NASFAA University Self-Study Guide: Need Analysis
Table A5: Parents’ Education Savings and
Asset Protection Allowance
for EFC Formula A Worksheet (parents only)
Age of older Allowance if Allowance if Age of older Allowance if Allowance if
parent as of there are two there is only parent as of there are two there is only
12/31/2016* one parent 12/31/2016* one parent
parents** parents**
25 or less $0 46 $9,000
26 $0 500 47 $17,800 9,200
27 1,000 1,100 48 18,300 9,400
28 2,100 1,600 49 18,700 9,700
29 3,100 2,100 50 19,200 9,900
30 4,100 2,600 51 19,700 10,100
31 5,200 3,200 52 20,200 10,400
32 6,200 3,700 53 20,700 10,600
33 7,200 4,200 54 21,300 10,900
34 8,300 4,700 55 21,800 11,100
35 9,300 5,300 56 22,400 11,400
36 10,300 5,800 57 23,000 11,700
37 11,400 6,300 58 23,700 12,000
38 12,400 6,800 59 24,300 12,300
39 13,400 7,400 60 25,000 12,600
40 14,500 7,900 61 25,700 12,900
41 15,500 8,100 62 26,400 13,200
42 15,900 8,300 63 27,200 13,600
43 16,300 8,500 64 27,900 13,900
44 16,600 8,600 65 or older 28,800 14,300
45 17,000 8,800 empty 29,600 empty
17,400 empty
Determine the age of the older parent listed in FAFSA/SAR #64 and #68 as of 12/31/2016.
If no parent date of birth is provide, use age 45.
** Use the two parent allowance when the Parents’ Marital Status listed in FAFSA/SAR #59 is
“married or remarried” or “unmarried and both parents are living together.”
Table A6: Parents’ Contribution from AAI
If the parents’ AAI— Then the parents’ contribution from AAI is—
Less than -$3,409 -$750
$-3,409 to $15,900 22% of AAI
$15,901 to $20,000 $3,498 + 25% of AAI over $15,900
$20,001 to $24,100 $4,523 + 29% of AAI over $20,000
$24,101 to $28,200 $5,712 + 34% of AAI over $24,100
$28,201 to $32,200 $7,106 + 40% of AAI over $28,200
$32,201 or more $8,706 + 47% of AAI over $32,200
Reprinted from The EFC Formula, 2016-17 Need Analysis: Lesson 2 49
NASFAA University Self-Study Guide: Need Analysis
Table A7: State and Other Tax Allowance
for EFC Formula A Worksheet (student only)
State Percent State Percent
Montana
Alabama 2% Nebraska 3%
0% Nevada 3%
Alaska 1% New Hampshire 1%
2% New Jersey 1%
American Samoa 3% New Mexico 4%
Arizona 5% New York 2%
Arkansas 1% North Carolina 6%
California 3% North Dakota 4%
Canada and Canadian Provinces 5% Northern Mariana Islands 1%
Colorado 3% Ohio 1%
Connecticut 5% Oklahoma 3%
Delaware 1% Oregon 2%
District of Columbia 1% Palau 5%
Federated States of Micronesia 3% Pennsylvania 1%
Florida 1% Puerto Rico 3%
Georgia 4% Rhode Island 1%
Guam 3% South Carolina 3%
Hawaii 3% South Dakota 3%
Idaho 3% Tennessee 1%
Illinois 3% Texas 1%
Indiana 3% Utah 1%
Iowa 4% Vermont 3%
Kansas 2% Virgin Islands 3%
Kentucky 4% Virginia 1%
Louisiana 1% Washington 4%
Maine 5% West Virginia 1%
Marshall Islands 4% Wisconsin 2%
Maryland 1% Wyoming 4%
Massachusetts 3% Blank or Invalid State 1%
Mexico 4% Other 1%
Michigan 2% 1%
Minnesota 3%
Mississippi
Missouri
To calculate the state and other tax allowance, multiply the Student’s Total Income (EFC Formula
A Worksheet, line 35) by the appropriate rate from the table above to get the “State and Other Tax
Allowance” (EFC Formula A Worksheet, line 37). Use the Student’s State of Legal Residence
(FAFSA/SAR #18) reported on the FAFSA. If this item is blank or invalid, use the state in the
student’s mailing address (FAFSA/SAR #6). If both items are blank or invalid, use the Parents’s
State of Legal Residence (FAFSA/SAR #70). If all three items are blank or invalid, use the rate for a
blank or invalid state above.
50 Need Analysis: Lesson 2 Reprinted from The EFC Formula, 2016-17
NASFAA University Self-Study Guide: Need Analysis
2016–2017 EFC FORMULA B : INDEPENDENT STUDENT BREGULAR
Without Dependent(s) Other than a Spouse
WORKSHEET
Page 1
STUDENT/SPOUSE INCOME IN 2015 CONTRIBUTION FROM AVAILABLE INCOME
1. Student’s and spouse’s Adjusted Gross Income TOTAL INCOME (from line 7) −
(FAFSA/SAR #36) If negative, enter zero. TOTAL ALLOWANCES (from line 14) =
15. AVAILABLE INCOME (AI)
2. a. Student’s income earned from work
(FAFSA/SAR #39) __________
2. b. Spouse’s income earned from work 16. Assessment rate × .50
=
(FAFSA/SAR #40) + __________ 17. CONTRIBUTION FROM AI
May be a negative number.
Total student/spouse income earned from work =
3. Student/spouse Taxable Income STUDENT’S/SPOUSE’S CONTRIBUTION FROM ASSETS
(If tax filers, enter the amount from line 1 above. 18. Cash, savings & checking (FAFSA/SAR #41)
If non-tax filers, enter the amount from line 2.)
4. Total untaxed income and benefits 19. Net worth of investments*
(sum total of FAFSA/SAR #45a. through 45j.) +
(FAFSA/SAR #42)
5. Taxable and untaxed income = If negative, enter zero. +
(sum of line 3 and line 4)
6. Total additional financial information 20. Net worth of business and/or investment farm +
(sum total of FAFSA/SAR #44a. through 44f.) −
(FAFSA/SAR #43)
7. TOTAL INCOME If negative, enter zero.
(line 5 minus line 6) May be a negative number. =
21. Adjusted net worth of business/farm +
(Calculate using Table B3.) =
22. Net worth (sum of lines 18, 19, and 21)
ALLOWANCES AGAINST STUDENT/SPOUSE INCOME 23. Asset protection allowance (Table B4) −
8. 2015 U.S. income tax paid (FAFSA/SAR #37) 24. Discretionary net worth (line 22 minus line 23) =
(tax filers only) If negative, enter zero.
9. State and other tax allowance + 25. Asset conversion rate × .20
(Table B1) If negative, enter zero. 26. CONTRIBUTION FROM ASSETS =
10. Student’s Social Security tax (Table B2) + If negative, enter zero.
11. Spouse’s Social Security tax (Table B2) +
12. Income protection allowance: EXPECTED FAMILY CONTRIBUTION
• $9,960 for single, separated or divorced/ CONTRIBUTION FROM AI (from line 17)
widowed student; May be a negative number.
• $9,960 for married student if spouse is CONTRIBUTION FROM ASSETS (from line 26) +
enrolled at least 1/2 time;
27. Contribution from AI and assets =
• $15,960 for married student if spouse is not 28. Number in college in 2016–2017
(FAFSA/SAR #96)
enrolled at least 1/2 time. + ÷
13. Employment expense allowance: 29. EXPECTED FAMILY CONTRIBUTION for
nine month enrollment. If negative, enter zero.** =
• If student is not married or is separated, the
allowance is zero.
• If student is married but only one person is
working (the student or spouse), the
allowance is zero. **To calculate the EFC for less than nine-month enrollment, see the
next page. If the student is enrolled for more than nine months, use
• If student is married and both student and the nine-month EFC (line 29 above).
spouse are working, the allowance is 35%
of the lesser of the earned incomes, or
$4,000, whichever is less. +
14. TOTAL ALLOWANCES =
Reprinted from The EFC Formula, 2016-17 Need Analysis: Lesson 2 51
NASFAA University Self-Study Guide: Need Analysis
Table B1: State and Other Tax Allowance
State Percent State Percent
Montana
Alabama 2% Nebraska 3%
0% Nevada 3%
Alaska 1% New Hampshire 1%
2% New Jersey 1%
American Samoa 3% New Mexico 4%
Arizona 5% New York 2%
Arkansas 1% North Carolina 6%
California 3% North Dakota 4%
Canada and Canadian Provinces 5% Northern Mariana Islands 1%
Colorado 3% Ohio 1%
Connecticut 5% Oklahoma 3%
Delaware 1% Oregon 2%
District of Columbia 1% Palau 5%
Federated States of Micronesia 3% Pennsylvania 1%
Florida 1% Puerto Rico 3%
Georgia 4% Rhode Island 1%
Guam 3% South Carolina 3%
Hawaii 3% South Dakota 3%
Idaho 3% Tennessee 1%
Illinois 3% Texas 1%
Indiana 3% Utah 1%
Iowa 4% Vermont 3%
Kansas 2% Virgin Islands 3%
Kentucky 4% Virginia 1%
Louisiana 1% Washington 4%
Maine 5% West Virginia 1%
Marshall Islands 4% Wisconsin 2%
Maryland 1% Wyoming 4%
Massachusetts 3% Blank or Invalid State 1%
Mexico 4% Other 1%
Michigan 2% 1%
Minnesota 3%
Mississippi
Missouri
To calculate the state and other tax allowance, multiply the total income of the student and spouse
(EFC Formula B Worksheet, line 7) by the appropriate rate from the table above to determine the
“State and Other Tax Allowance” (EFC Formula B Worksheet, line 9). Use the Student’s State of
Legal Residence (FAFSA/SAR #18) reported on the FAFSA. If this item is blank or invalid, use the
state in the student’s mailing address (FAFSA/SAR #6). If both items are blank or invalid, use the rate
for a blank or invalid state above.
52 Need Analysis: Lesson 2 Reprinted from The EFC Formula, 2016-17
NASFAA University Self-Study Guide: Need Analysis
Table B2: Social Security Tax
Income Earned from Work* Social Security Tax
$0 – $118,500 7.65% of income
$118,501 or greater $9,065.25 + 1.45% of amount over $118,500
Calculate separately the Social Security tax of the student and spouse.
*Student’s 2015 income earned from work is FAFSA/SAR #39
Spouse’s 2015 income earned from work is FAFSA/SAR #40
Social Security Tax will never be less than zero.
