitive edge. DIFFICULTY LEVEL


TOPICS BEGINNER INTERMEDIATE ADVANCED

Overview of Financial Aid Programs

PART 1

Application Process

Student Eligibility

Cost of Attendance

Need Analysis: Federal and Institutional Methodology

Verification

PART 2

Federal Pell Grants and Afghanistan Service Grants

Campus-Based Programs

TEACH Grant Program

Direct Loan Program

Packaging and Notification of Awards

PART 3

Return of Title IV Funds

Satisfactory Academic Progress

Consumer Information

Cash Management

Administrative Capability

Professional Judgment

For more information, visit nasfaa.org/university

UNANSFAIAVERSITY
CREDENTIALED TRAINING

Written for the independent learner,
each Self-Study Guide includes

multiple lessons with a variety of
exercises to reinforce each lesson.
You’ll do independent study and

take quizzes in a traditional
paper format (not online).
Then you can qualify to take an
examination and earn a professional
credential. NASFAA University
Self-Study Guides are available for
purchase in our online store.

© 2016 National Association of Student Financial Aid Administrators

1101 CONNECTICUT AVENUE NW, SUITE 1100
WASHINGTON, DC 20036-4303

202.785.0453 FAX. 202.785.1487 WWW.NASFAA.ORG