Table B3: Business/Farm Net Worth Adjustment
If the net worth of a business or farm is— Then the adjusted network is—
Less than $1 $0
$1 to $125,000 40% of net worth of business/farm
$125,001 to $380,000 $50,000 + 50% of net worth over $125,000
$380,001 to $635,000 $177,500 + 60% of net worth over $380,000
$635,001 or more $330,500 + 100% of net worth over $635,000
Reprinted from The EFC Formula, 2016-17 Need Analysis: Lesson 2 53
NASFAA University Self-Study Guide: Need Analysis
Table B4: Asset Protection Allowance
Age of Allowance for Allowance for Age of Allowance for Allowance for
Student as of Married Student Unmarried Student as of Married Student Unmarried
12/31/2016* Student 12/31/2016* Student
$0 $17,800
25 or less 1,000 $0 46 18,300 $9,000
26 2,100 500 47 18,700 9,200
27 3,100 1,100 48 19,200 9,400
28 4,100 1,600 49 19,700 9,700
29 5,200 2,100 50 20,200 9,900
30 6,200 2,600 51 20,700 10,100
31 7,200 3,200 52 21,300 10,400
32 8,300 3,700 53 21,800 10,600
33 9,300 4,200 54 22,400 10,900
34 10,300 4,700 55 23,000 11,100
35 11,400 5,300 56 23,700 11,400
36 12,400 5,800 57 24,300 11,700
37 13,400 6,300 58 25,000 12,000
38 14,500 6,800 59 25,700 12,300
39 15,500 7,400 60 26,400 12,600
40 15,900 7,900 61 27,200 12,900
41 16,300 8,100 62 27,900 13,200
42 16,600 8,300 63 28,800 13,600
43 17,000 8,500 64 29,600 13,900
44 17,400 8,600 65 or older empty 14,300
45 8,800 empty empty
54 Need Analysis: Lesson 2 Reprinted from The EFC Formula, 2016-17
NASFAA University Self-Study Guide: Need Analysis
2016–2017 EFC FORMULA C : INDEPENDENT STUDENT CREGULAR
With Dependent(s) Other than a Spouse
WORKSHEET
STUDENT/SPOUSE INCOME IN 2015 AVAILABLE INCOME Page 1
1. Student’s and spouse’s Adjusted Gross Income TOTAL INCOME (from line 7)
(FAFSA/SAR #36) If negative, enter zero.
TOTAL ALLOWANCES (from line 14)
2. a. Student’s income earned from work 15. AVAILABLE INCOME (AI) −
=
(FAFSA/SAR #39) __________ May be a negative number.
2. b. Spouse’s income earned from work STUDENT’S/SPOUSE’S CONTRIBUTION FROM ASSETS
(FAFSA/SAR #40) + __________ 16. Cash, savings & checking (FAFSA/SAR #41)
Total student/spouse income earned from work =
3. Student/spouse Taxable Income 17. Net worth of investments** +
(If tax filers, enter the amount from line 1 above. (FAFSA/SAR #42) +
If non-tax filers, enter the amount from line 2.)*
If negative, enter zero. +
4. Total untaxed income and benefits
(sum total of FAFSA/SAR #45a. through 45j.) + 18. Net worth of business and/or investment farm
(FAFSA/SAR #43)
5. Taxable and untaxed income =
(sum of line 3 and line 4) If negative, enter zero.
6. Total additional financial information 19. Adjusted net worth of business/farm
(sum total of FAFSA/SAR #44a. through 44f.) − (Calculate using Table C4.)
20. Net worth (sum of lines 16, 17, and 19) =
7. TOTAL INCOME 21. Asset protection allowance (Table C5) −
(line 5 minus line 6) May be a negative number. =
22. Discretionary net worth (line 20 minus line 21) =
ALLOWANCES AGAINST STUDENT/SPOUSE INCOME 23. Asset conversion rate × .07
=
8. 2015 U.S. income tax paid (FAFSA/SAR #37) 24. CONTRIBUTION FROM ASSETS
(tax filers only) If negative, enter zero. If negative, enter zero.
9. State and other tax allowance + EXPECTED FAMILY CONTRIBUTION
(Table C1) If negative, enter zero. + AVAILABLE INCOME (AI) (from line 15)
+ CONTRIBUTION FROM ASSETS (from line 24) +
10. Student’s Social Security tax (Table C2)
11. Spouse’s Social Security tax (Table C2)
12. Income protection allowance (Table C3) + 25. Adjusted Available Income (AAI) =
May be a negative number.
13. Employment expense allowance: 26. Total contribution from AAI
(Calculate using Table C6.) If negative, enter zero.
• Student and spouse both working: 35% of
the lesser of the earned incomes, or $4,000, 27. Number in college in 2016–2017 ÷
whichever is less (FAFSA/SAR #96)
• One-parent families: 35% of earned income, 28. EXPECTED FAMILY CONTRIBUTION for
or $4,000, whichever is less nine month enrollment. If negative, enter zero.*** =
• Student or spouse working (not both): zero +
14. TOTAL ALLOWANCES =
*STOP HERE if the following are true: **Do not include the student’s home.
***To calculate the EFC for less than nine-month enrollment, see the
Line 3 is $25,000 or less and
next page. If the student is enrolled for more than nine months, use
• The student (and the student’s spouse, if any) are eligible to file a 2015 the nine-month EFC (line 28 above).
IRS Form 1040A or 1040EZ (they are not required to file a 2015 Form
1040) or they are not required to file any income tax return or
• Anyone included in the student’s household size (as defined on the
FAFSA) received benefits during 2014 or 2015 from any of the
designated means-tested federal benefit programs or
• The student (or the student’s spouse, if any) is a dislocated worker.
If these circumstances are true, the Expected Family Contribution is
automatically zero.
Reprinted from The EFC Formula, 2016-17 Need Analysis: Lesson 2 55
NASFAA University Self-Study Guide: Need Analysis
Table C1: State and Other Tax Allowance
State Percent of Total Income State Percent of Total Income
$0 - $14,999 $15,000 or more $0 - $14,999 $15,000 or more
Alabama Montana
Alaska 3% 2% Nebraska 4% 3%
American Samoa 2% 1% Nevada 5% 4%
Arizona 2% 1% New Hampshire 2% 1%
Arkansas 4% 3% New Jersey 5% 4%
California 4% 3% New Mexico 9% 8%
Canada and 7% 6% 3% 2%
Canadian Provinces
Colorado 2% 1% New York 9% 8%
Connecticut
4% 3% North Carolina 5% 4%
Delaware
8% 7% North Dakota 2% 1%
District of Columbia
Federated States of 5% 4% Northern Mariana 2% 1%
Micronesia Islands
Florida
Georgia 7% 6% Ohio 5% 4%
Guam
Hawaii 2% 1% Oklahoma 3% 2%
Idaho
Illinois 3% 2% Oregon 7% 6%
Indiana
Iowa 5% 4% Palau 2% 1%
Kansas
Kentucky 2% 1% Pennsylvania 5% 4%
Louisiana
Maine 5% 4% Puerto Rico 2% 1%
Marshall Islands
Maryland 5% 4% Rhode Island 7% 6%
Massachusetts
Mexico 6% 5% South Carolina 4% 3%
Michigan
Minnesota 4% 3% South Dakota 2% 1%
Mississippi
Missouri 5% 4% Tennessee 2% 1%
5% 4% Texas 3% 2%
5% 4% Utah 5% 4%
3% 2% Vermont 6% 5%
6% 5% Virgin Islands 2% 1%
2% 1% Virginia 6% 5%
8% 7% Washington 3% 2%
6% 5% West Virginia 3% 2%
2% 1% Wisconsin 7% 6%
4% 3% Wyoming 1% 0%
6% 5% Blank or Invalid State 2% 1%
3% 2% Other 2% 1%
4% 3%
To calculate the state and other tax allowance, multiply the total income of the student and spouse (EFC
Formula C Worksheet, line 7) by the appropriate rate from the table above to get the “State and Other Tax Al-
lowance” (EFC Formula C Worksheet, line 9). Use the student’s State of Legal Residence (FAFSA/SAR #18)
reported on the FAFSA. If this item is blank or invalid, use the State in the Student’s Mailing Address (FAFSA/
SAR #6). If both items are blank or invalid, use the rate for a blank or invalid state above.
56 Need Analysis: Lesson 2 Reprinted from The EFC Formula, 2016-17
NASFAA University Self-Study Guide: Need Analysis
Table C2: Social Security Tax
Income Earned from Work* Social Security Tax
$0 – $118,500 7.65% of income
$118,501 or greater $9,065.25 + 1.45% of amount over $118,500
Calculate separately the Social Security tax of the student and spouse.
*Student’s 2015 income earned from work is FAFSA/SAR #39
Spouse’s 2015 income earned from work is FAFSA/SAR #40
Social Security Tax will never be less than zero.
Table C3: Income Protection Allowance
Number in student’s Number of college students in the household (FAFSA/SAR #96)
household, including 12345
student
(FAFSA/SAR #95)
2 $25,210 $20,900 not applicable not applicable not applicable
3 $31,390 $27,100 $22,790 not applicable not applicable
4 $38,760 $34,460 $30,170 $25,850 not applicable
5 $45,740 $41,420 $37,130 $32,830 $28,540
6 $53,490 $49,190 $44,910 $40,580 $36,300
Note: For each additional family member, add $6,040.
For each additional college student, subtract $4,290.
Table C4: Business/Farm Net Worth Adjustment
If the net worth of a business or farm is— Then the adjusted network is—
Less than $1 $0
$1 to $125,000 40% of net worth of business/farm
$125,001 to $380,000 $50,000 + 50% of net worth over $125,000
$380,001 to $635,000 $177,500 + 60% of net worth over $380,000
$635,001 or more $330,500 + 100% of net worth over $635,000
Reprinted from The EFC Formula, 2016-17 Need Analysis: Lesson 2 57
NASFAA University Self-Study Guide: Need Analysis
Table C5: Asset Protection Allowance
Age of older Allowance Allowance for Age of older Allowance Allowance for
parent as of for Married Unmarried parent as of for Married Unmarried
12/31/2016* Student 12/31/2016* Student
Student Student
25 or less $0 46 $9,000
26 $0 500 47 $17,800 9,200
27 1,000 1,100 48 18,300 9,400
28 2,100 1,600 49 18,700 9,700
29 3,100 2,100 50 19,200 9,900
30 4,100 2,600 51 19,700 10,100
31 5,200 3,200 52 20,200 10,400
32 6,200 3,700 53 20,700 10,600
33 7,200 4,200 54 21,300 10,900
34 8,300 4,700 55 21,800 11,100
35 9,300 5,300 56 22,400 11,400
36 10,300 5,800 57 23,000 11,700
37 11,400 6,300 58 23,700 12,000
38 12,400 6,800 59 24,300 12,300
39 13,400 7,400 60 25,000 12,600
40 14,500 7,900 61 25,700 12,900
41 15,500 8,100 62 26,400 13,200
42 15,900 8,300 63 27,200 13,600
43 16,300 8,500 64 27,900 13,900
44 16,600 8,600 65 or older 28,800 14,300
45 17,000 8,800 empty 29,600 empty
17,400 empty
* Determine the student’s age as of 12/31/2016 from the student’s date of birth (FAFSA/SAR #9)
Table C6: Student’s Contribution from AAI
If the student’s AAI— Then the student’s contribution from AAI is—
Less than -$3,409 -$750
$-3,409 to $15,900 22% of AAI
$15,901 to $20,000 $3,498 + 25% of AAI over $15,900
$20,001 to $24,100 $4,523 + 29% of AAI over $20,000
$5,712 + 34% of AAI over $24,100
$24,101 to $28,200
$28,201 to $32,200 $7,106 + 40% of AAI over $28,200
$32,201 or more $8,706 + 47% of AAI over $32,200
58 Need Analysis: Lesson 2 Reprinted from The EFC Formula, 2016-17
NASFAA University Self-Study Guide: Need Analysis
Lesson 2 Glossary
Dependent: A student who does not meet the definition of an independent student as prescribed under section
480(d) of the Higher Education Act of 1965 (HEA), as amended. Also an individual for whom an independent
student will provide more than 50 percent support during the award year.
Expected family contribution (EFC): Estimate of a family’s ability to contribute toward postsecondary
educational costs, derived by a formula known as Federal Methodology.
Family-owned and controlled small business: Any family-owned and controlled small business with 100 or
fewer full-time or full-time equivalent employees. Family-owned and controlled means the student and/or the
student’s parents, or other persons directly related, or who are or were related by marriage, own more than 50
percent of the business.
Means-tested federal benefit program: A federal mandatory spending program, other than a Title IV
program, in which eligibility for benefits or the amount of benefits is determined based on income or resources.
Some examples of such programs include:
• Supplemental Security Income (SSI);
• Supplemental Nutrition Assistance Program (SNAP);
• Free and reduced price school lunches;
• Temporary Assistance for Needy Families (TANF);
• Special Supplemental Nutrition Programs for Women, Infants, and Children (WIC); and
• Other programs identified by the Department of Education.
Model: A description of a complex system.
Parent contribution (PC): The amount the parent(s) of a dependent student are expected to contribute
towards the student’s educational costs for an award year.
Professional judgment (PJ): The authority provided under the HEA 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.
Specified year: Either of the two calendar years preceding the first year covered by an award year and
indicates which year’s demographic and financial information will be used to calculate a student’s EFC.
Student contribution (SC): The amount the student is expected to contribute towards his or her educational
costs for an award year.
© 2016 NASFAA Need Analysis: Lesson 2 59
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60 Need Analysis: Lesson 2 © 2016 NASFAA
NASFAA University Self-Study Guide: Need Analysis
Lesson 2 Answer Keys
Learning Activity: Selecting the Correct Regular Formula Model
1. Alex
Alex is a 22-year-old senior at Big State University. He works part time and earns enough money to pay
for most of his living expenses. Alex’s parents no longer claim him on their tax return, but still pay for his
health and car insurance.
Model A Model B Model C
2. Leila
At 21, Leila works as the manager of a popular pizza delivery business and supports herself financially.
Her younger brother Nathan had a huge fight with their stepfather last year and now lives with Leila.
Leila will provide more than half of Nathan’s financial support during the award year, and claimed
Nathan on her 2015 tax return. This fall, she plans to enroll at Wood College to pursue a degree in
business.
Model A Model B Model C
3. Carlos
Carlos is enrolled in the astrophysics doctoral program at National Science University. He and his wife
Maria have no children, and they now live with her parents because the stipend from his research
assistantship no longer covers the rent for an apartment close to campus.
Model A Model B Model C
© 2016 NASFAA Need Analysis: Lesson 2 61
NASFAA University Self-Study Guide: Need Analysis
Quick Quiz 1
1. Which model or models of the regular formula are used to calculate the EFC of independent students?
Models B and C are used to calculate the EFC of independent students.
2. What allowances are subtracted from parents’ total income to calculate parents’ available income?
The following allowances are subtracted from parents’ total income: U.S. income tax paid, state and
other taxes, Social Security tax, IPA, and employment expense.
3. What is the purpose of the education savings and asset protection allowance?
The education savings and asset protection allowance protects a portion of the parents’ assets for
retirement, emergencies, and personal educational expenses.
4. What is the purpose of the allowance for negative parents’ adjusted available income?
The allowance for negative parents’ adjusted available income recognizes situations where the parents’
income is insufficient to cover basic living expenses, so the student’s income is used to support the
family.
5. What assessment rates are used to calculate the dependent student’s contributions from available
income and assets?
The dependent student’s income is assessed at 50 percent and his or her assets are assessed at 20
percent.
62 Need Analysis: Lesson 2 © 2016 NASFAA
NASFAA University Self-Study Guide: Need Analysis
Learning Activity: Hand Calculation Using Model A
See the worksheet results beginning on page 64.
© 2016 NASFAA Need Analysis: Lesson 2 63
NASFAA University Self-Study Guide: Need Analysis
2016–2017 EFC FORMULA A : DEPENDENT STUDENT AREGULAR
PARENTS’ INCOME IN 2015 AVAILABLE INCOME WORKSHEET
Page 1
1. Parents’ Adjusted Gross Income (FAFSA/SAR #85) 74,386 Total income (from line 7) 77,186
If negative, enter zero. 50,135
Total allowances (from line 14) − 27,051
2. a. Parent 1 (father/mother/stepparent) income
15. AVAILABLE INCOME (AI)
53,000earned from work (FAFSA/SAR #88) __________ May be a negative number. =
2. b. Parent 2 (father/mother/stepparent) income
21,386earned from work (FAFSA/SAR #89) + __________
Total parents’ income earned from work = 74,386 PARENTS’ CONTRIBUTION FROM ASSETS
3. Parents’ Taxable Income
74,386 16. Cash, savings & checking (FAFSA/SAR #90) 16,778
(If tax filers, enter the amount from line 1 above. + 6,100 +0
If non-tax filers, enter the amount from line 2.)* = 80,846 17. Net worth of investments** (FAFSA/SAR #91)
− 3,300 If negative, enter zero.
4. Total untaxed income and benefits = 77,186
(Total of FAFSA/SAR #94a. through 94i.) 18. Net worth of business and/or investment farm +
(FAFSA/SAR #92)
5. Taxable and untaxed income
(sum of line 3 and line 4) If negative, enter zero. 0
+0
6. Total additional financial information 19. Adjusted net worth of business/farm = 16,778
(Total of FAFSA/SAR #93a. through 93f.) (Calculate using Table A4.)
− 18,700
7. TOTAL INCOME 20. Net worth (sum of lines 16, 17, and 19)
(line 5 minus line 6) May be a negative number. 21. Education savings and asset
ALLOWANCES AGAINST PARENTS’ INCOME protection allowance (Table A5)
8. 2015 U.S. income tax paid (FAFSA/SAR #86) 6,829 22. Discretionary net worth = -1,922
(tax filers only) If negative, enter zero. (line 20 minus line 21)
9. State and other tax allowance 23. Asset conversion rate × .12
(Table A1) If negative, enter zero.
+ 6,175 24. CONTRIBUTION FROM ASSETS =0
If negative, enter zero.
10. Parent 1 (father/mother/stepparent) Social
Security tax allowance (Table A2) + 4,055
11. Parent 2 (father/mother/stepparent) Social + 1,636 PARENTS’ CONTRIBUTION
Security tax allowance (Table A2) AVAILABLE INCOME (AI) (from line 15)
CONTRIBUTION FROM ASSETS (from line 24) +
12. Income protection allowance (Table A3) + 27,440 27,051
13. Employment expense allowance: 0
• Two working parents (Parents’ Marital Status 25. Adjusted Available Income (AAI) = 27,051
is “married” or “unmarried and both parents May be a negative number. 6,715
living together”): 35% of the lesser of the
earned incomes, or $4,000, whichever is less 26. Total parents’ contribution from AAI 1
(Calculate using Table A6.) If negative, enter zero.
6,715
• One-parent families: 35% of earned income, 27. Number in college in 2016–2017 ÷
or $4,000, whichever is less (Exclude parents) (FAFSA/SAR #74)
• Two-parent families, one working parent: +
enter zero 4,000 28. PARENTS’ CONTRIBUTION (standard
50,135 contribution for nine-month enrollment)***
14. TOTAL ALLOWANCES = =
If negative, enter zero.
*STOP HERE if the following are true: **Do not include the family’s home.
Line 3 is $25,000 or less and
***To calculate the parents’ contribution for other than nine-month
• The parents are eligible to file a 2015 IRS Form 1040A or 1040EZ (they enrollment, see page 11.
are not required to file a 2015 Form 1040) or they are not required to fil
any income tax return or continued on the next page
• Anyone included in the parents’ household size (as defined on the FAFSA)
received benefits during 2014 or 2015 from any of the designated means-
tested federal benefit programs or
• Either of the parents is a dislocated worker.
If these circumstances are true, the Expected Family Contribution is
automatically zero.
64 Need Analysis: Lesson 2 © 2016 NASFAA
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REGULAR A
WORKSHEET
Page 2
STUDENT’S INCOME IN 2015 STUDENT’S CONTRIBUTION FROM ASSETS
45. Cash, savings & checking (FAFSA/SAR #41)
29. Adjusted Gross Income (FAFSA/SAR #36) 0 0
If negative, enter zero. 2,340
46. Net worth of investments*
30. Income earned from work (FAFSA/SAR #39) 2,340 (FAFSA/SAR #42) 0
0
31. Taxable Income If negative, enter zero + 0
(If tax filer, enter the amount from line 29 above. 2,340 0
If non-tax filer, enter the amount from line 30.) 0 47. Net worth of business and/or investment farm +
(FAFSA/SAR #43) =
32. Total untaxed income and benefits + 2,340
(Total of FAFSA/SAR #45a. through 45j.) If negative, enter zero.
48. Net worth (sum of lines 45 through 47)
33. Taxable and untaxed income = 49. Assessment rate × .20
(sum of line 31 and line 32)
34. Total additional financial information 50. STUDENT’S CONTRIBUTION FROM ASSETS = 0
(Total of FAFSA/SAR #44a. through 44f.)
− EXPECTED FAMILY CONTRIBUTION
35. TOTAL INCOME =
(line 33 minus line 34) PARENTS’ CONTRIBUTION
May be a negative number. (from line 28)
6,715
ALLOWANCES AGAINST STUDENT INCOME STUDENT’S CONTRIBUTION FROM AI + 0
(from line 44)
36. 2015 U.S. income tax paid (FAFSA/SAR #37)
(tax filers only) If negative, enter zero. 0 STUDENT’S CONTRIBUTION FROM ASSETS + 0
(from line 50)
37. State and other tax allowance + 140 51. EXPECTED FAMILY CONTRIBUTION 6,715
(Table A7) If negative, enter zero. (standard contribution for nine-month
enrollment)** If negative, enter zero. =
38. Social Security tax allowance (Table A2) + 179
39. Income protection allowance + 6,400
40. Allowance for parents’ negative Adjusted *Do not include the student’s home.
Available Income (If line 25 is negative, enter **To calculate the EFC for other than nine-month enrollment, see the
next page.
line 25 as a positive number in line 40. 0
If line 25 is zero or positive, enter zero in +
line 40.)
41. TOTAL ALLOWANCES = 6,719
STUDENT’S CONTRIBUTION FROM INCOME
Total income (from line 35) 2,340
Total allowances (from line 41) − 6,719
42. Available income (AI) = -4,379
43. Assessment of AI × .50
44. STUDENT’S CONTRIBUTION FROM AI = 0
If negative, enter zero.
© 2016 NASFAA Need Analysis: Lesson 2 65
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Learning Activity: Hand Calculation Using Model B
See the worksheet results on page 67.
66 Need Analysis: Lesson 2 © 2016 NASFAA
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2016–2017 EFC FORMULA B : INDEPENDENT STUDENT BREGULAR
Without Dependent(s) Other than a Spouse
WORKSHEET
Page 1
STUDENT/SPOUSE INCOME IN 2015 CONTRIBUTION FROM AVAILABLE INCOME
1. Student’s and spouse’s Adjusted Gross Income 46,159 TOTAL INCOME (from line 7) 39,659
(FAFSA/SAR #36) If negative, enter zero. TOTAL ALLOWANCES (from line 14) − 20,419
15. AVAILABLE INCOME (AI) = 19,240
2. a. Student’s income earned from work
22,000(FAFSA/SAR #39)
__________
2. b. Spouse’s income earned from work 16. Assessment rate × .50
24,000(FAFSA/SAR #40) 17. CONTRIBUTION FROM AI
+ __________ = 9,620
May be a negative number.
Total student/spouse income earned from work = 46,000
3. Student/spouse Taxable Income 46,159 STUDENT’S/SPOUSE’S CONTRIBUTION FROM ASSETS
(If tax filers, enter the amount from line 1 above. 0
If non-tax filers, enter the amount from line 2.)
46,159
4. Total untaxed income and benefits 18. Cash, savings & checking (FAFSA/SAR #41) 5,300
(sum total of FAFSA/SAR #45a. through 45j.) + 6,500
39,659 19. Net worth of investments*
5. Taxable and untaxed income = +0
(sum of line 3 and line 4) (FAFSA/SAR #42)
If negative, enter zero.
6. Total additional financial information 20. Net worth of business and/or investment farm +
(sum total of FAFSA/SAR #44a. through 44f.) − (FAFSA/SAR #43)
If negative, enter zero. 0
7. TOTAL INCOME
(line 5 minus line 6) May be a negative number. = 21. Adjusted net worth of business/farm +0
(Calculate using Table B3.) = 5,300
22. Net worth (sum of lines 18, 19, and 21)
ALLOWANCES AGAINST STUDENT/SPOUSE INCOME 23. Asset protection allowance (Table B4) − 2,100
8. 2015 U.S. income tax paid (FAFSA/SAR #37) 1,750 24. Discretionary net worth (line 22 minus line 23) = 3,200
(tax filers only) If negative, enter zero. 1,190
9. State and other tax allowance + 25. Asset conversion rate × .20
(Table B1) If negative, enter zero.
1,68310. Student’s Social Security tax (Table B2) + 26. CONTRIBUTION FROM ASSETS = 640
If negative, enter zero.
11. Spouse’s Social Security tax (Table B2) + 1,836
12. Income protection allowance: EXPECTED FAMILY CONTRIBUTION
• $9,960 for single, separated or divorced/ CONTRIBUTION FROM AI (from line 17) 9,620
widowed student; May be a negative number. 640
• $9,960 for married student if spouse is CONTRIBUTION FROM ASSETS (from line 26) + 10,260
enrolled at least 1/2 time; 2
27. Contribution from AI and assets =
• $15,960 for married student if spouse is not + 28. Number in college in 2016–2017
(FAFSA/SAR #96)
enrolled at least 1/2 time. 9,960 ÷
13. Employment expense allowance: 29. EXPECTED FAMILY CONTRIBUTION for 5,130
nine month enrollment. If negative, enter zero.** =
• If student is not married or is separated, the
allowance is zero.
• If student is married but only one person is
working (the student or spouse), the
allowance is zero. **To calculate the EFC for less than nine-month enrollment, see the
next page. If the student is enrolled for more than nine months, use
• If student is married and both student and the nine-month EFC (line 29 above).
spouse are working, the allowance is 35%
of the lesser of the earned incomes, or + 4,000
$4,000, whichever is less.
14. TOTAL ALLOWANCES = 20,419
© 2016 NASFAA Need Analysis: Lesson 2 67
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Quick Quiz 2
1. Which model of the regular formula is used to calculate the EFC of an independent student without
dependents other than a spouse?
Model B is used to calculate the EFC of an independent student without dependents other than a
spouse.
2. Under Model C, which students qualify for the employment expense allowance?
Under Model C, married students where both the student and his or her spouse work and one-parent
families qualify for the employment expense allowance.
3. What is the IPA of a student under Model B?
The IPA of a student under Model B varies based on the student’s marital status and the enrollment
status of his or her spouse, as follows:
• $9,960 for a single, separated, divorced, or widowed student;
• $9,960 for a married student if the spouse is enrolled at least half time; and
• $15,960 for a married student if only the student is enrolled at least half time.
4. What is the asset conversion rate for Model C?
The asset conversion rate for Model C is seven percent.
5. Which independent student model uses the adjusted available income?
Model C uses adjusted available income.
68 Need Analysis: Lesson 2 © 2016 NASFAA
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Lesson 3: Simplified Formulas
Learning Objectives Simplified Formulas
After completing this lesson Review of the Regular Formula
you will:
In Lesson 2, you learned how a student’s expected family contribution
• Recognize the differences (EFC) is calculated under the regular formula. The regular formula is a full
between the regular data element formula which considers the student’s and his family’s
formula and the simplified income and assets in the calculation.
formulas;
The regular formula uses three models to account for the difference in
• Be able to identify which treatment of dependent students (Model A), independent students without
models qualify for the dependents other than a spouse (Model B), and independent students with
simplified formulas; dependents other than a spouse (Model C). Although there are differences
in the calculation across models, the regular formula consists of the
• Understand the eligibility following basic steps:
criteria for an Automatic
Zero EFC; and • Calculation of total income;
• Understand the eligibility • Calculation of total allowances;
criteria for the Simplified
Needs Test. • Calculation of available income;
Key Concepts • Calculation of contribution from available income;
The key concepts you will • Calculation of net worth;
learn in this lesson:
• Calculation of contribution from assets; and
• Automatic Zero EFC;
• Calculation of the student’s EFC.
• Simplified Needs Test;
Simplified Formulas Overview
• Means-tested federal
benefit program; Federal Methodology (FM) recognizes that some applicants have limited
income and resources. For students who meet certain criteria, their EFCs
• Dislocated worker; are calculated using a simplified formula.
• Income threshold; The simplified formulas are not full data element formulas; they do not
consider assets in the calculation of the student’s EFC. There are two
• Primary EFC; and simplified formulas:
• Secondary EFC. • Automatic Zero EFC; and
Resources for • Simplified Needs Test (SNT).
This Lesson
Automatic Zero EFC
• Worksheets and tables
from The EFC Formula, The Automatic Zero EFC is exactly what it sounds like. Applicants
2016–2017 who meet certain criteria will automatically receive a zero EFC
rather than calculate an EFC using the regular formula. Only two
• Lesson 3 Glossary of the three formula models qualify for an Automatic Zero EFC:
• Dependent students (Model A); and
• Independent students with dependents other a spouse (Model C).
© 2016 NASFAA Need Analysis: Lesson 3 69
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Icons Independent students without dependents other a spouse (Model B), are
You will see the following not eligible for an Automatic Zero EFC.
icons in Lesson 3:
Simplified Needs Test
• Key concept
The other simplified formula is the Simplified Needs Test (SNT).
• Quick quiz The SNT is a short EFC formula for families with moderate
incomes, which results in exclusion of assets. All formula models
• Reflection questions qualify for the SNT.
In the following discussion, note the similarities between the qualifying
criteria for the simplified formulas.
• Learning activity Eligibility Criteria for an Automatic Zero EFC
• Helpful hint
To qualify for an Automatic Zero EFC, the independent student (and
spouse, if married) or the parents of a dependent student must meet
certain criteria—both the status criterion and the income criterion.
Status Criterion
The first criterion looks at the family’s tax filing status, receipt of benefits
from a means-tested federal benefit program, or status as a dislocated
worker. Meeting any one of these conditions indicates that calculation of
the EFC under the regular formula is unnecessary.
To meet this criterion through tax filing status, both the independent
student and spouse or both parents of a dependent student must:
• File or be eligible to file a 2015 IRS Form 1040A or 1040EZ;
• File an income tax return required by the tax code for Puerto Rico,
Guam, American Samoa, the U.S. Virgin Islands, the Republic of the
Marshall Islands, the Federated States of Micronesia, or Palau; or
• Not be required to file any income tax return.
To meet this criterion through receipt of benefits from a means-tested
federal benefit program, a member of the independent student’s or
parents’ household must have received benefits in either 2014 or 2015.
A means-tested federal benefit program is one for which a
recipient demonstrates financial need. For the purposes of
qualifying for a simplified formula, the U.S. Department of
Education (ED) considers the following means-tested federal
benefit programs:
• Supplemental Security Income (SSI) Program;
• Supplemental Nutrition Assistance Program (SNAP);
• Free and Reduced Price School Lunch Program;
• Temporary Assistance for Needy Families (TANF) Program; and
• Special Supplemental Nutrition Program for Women, Infants, and
Children (WIC).
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The third way to meet this criterion is for An income threshold represents the
either the independent student (or maximum level of income an independent
spouse, if married) or the parent of a student (and spouse if married) or
dependent student to be classified as a parent(s) of a dependent student may
dislocated worker. have in order to qualify for a simplified formula. This
includes income earned from work from all W-2
A dislocated worker is a person who: forms and any other earnings from work not
appearing on a W-2.
• Meets all of the following:
To qualify for an Automatic Zero EFC, the income
Was terminated or laid off from employment of an independent student (and spouse if married)
or received a notice of termination or layoff, or the parents of a dependent student cannot
exceed:
Is eligible for or has exhausted his
unemployment compensation, or he is not • An adjusted gross income (AGI) of $25,000, for
eligible because, even though he has been tax filers; or
employed long enough to demonstrate
attachment to the workforce, he had • Income earned work of $25,000, if nontax filers.
insufficient earnings or performed services
for an employer that were not covered The income earned from work for nontax filers is
under a state’s unemployment determined using the total income from both
compensation law, and parents of a dependent student or both the
independent student and spouse, as applicable.
Is unlikely to return to a previous
occupation;
• 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
within 180 days;
• Was self-employed but is now unemployed due
to general economic conditions in his
community or natural disaster; or
• Is a displaced homemaker.
You will find the definition of a displaced
homemaker in the glossary for this lesson
on page 95.
Income Criterion
In addition to meeting one of the three conditions of
the status criterion, to qualify for an Automatic Zero
EFC, the independent student (and spouse, if
married) or parents of a dependent student must
also meet an income threshold.
© 2016 NASFAA Need Analysis: Lesson 3 71
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Learning Activity: Qualifying for an Automatic Zero EFC
Using the information below, determine whether or not each student qualifies for an Automatic
Zero EFC. Check your answers using the Answer Key on page 97.
1. Nicholas
Nicholas is a dependent student, and his recently widowed mother completed his Free Application for
Federal Student Aid (FAFSA) as the parent of record. Nicholas’ mother works part time as a receptionist
for the local humane society, and earned $18,000 in 2015. For the 2015 tax year, Nicholas’ mother was
required to file a 1040 due to the value of the investments left to her in her late husband’s will. Her AGI
was $36,000.
Nicholas is eligible for an Automatic Zero EFC.
Nicholas is not eligible for an Automatic Zero EFC.
2. Priya
Priya is in her second year at Mile High College. She is the single mother of two small children who live
with her. Between her off-campus job as a checker in a local grocery store and her on-campus Federal
Work-Study (FWS) job, she earned $20,000 in 2015. Based on the advice of her tax professional, she
filed a 1040 for the 2015 tax year, even though she could have filed a 1040A. She reported an AGI of
$20,000. In 2015, Priya received several months of benefits through TANF.
Priya is eligible for an Automatic Zero EFC.
Priya is not eligible for an Automatic Zero EFC.
3. Lupe
Lupe will be an entering freshman Fall 2016. For 2015, her parents reported an AGI of $48,000. Her
father, who works in a local manufacturing plant, just received notice that the plant will be closing in
three months.
Lupe is eligible for an Automatic Zero EFC.
Lupe is not eligible for an Automatic Zero EFC.
72 Need Analysis: Lesson 3 © 2016 NASFAA
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Eligibility Criteria for the • SNAP;
Simplified Needs Test
• Free and Reduced Price School Lunch
As noted at the beginning of the lesson, the Program;
eligibility criteria for the Simplified Needs Test
(SNT) and the Automatic Zero EFC are similar. To • TANF Program; or
qualify for the SNT, the independent student (and
spouse) or the parents of a dependent student • WIC.
must meet two criteria:
In order for a student to qualify for the SNT, the
• Status; and benefits had to have been received in either 2014
or 2015.
• Income.
“To qualify for the SNT, the
Meeting both of these criteria indicates it is not
necessary to include assets in the calculation of the independent student (and spouse)
student’s EFC.
or the parent of a dependent
Status Criterion
student must meet two criteria:
The applicant must meet one of the three
status conditions described earlier under • Status; and
the discussion of the Automatic Zero EFC.
The three conditions are: • Income.”
• Tax filing status; The final status criterion that can be met is status
as a dislocated worker. The applicant qualifies
• Receipt of benefits from a means-tested federal under this criterion if either the independent student
benefit program; or or spouse is a dislocated worker, or if either parent
of a dependent student is a dislocated worker. As a
• Status as a dislocated worker (also applies to reminder, a dislocated worker is an individual who:
the spouse of an independent student).
• Meets all of the following:
To meet this criterion through tax filing status, both Was terminated or laid off from employment
the independent student (and spouse) or both or received a notice of termination or layoff,
parents of a dependent student must: Is eligible for or has exhausted her
unemployment compensation, or she is not
• File or be eligible to file a 2015 IRS Form eligible because, even though she has been
1040A or 1040EZ; employed long enough to demonstrate
attachment to the workforce, she had
• File an income tax return required by the tax insufficient earnings or performed services
code for Puerto Rico, Guam, American Samoa, for an employer that were not covered
the U.S. Virgin Islands, the Republic of the under a state’s unemployment
Marshall Islands, the Federated States of compensation law, and
Micronesia, or Palau; or Is unlikely to return to a previous
occupation;
• Not be required to file any income tax return.
• Was terminated or laid off from employment or
To meet the criterion through receipt of benefits received a notice of termination or layoff as a
from a federal means-tested benefit program, a result of any permanent closure of, or any
member of either the independent student’s or the
parents’ household of a dependent student must
have received benefits from one of the following
programs:
• SSI Program;
© 2016 NASFAA Need Analysis: Lesson 3 73
NASFAA University Self-Study Guide: Need Analysis
substantial layoff at, a plant, facility, or FAFSA. Finally, the amount of additional financial
enterprise; information from the FAFSA is subtracted to
determine the parents’ total income. This may be a
• Is employed at a facility at which the employer negative number.
made a general announcement that it will close
within 180 days; Step 2: Parents’ Total Allowances
• Was self-employed but is now unemployed due As with the regular formula, the next step is to
to general economic conditions in his calculate the parents’ allowances against income.
community or natural disaster; or
Under the SNT, parents are eligible for the
• Is a displaced homemaker. following allowances:
You can find the definition of a displaced • U.S. income tax paid;
homemaker in the glossary for this lesson.
• State and other taxes;
Income Criterion
• Social Security tax;
As with the Automatic Zero EFC, there is
an income threshold which applicants • Income protection allowance (IPA); and
cannot exceed to be eligible for the SNT.
• Employment expense allowance.
To qualify, the income of the independent student
(and spouse, if married) or parents of a dependent The values of these allowances are calculated the
student cannot be greater than: same way as under the regular formula. The value
of U.S. income tax paid is taken from the FAFSA.
• An AGI of $49,999 for tax filers; or The allowance for state and other taxes is
calculated using a table (A1). The Social Security
• Income earned from work of $49,999 for nontax tax for each parent is calculated using a specified
filers. percentage of income earned from work and Table
A2.
The income earned from work for nontax filers is
determined using the total income from both Income Protection Allowance. The formula
parents of a dependent student or both the determines the IPA using a table (A3) which factors
independent student and spouse, as applicable. in both the size of the family and the number in
This includes income earned from work from all college.
W-2 forms and any other earnings from work not
appearing on the W-2s. Employment Expense Allowance. The value of the
employment expense allowance is based on the
Next, you will learn the steps for calculating a number of parents in the household, which parents
dependent student’s EFC when he meets the work, and income. The allowance is either 35
criteria for the SNT (using Model A). percent of the lower income or $4,000, whichever is
less. In a two-parent household, if only one parent
Simplified Needs Test: Model A works, the allowance is zero.
Step 1: Parents’ Total Income The value of the parents’ total allowances is the
sum of all applicable allowances.
The process for calculating parents’ total income
under the SNT is the same as it is under the regular Step 3: Parents’ Available Income
formula. The formula will use either the parents’
AGI or income earned from work, depending on the After calculating the parents’ total allowances, the
parents’ tax filing status. To this number is added formula next calculates the parents’ available
any untaxed income and benefits reported on the income by subtracting total allowances from total
income (calculated in Step 1).
74 Need Analysis: Lesson 3 © 2016 NASFAA
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Step 4: Parents’ Contribution Step 6: Student’s Total Allowances
Under the SNT, parents’ available income is the The student is eligible for the following allowances:
same as parents’ adjusted available income under
the regular formula (because no assets are • U.S. income tax paid;
factored into the calculation). The parents’ total
contribution from adjusted available income is • State and other taxes;
calculated using the table (A6) which protects a
certain portion of income. To calculate the • Social Security tax;
contribution for an individual student, the formula
divides the parents’ total contribution by the number • IPA; and
in college, excluding the parents.
• Parents’ negative adjusted available income.
“Under the SNT, parents’
The first three allowances are self-explanatory. The
available income is the same IPA of the dependent student is a standard
allowance of $6,400, just as it is under the regular
as parents’ adjusted available formula. The SNT, like the regular formula,
provides a student allowance for parents’ negative
income under the regular formula adjusted available income. As noted in the previous
lesson, this allowance accounts for situations
(because no assets are where the student’s income is needed to support
the family.
factored into the calculation).
The student’s total allowances are the sum of all
The parents’ total contribution applicable allowances.
from adjusted available income Step 7: Student’s Contribution from
Income
is calculated using the table
The first step in calculating the student’s
which protects a certain contribution from income is determining her
available income. This is done by subtracting the
portion of income.” student’s total allowances from her total income.
The student’s available income is then assessed at
Step 5: Student’s Income a rate of 50 percent to calculate the student’s
contribution from available income. The contribution
After calculating the parents’ contribution, the may not be a negative number.
formula next calculates the student’s contribution.
First, the student’s income is calculated. This Step 8: Expected Family Contribution
process should sound familiar to you. Depending
on the student’s tax filing status, the formula uses To calculate the student’s EFC, the formula totals
either the student’s AGI or income earned from the parents’ contribution and the student’s
work. To this figure is added any untaxed income contribution from available income. No student
and benefits reported on the FAFSA. After this contribution from assets is included. The resulting
figure is calculated, the amount of any reported figure is the student’s EFC.
additional financial information (such as education
tax credits, FWS wages, or child support paid) is
subtracted to calculate the student’s total income.
The student’s total income may be a negative
number.
© 2016 NASFAA Need Analysis: Lesson 3 75
NASFAA University Self-Study Guide: Need Analysis
Quick Quiz
Now it’s time to check what you have learned so far. Answer the following questions and check
your responses using the Answer Key on page 98.
1. What are the names of the two simplified formulas?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
2. What is the maximum AGI or, in the case of a nontax filer, maximum income earned from work an
independent student (and spouse, if married) or the parents of a dependent student can have and qualify
for an Automatic Zero EFC?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
3. Receiving benefits from which means-tested federal benefit programs partially qualifies a student for the
SNT?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
4. Which formula model is not eligible for an Automatic Zero EFC?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
5. What is the maximum AGI or, in the case of a nontax filer, maximum income earned from work an
independent student (and spouse, if married) or the parents of a dependent student can have and qualify
for the SNT?
___________________________________________________________________________________
___________________________________________________________________________________
76 Need Analysis: Lesson 3 © 2016 NASFAA
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Simplified Needs Test: Model B • $15,960 for a married student if only she is
enrolled at least half time.
Under the SNT, the steps for calculating the
indepndent student’s EFC are similar to the steps Employment Expense Allowance. The value of this
used to calculate the student’s contribution from allowance is also calculated the same way as it is
income under the regular formula. under the regular formula. Only married students
are eligible for this allowance if both the student
If the student is married, his spouse’s and her spouse work. The value is 35 percent of
income is included throughout the the lesser earned income or $4,000, whichever is
calculation. less.
Step 1: Student’s Total Income The student’s total allowances is the sum of all
applicable allowances.
As with Model B under the regular formula, the first
step in calculating the student’s EFC is determining “The independent student is
his total income. The formula uses either AGI or eligible for the following
income earned from work, depending on whether or allowances:
not the student (and spouse, if married) are
required to file a tax return. To this amount, the • U.S. income tax paid;
formula adds any untaxed income and benefits the
student reported on his FAFSA. Finally, any • State and other taxes;
additional financial information included on the
FAFSA is subtracted to calculate the student’s total • Social Security tax;
income. This may be a negative number.
• IPA; and
Step 2: Student Total Allowances
• Employment expense
The independent student is eligible for the following allowance.”
allowances:
Step 3: Student’s Contribution from
• U.S. income tax paid; Available Income
• State and other taxes; The student’s available income is the result of
subtracting his total allowances from total income.
• Social Security tax; Available income is assessed at a rate of 50
percent to calculate the student’s contribution from
• IPA; and available income.
• Employment expense allowance. Step 4: Expected Family Contribution
Income Protection Allowance. The calculation of To calculate the student’s EFC, the formula divides
the IPA for students whose EFC is calculated under the student’s conribution from available income by
Model B using the SNT is the same as it is under the number in college. No assets are included in
the regular formula. The IPA is a standard amount the EFC calculation.
based on the student’s marital status and
enrollment status of her spouse, if married.
The standard IPA amounts are as follows:
• $9,960 for a single, separated, divorced, or
widowed student;
• $9,960 for a married student if her spouse is
enrolled at least half time; and
© 2016 NASFAA Need Analysis: Lesson 3 77
NASFAA University Self-Study Guide: Need Analysis © 2016 NASFAA
Simplified Needs Test: Model C
The calculation of the independent student’s EFC
under Model C is the same as calculating the
parents’ contribution under Model A. To review the
steps, see the discussion beginning on page 74.
Primary and Secondary EFCs
Occasionally, a student who is eligible for the SNT
will submit her FAFSA with asset information.
When this occurs, the Central Processing System
(CPS) will calculate two EFCs: a primary EFC and
a secondary EFC. This situation is most likely to
occur if a student submits a paper FAFSA, because
FAFSA on the Web allows the applicant to skip the
asset questions when they are not required.
The student’s primary EFC is calculated using the
SNT; the formula does not include any reported
assets. You should always use a student’s primary
EFC to calculate her eligibility for Title IV aid.
“The student’s primary EFC
is calculated using the SNT;
the formula does not include
any reported assets.”
To calculate the student’s secondary EFC, the CPS
uses the appropriate model of the regular formula,
including the reported assets. A student’s
secondary EFC will appear in the “Information for
Financial Aid Professionals” section of the Student
Aid Report (SAR) and Institutional Student
Information Record (ISIR). While you cannot use
the secondary EFC to award Title IV aid, it may be
used to award institutional aid.
78 Need Analysis: Lesson 3
NASFAA University Self-Study Guide: Need Analysis
Learning Activity: SNT Hand Calculation Using Model A
Using the case study below and the worksheet and tables for Model A, beginning on page 81,
calculate the dependent student’s EFC using the Simplified Needs Test (SNT). Check your
answer using the Answer Key on page 99.
All calculations should be carried out to three decimal places. The result is rounded to the nearest whole
number:
• .001 through .499 is rounded down; and
• .500 through .999 is rounded up.
Amani Parker
Amani will be a second-year undergraduate student at My State University starting Fall 2016. Her date of
birth is May 15, 1997. She lives in Chicago, Illinois with her mother and two younger brothers, Jonathan
and Jeremiah. Her brothers are both in high school.
Amani’s mother, Mary Anne, was widowed in 2006. She was born on August 20, 1973.
Amani’s mother filed an IRS Form 1040A for the 2015 tax year. She works as an administrative assistant
and earned $45,000 in 2015. Mary Anne reported an AGI of $44,600 after an individual retirement account
deduction of $400, and she had a tax liability of $2,954. Mary Anne claimed all three of her children as
dependents. No one in the family received benefits from a means-tested federal benefit program in 2014 or
2015. She reported that she claimed an American Opportunity Tax Credit of $1,200 for Amani’s first-year
postsecondary expenses on the FAFSA. She has 15,000 in a savings account.
Amani earned $2,500 in 2015 working at a fast food restaurant. She filed a 1040EZ with an AGI of $2,500
and no tax liability. She has $500 in a savings account, which she plans to use to buy books for the fall
semester. She reported no additional financial information on the FAFSA.
© 2016 NASFAA Need Analysis: Lesson 3 79
NASFAA University Self-Study Guide: Need Analysis
Reflection Questions
Take a few moments to reflect on the following questions. There are no right or wrong answers.
You can also discuss these questions with a coworker in your office.
1. Do you agree with the rationale for the simplified formulas? Why or why not?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
2. In your opinion, is the maximum AGI or, for nontax filers, maximum income earned from work used to
qualify for the simplified formulas set at the appropriate levels? Why or why not?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
3. If an applicant who qualifies for the SNT reports assets on the FAFSA, should they be included in the
calculation of the EFC? Why or why not?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
80 Need Analysis: Lesson 3 © 2016 NASFAA
NASFAA University Self-Study Guide: Need Analysis
2016–2017 EFC FORMULA A : DEPENDENT STUDENT SIMPLIFIED A
WORKSHEET
Page 1
PARENTS’ INCOME IN 2015 AVAILABLE INCOME
Total income (from line 7)
1. Parents’ Adjusted Gross Income (FAFSA/SAR #85)
If negative, enter zero.
2. a. Parent 1 (father/mother/stepparent) income Total allowances (from line 14) −
earned from work (FAFSA/SAR #88) __________ =
15. AVAILABLE INCOME (AI)
2. b. Parent 2 (father/mother/stepparent) income May be a negative number.
earned from work (FAFSA/SAR #89) + __________
Total parents’ income earned from work = PPAARREENNTTSS’’CCOONNTTRRIIBBUUTTIION FROMM ASSSEETTSS
3. Parents’ Taxable Income
+ 16. Cash, savings & checking (FAFSA/SAR #90)
(If tax filers, enter the amount from line 1 above. =
If non-tax filers, enter the amount from line 2.)* − 17. Net worth of investments** +
(FAFSA/SAR #91)
4. Total untaxed income and benefits: If negative, enter zero.
(Total of FAFSA/SAR #94a. through 94i.)
18. Net worth of business and/or investment farm +
5. Taxable and untaxed income (FAFSA/SAR #92)
(sum of line 3 and line 4)
If negative, enter zero.
6. Total additional financial information
19. Adjusted net worth of business/farm +
(Total of FAFSA/SAR #93a. through 93f.) (Calculate using Table A4.)
7. TOTAL INCOME 20. Net worth (sum of lines 16, 17, and 19) =
(line 5 minus line 6) May be a negative number. = −
21. Education savings and asset =
ALLOWANCES AGAINST PARENTS’ INCOME protection allowance (Table A5) ×
8. 2015 U.S. income tax paid (FAFSA/SAR #86) 22. Discretionary net worth =
(tax filers only) If negative, enter zero. (line 20 minus line 21)
9. State and other tax allowance + 23. Asset conversion rate
(Table A1) If negative, enter zero.
24. CONTRIBUTION FROM ASSETS
10. Parent 1 (father/mother/stepparent) Social If negative, enter zero.
Security tax allowance (Table A2)
+
11. Parent 2 (father/mother/stepparent) Social + PARENTS’ CONTRIBUTION
Security tax allowance (Table A2) AVAILABLE INCOME (AI) (from line 15)
12. Income protection allowance (Table A3) +
13. Employment expense allowance: CONTRIBUTION FROM ASSETS (from line 24) +
• Two working parents (Parents’ Marital Status 25. Adjusted Available Income (AAI) =
is “married” or “unmarried and both parents May be a negative number.
living together”): 35% of the lesser of the
earned incomes, or $4,000, whichever is less 26. Total parents’ contribution from AAI
(Calculate using Table A6.) If negative, enter zero.
• One-parent families: 35% of earned income, 27. Number in college in 2016–2017 ÷
or $4,000, whichever is less (Exclude parents) (FAFSA/SAR #74)
• Two-parent families, one working parent:
enter zero + 28. PARENTS’ CONTRIBUTION (standard
14. TOTAL ALLOWANCES = contribution for nine-month enrollment)*** =
If negative, enter zero.
*STOP HERE if the following are true: **Do not include the family’s home.
Line 3 is $25,000 or less and ***To calculate the parents’ contribution for other than nine-month
enrollment, see page 15.
• The parents are eligible to file a 2015 IRS Form 1040A or 1040EZ (they
are not required to file a 2015 Form 1040) or they are not required to file Note: Do not complete the shaded areas; asset
any income tax return or information is not required in the simplified
formula.
• Anyone included in the parents’ household size (as defined on the
FAFSA) received benefits during 2014 or 2015 from any of the continued on the next page
designated means-tested federal benefit programs or
• Either of the parents is a dislocated worker.
If these circumstances are true, the Expected Family Contribution is
automatically zero.
Reprinted from The EFC Formula, 2016-17 Need Analysis: Lesson 3 81
NASFAA University Self-Study Guide: Need Analysis
SIMPLIFIED A
WORKSHEET
Page 2
STUDENT’S INCOME IN 2015 STUDENT’S CONTRIBUTION FROM ASSETS
29. Adjusted Gross Income (FAFSA/SAR #36) 45. Cash, savings & checking (FAFSA/SAR #41)
If negative, enter zero.
46. Net worth of investments*
30. Income earned from work (FAFSA/SAR #39) (FAFSA/SAR #42)
31. Taxable Income If negative, enter zero +
(If tax filer, enter the amount from line 29 above. +
If non-tax filer, enter the amount from line 30.) 47. Net worth of business and/or investment farm
(FAFSA/SAR #43)
32. Total untaxed income and benefits
(Total of FAFSA/SAR #45a. through 45j.) If negative, enter zero.
+ 48. Net worth (sum of lines 45 through 47) =
33. Taxable and untaxed income = 49. Assessment rate × .20
(sum of line 31 and line 32)
50. STUDENT’S CONTRIBUTION FROM ASSETS =
34. Total additional financial information −
(Total of FAFSA/SAR #44a. through 44f.)
35. TOTAL INCOME = EXPECTED FAMILY CONTRIBUTION
(line 33 minus line 34) PARENTS’ CONTRIBUTION
May be a negative number. (from line 28)
ALLOWANCES AGAINST STUDENT INCOME STUDENT’S CONTRIBUTION FROM AI +
(from line 44) +
36. 2015 U.S. income tax paid (FAFSA/SAR #37)
(tax filers only) If negative, enter zero. STUDENT’S CONTRIBUTION FROM ASSETS
(from line 50)
37. State and other tax allowance + 51. EXPECTED FAMILY CONTRIBUTION
(Table A7) If negative, enter zero.
(standard contribution for nine-month
38. Social Security tax allowance (Table A2) + enrollment)** If negative, enter zero. =
39. Income protection allowance + 6,400
40. Allowance for parents’ negative Adjusted + *Do not include the student’s home.
Available Income (If line 25 is negative, enter **To calculate the EFC for other than nine-month enrollment, see the
line 25 as a positive number in line 40. next page.
If line 25 is zero or positive, enter zero in Note: Do not complete the shaded areas;
line 40.) asset information is not required in the
simplified formula.
41. TOTAL ALLOWANCES =
STUDENT’S CONTRIBUTION FROM INCOME
Total income (from line 35)
Total allowances (from line 41) −
42. Available income (AI) =
43. Assessment of AI × .50
44. STUDENT’S CONTRIBUTION FROM AI =
If negative, enter zero.
82 Need Analysis: Lesson 3 Reprinted from The EFC Formula, 2016-17
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Table A1: State and Other Tax Allowance
for EFC Formula A Worksheet (parents only)
State Percent of Total Income State Percent of Total Income
$0 - $14,999 $15,000 or more $0 - $14,999 $15,000 or more
Alabama Montana
Alaska 3% 2% Nebraska 4% 3%
American Samoa 2% 1% Nevada 5% 4%
Arizona 2% 1% New Hampshire 2% 1%
Arkansas 4% 3% New Jersey 5% 4%
California 4% 3% New Mexico 9% 8%
Canada and 7% 6% 3% 2%
Canadian Provinces
Colorado 2% 1% New York 9% 8%
Connecticut
4% 3% North Carolina 5% 4%
Delaware
8% 7% North Dakota 2% 1%
District of Columbia
Federated States of 5% 4% Northern Mariana 2% 1%
Micronesia Islands
Florida
Georgia 7% 6% Ohio 5% 4%
Guam
Hawaii 2% 1% Oklahoma 3% 2%
Idaho
Illinois 3% 2% Oregon 7% 6%
Indiana
Iowa 5% 4% Palau 2% 1%
Kansas
Kentucky 2% 1% Pennsylvania 5% 4%
Louisiana
Maine 5% 4% Puerto Rico 2% 1%
Marshall Islands
Maryland 5% 4% Rhode Island 7% 6%
Massachusetts
Mexico 6% 5% South Carolina 4% 3%
Michigan
Minnesota 4% 3% South Dakota 2% 1%
Mississippi
Missouri 5% 4% Tennessee 2% 1%
5% 4% Texas 3% 2%
5% 4% Utah 5% 4%
3% 2% Vermont 6% 5%
6% 5% Virgin Islands 2% 1%
2% 1% Virginia 6% 5%
8% 7% Washington 3% 2%
6% 5% West Virginia 3% 2%
2% 1% Wisconsin 7% 6%
4% 3% Wyoming 1% 0%
6% 5% Blank or Invalid State 2% 1%
3% 2% Other 2% 1%
4% 3%
To calculate the state and other tax allowance, multiply the Parents’ Total Income (EFC Formula A Worksheet,
line 7) by the appropriate rate from the table above to get the “State and Other Tax Allowance” (EFC Formula A
Worksheet, line 9). Use the parents’ State of Legal Residence (FAFSA/SAR #70). If this item is blank or invalid,
use the student’s State of Legal Residence (FAFSA/SAR #18). If both items are blank or invalid, use the State in
the Student’s Mailing Address (FAFSA/SAR #6). If all three items are blank or invalid, use the rate for a blank or
invalid state above.
Reprinted from The EFC Formula, 2016-17 Need Analysis: Lesson 3 83
NASFAA University Self-Study Guide: Need Analysis
Table A2: Social Security Tax
Income Earned from Work* Social Security Tax
$0 – $118,500 7.65% of income
$118,501 or greater $9,065.25 + 1.45% of amount over $118,500
Calculate separately the Social Security tax of parent 1, parent 2, and the student.
*Parent 1 (father/mother/stepparent) 2015 income earned from work is FAFSA/SAR #88
Parent 2 (father/mother/stepparent) 2015 income earned from work is FAFSA/SAR #89
Student’s 2015 income earned from work is FAFSA/SAR#39
Social Security Tax will never be less than zero.
Table A3: Income Protection Allowance
Number in parents’ Number of college students in the household (FAFSA/SAR #74)
household, including 12345
student
(FAFSA/SAR #73)
2 $17,840 $14,790 not applicable not applicable not applicable
3 $22,220 $19,180 $16,130 not applicable not applicable
4 $27,440 $24,390 $21,350 $18,300 not applicable
5 $32,380 $29,320 $26,290 $23,240 $20,200
6 $37,870 $34,820 $31,780 $28,730 $25,690
Note: For each additional family member, add $4,270.
For each additional college student (except parents), subtract $3,040.
Table A4: Business/Farm Net Worth Adjustment
for EFC Formula A Worksheet (parents only)
If the net worth of a business or farm is— Then the adjusted network is—
Less than $1 $0
$1 to $125,000 40% of net worth of business/farm
$125,001 to $380,000 $50,000 + 50% of net worth over $125,000
$380,001 to $635,000 $177,500 + 60% of net worth over $380,000
$635,000 or more $330,500 + 100% of net worth over $635,000
84 Need Analysis: Lesson 3 Reprinted from The EFC Formula, 2016-17
NASFAA University Self-Study Guide: Need Analysis
Table A5: Parents’ Education Savings and
Asset Protection Allowance
for EFC Formula A Worksheet (parents only)
Age of older Allowance if Allowance if Age of older Allowance if Allowance if
parent as of there are two there is only parent as of there are two there is only
12/31/2016* one parent 12/31/2016* one parent
parents** parents**
25 or less $0 46 $9,000
26 $0 500 47 $17,800 9,200
27 1,000 1,100 48 18,300 9,400
28 2,100 1,600 49 18,700 9,700
29 3,100 2,100 50 19,200 9,900
30 4,100 2,600 51 19,700 10,100
31 5,200 3,200 52 20,200 10,400
32 6,200 3,700 53 20,700 10,600
33 7,200 4,200 54 21,300 10,900
34 8,300 4,700 55 21,800 11,100
35 9,300 5,300 56 22,400 11,400
36 10,300 5,800 57 23,000 11,700
37 11,400 6,300 58 23,700 12,000
38 12,400 6,800 59 24,300 12,300
39 13,400 7,400 60 25,000 12,600
40 14,500 7,900 61 25,700 12,900
41 15,500 8,100 62 26,400 13,200
42 15,900 8,300 63 27,200 13,600
43 16,300 8,500 64 27,900 13,900
44 16,600 8,600 65 or older 28,800 14,300
45 17,000 8,800 empty 29,600 empty
17,400 empty
Determine the age of the older parent listed in FAFSA/SAR #64 and #68 as of 12/31/2016.
If no parent date of birth is provide, use age 45.
** Use the two parent allowance when the Parents’ Marital Status listed in FAFSA/SAR #59 is
“married or remarried” or “unmarried and both parents are living together.”
Table A6: Parents’ Contribution from AAI
If the parents’ AAI— Then the parents’ contribution from AAI is—
Less than -$3,409 -$750
$-3,409 to $15,900 22% of AAI
$15,901 to $20,000 $3,498 + 25% of AAI over $15,900
$20,001 to $24,100 $4,523 + 29% of AAI over $20,000
$24,101 to $28,200 $5,712 + 34% of AAI over $24,100
$28,201 to $32,200 $7,106 + 40% of AAI over $28,200
$32,201 or more $8,706 + 47% of AAI over $32,200
Reprinted from The EFC Formula, 2016-17 Need Analysis: Lesson 3 85
NASFAA University Self-Study Guide: Need Analysis
Table A7: State and Other Tax Allowance
for EFC Formula A Worksheet (student only)
State Percent State Percent
Montana
Alabama 2% Nebraska 3%
0% Nevada 3%
Alaska 1% New Hampshire 1%
2% New Jersey 1%
American Samoa 3% New Mexico 4%
Arizona 5% New York 2%
Arkansas 1% North Carolina 6%
California 3% North Dakota 4%
Canada and Canadian Provinces 5% Northern Mariana Islands 1%
Colorado 3% Ohio 1%
Connecticut 5% Oklahoma 3%
Delaware 1% Oregon 2%
District of Columbia 1% Palau 5%
Federated States of Micronesia 3% Pennsylvania 1%
Florida 1% Puerto Rico 3%
Georgia 4% Rhode Island 1%
Guam 3% South Carolina 3%
Hawaii 3% South Dakota 3%
Idaho 3% Tennessee 1%
Illinois 3% Texas 1%
Indiana 3% Utah 1%
Iowa 4% Vermont 3%
Kansas 2% Virgin Islands 3%
Kentucky 4% Virginia 1%
Louisiana 1% Washington 4%
Maine 5% West Virginia 1%
Marshall Islands 4% Wisconsin 2%
Maryland 1% Wyoming 4%
Massachusetts 3% Blank or Invalid State 1%
Mexico 4% Other 1%
Michigan 2% 1%
Minnesota 3%
Mississippi
Missouri
To calculate the state and other tax allowance, multiply the Student’s Total Income (EFC Formula
A Worksheet, line 35) by the appropriate rate from the table above to get the “State and Other Tax
Allowance” (EFC Formula A Worksheet, line 37). Use the Student’s State of Legal Residence
(FAFSA/SAR #18) reported on the FAFSA. If this item is blank or invalid, use the state in the
student’s mailing address (FAFSA/SAR #6). If both items are blank or invalid, use the Parents’s
State of Legal Residence (FAFSA/SAR #70). If all three items are blank or invalid, use the rate for a
blank or invalid state above.
86 Need Analysis: Lesson 3 Reprinted from The EFC Formula, 2016-17
NASFAA University Self-Study Guide: Need Analysis
2016–2017 EFC FORMULA B : INDEPENDENT STUDENT BSIMPLIFIED
Without Dependent(s) Other than a Spouse
WORKSHEET
STUDENT/SPOUSE INCOME IN 2015 Page 1
CONTRIBUTION FROM AVAILABLE INCOME
1. Student’s and spouse’s Adjusted Gross Income TOTAL INCOME (from line 7)
(FAFSA/SAR #36) If negative, enter zero. TOTAL ALLOWANCES (from line 14)
15. AVAILABLE INCOME (AI)
2. a. Student’s income earned from work −
=
(FAFSA/SAR #39) __________
2. b. Spouse’s income earned from work 16. Assessment rate × .50
=
(FAFSA/SAR #40) + __________ 17. CONTRIBUTION FROM AI
May be a negative number.
Total student/spouse income earned from work =
3. Student/spouse Taxable Income STUDENT’S/SPOUSE’S CONTRIBUTION FROM ASSETS
(If tax filers, enter the amount from line 1 above. 18. Cash, savings & checking (FAFSA/SAR #41)
If non-tax filers, enter the amount from line 2.)
4. Total untaxed income and benefits 19. Net worth of investments*
(sum total of FAFSA/SAR #45a. through 45j.) + (FAFSA/SAR #42)
5. Taxable and untaxed income = If negative, enter zero. +
(sum of line 3 and line 4) +
20. Net worth of business and/or investment farm
6. Total additional financial information (FAFSA/SAR #43)
(sum total of FAFSA/SAR #44a. through 44f.) −
If negative, enter zero.
7. TOTAL INCOME
(line 5 minus line 6) May be a negative number. = 21. Adjusted net worth of business/farm +
(Calculate using Table B3.)
22. Net worth (sum of lines 18, 19, and 21) =
ALLOWANCES AGAINST STUDENT/SPOUSE INCOME 23. Asset protection allowance (Table B4) −
24. Discretionary net worth (line 22 minus line 23) =
8. 2015 U.S. income tax paid (FAFSA/SAR #37) 25. Asset conversion rate × .20
(tax filers only) If negative, enter zero. 26. CONTRIBUTION FROM ASSETS
=
9. State and other tax allowance + If negative, enter zero.
(Table B1) If negative, enter zero.
10. Student’s Social Security tax (Table B2) +
11. Spouse’s Social Security tax (Table B2) +
12. Income protection allowance: EXPECTED FAMILY CONTRIBUTION
• $9,960 for single, separated or divorced/ CONTRIBUTION FROM AI (from line 17)
widowed student; May be a negative number.
• $9,960 for married student if spouse is enrolled CONTRIBUTION FROM ASSETS (from line 26) +
at least 1/2 time;
27. Contribution from AI and assets =
• $15,960 for married student if spouse is not 28. Number in college in 2016–2017
(FAFSA/SAR #96)
enrolled at least 1/2 time. + ÷
13. Employment expense allowance: 29. EXPECTED FAMILY CONTRIBUTION for
nine month enrollment. If negative, enter zero.** =
• If student is not married or is separated, the
allowance is zero.
• If student is married but only one person is *Do not include the student’s home.
working (the student or spouse), the allowance **To calculate the EFC for less than nine-month enrollment, see the
is zero.
next page. If the student is enrolled for more than nine months, use
• If student is married and both student and the nine-month EFC (line 29 above).
spouse are working, the allowance is 35% of Note: Do not complete the shaded areas;
asset information is not required in the
the lesser of the earned incomes, or $4,000, simplified formula.
whichever is less. +
14. TOTAL ALLOWANCES =
Reprinted from The EFC Formula, 2016-17 Need Analysis: Lesson 3 87
NASFAA University Self-Study Guide: Need Analysis
Table B1: State and Other Tax Allowance
State Percent State Percent
Montana
Alabama 2% Nebraska 3%
0% Nevada 3%
Alaska 1% New Hampshire 1%
2% New Jersey 1%
American Samoa 3% New Mexico 4%
Arizona 5% New York 2%
Arkansas 1% North Carolina 6%
California 3% North Dakota 4%
Canada and Canadian Provinces 5% Northern Mariana Islands 1%
Colorado 3% Ohio 1%
Connecticut 5% Oklahoma 3%
Delaware 1% Oregon 2%
District of Columbia 1% Palau 5%
Federated States of Micronesia 3% Pennsylvania 1%
Florida 1% Puerto Rico 3%
Georgia 4% Rhode Island 1%
Guam 3% South Carolina 3%
Hawaii 3% South Dakota 3%
Idaho 3% Tennessee 1%
Illinois 3% Texas 1%
Indiana 3% Utah 1%
Iowa 4% Vermont 3%
Kansas 2% Virgin Islands 3%
Kentucky 4% Virginia 1%
Louisiana 1% Washington 4%
Maine 5% West Virginia 1%
Marshall Islands 4% Wisconsin 2%
Maryland 1% Wyoming 4%
Massachusetts 3% Blank or Invalid State 1%
Mexico 4% Other 1%
Michigan 2% 1%
Minnesota 3%
Mississippi
Missouri
To calculate the state and other tax allowance, multiply the total income of the student and spouse
(EFC Formula B Worksheet, line 7) by the appropriate rate from the table above to determine the
“State and Other Tax Allowance” (EFC Formula B Worksheet, line 9). Use the Student’s State of
Legal Residence (FAFSA/SAR #18) reported on the FAFSA. If this item is blank or invalid, use the
state in the student’s mailing address (FAFSA/SAR #6). If both items are blank or invalid, use the rate
for a blank or invalid state above.
88 Need Analysis: Lesson 3 Reprinted from The EFC Formula, 2016-17
NASFAA University Self-Study Guide: Need Analysis
Table B2: Social Security Tax
Income Earned from Work* Social Security Tax
$0 – $118,500 7.65% of income
$118,501 or greater $9,065.25 + 1.45% of amount over $118,500
Calculate separately the Social Security tax of the student and spouse.
*Student’s 2015 income earned from work is FAFSA/SAR #39
Spouse’s 2015 income earned from work is FAFSA/SAR #40
Social Security Tax will never be less than zero.
Table B3: Business/Farm Net Worth Adjustment
If the net worth of a business or farm is— Then the adjusted network is—
Less than $1 $0
$1 to $125,000 40% of net worth of business/farm
$125,001 to $380,000 $50,000 + 50% of net worth over $125,000
$380,001 to $635,000 $177,500 + 60% of net worth over $380,000
$635,001 or more $330,500 + 100% of net worth over $635,000
Reprinted from The EFC Formula, 2016-17 Need Analysis: Lesson 3 89
NASFAA University Self-Study Guide: Need Analysis
Table B4: Asset Protection Allowance
Age of Allowance for Allowance for Age of Allowance for Allowance for
Student as of Married Student Unmarried Student as of Married Student Unmarried
12/31/2016* Student 12/31/2016* Student
$0 $17,800
25 or less 1,000 $0 46 18,300 $9,000
26 2,100 500 47 18,700 9,200
27 3,100 1,100 48 19,200 9,400
28 4,100 1,600 49 19,700 9,700
29 5,200 2,100 50 20,200 9,900
30 6,200 2,600 51 20,700 10,100
31 7,200 3,200 52 21,300 10,400
32 8,300 3,700 53 21,800 10,600
33 9,300 4,200 54 22,400 10,900
34 10,300 4,700 55 23,000 11,100
35 11,400 5,300 56 23,700 11,400
36 12,400 5,800 57 24,300 11,700
37 13,400 6,300 58 25,000 12,000
38 14,500 6,800 59 25,700 12,300
39 15,500 7,400 60 26,400 12,600
40 15,900 7,900 61 27,200 12,900
41 16,300 8,100 62 27,900 13,200
42 16,600 8,300 63 28,800 13,600
43 17,000 8,500 64 29,600 13,900
44 17,400 8,600 65 or older empty 14,300
45 8,800 empty empty
90 Need Analysis: Lesson 3 Reprinted from The EFC Formula, 2016-17
NASFAA University Self-Study Guide: Need Analysis
2016–2017 EFC FORMULA C : INDEPENDENT STUDENT CSIMPLIFIED
With Dependent(s) Other than a Spouse
WORKSHEET
STUDENT/SPOUSE INCOME IN 2015 AVAILABLE INCOME Page 1
1. Student’s and spouse’s Adjusted Gross Income TOTAL INCOME (from line 7)
(FAFSA/SAR #36) If negative, enter zero.
TOTAL ALLOWANCES (from line 14)
2. a. Student’s income earned from work 15. AVAILABLE INCOME (AI) −
=
(FAFSA/SAR #39) __________ May be a negative number.
2. b. Spouse’s income earned from work
(FAFSA/SAR #40) + __________
Total student/spouse income earned from work = STUDENT’S/SPOUSE’S CONTRIBUTION FROM ASSETS
3. Student/spouse Taxable Income 16. Cash, savings & checking (FAFSA/SAR #41)
(If tax filers, enter the amount from line 1 above.
If non-tax filers, enter the amount from line 2.)* 17. Net worth of investments**
(FAFSA/SAR #42)
4. Total untaxed income and benefits If negative, enter zero. +
(sum total of FAFSA/SAR #45a. through 45j.) + +
18. Net worth of business and/or investment farm
5. Taxable and untaxed income = (FAFSA/SAR #43) +
(sum of line 3 and line 4) If negative, enter zero. =
−
6. Total additional financial information 19. Adjusted net worth of business/farm
(sum total of FAFSA/SAR #44a. through 44f.) − (Calculate using Table C4.)
7. TOTAL INCOME 20. Net worth (sum of lines 16, 17, and 19)
(line 5 minus line 6) May be a negative number. =
21. Asset protection allowance (Table C5)
ALLOWANCES AGAINST STUDENT/SPOUSE INCOME 22. Discretionary net worth (line 20 minus line 21) =
×
8. 2015 U.S. income tax paid (FAFSA/SAR #37) 23. Asset conversion rate
(tax filers only) If negative, enter zero. =
24. CONTRIBUTION FROM ASSETS
If negative, enter zero.
9. State and other tax allowance +
(Table C1) If negative, enter zero.
10. Student’s Social Security tax (Table C2) + EXPECTED FAMILY CONTRIBUTION
AVAILABLE INCOME (AI) (from line 15)
11. Spouse’s Social Security tax (Table C2) +
12. Income protection allowance (Table C3) + CONTRIBUTION FROM ASSETS (from line 24) +
13. Employment expense allowance: 25. Adjusted Available Income (AAI) =
May be a negative number.
• Student and spouse both working: 35% of
the lesser of the earned incomes, or $4,000, 26. Total contribution from AAI
whichever is less (Calculate using Table C6.) If negative, enter zero.
• One-parent families: 35% of earned income, 27. Number in college in 2016–2017 ÷
or $4,000, whichever is less (FAFSA/SAR #96)
• Student or spouse working (not both): zero +
14. TOTAL ALLOWANCES = 28. EXPECTED FAMILY CONTRIBUTION for
*STOP HERE if the following are true: nine month enrollment. If negative, enter zero.*** =
Line 3 is $25,000 or less and **Do not include the student’s home.
***To calculate the EFC for less than nine-month enrollment, see the next
• The student (and the student’s spouse, if any) are eligible to file a 2015
IRS Form 1040A or 1040EZ (they are not required to file a 2015 Form page. If the student is enrolled for more than nine months, use the nine-
1040) or they are not required to file any income tax return or month EFC (line 28 above).
• Anyone included in the student’s household size (as defined on the Note: Do not complete the shaded areas;
FAFSA) received benefits during 2014 or 2015 from any of the asset information is not required in the
designated means-tested federal benefit programs or simplified formula.
• The student (or the student’s spouse, if any) is a dislocated worker.
If these circumstances are true, the Expected Family Contribution is
automatically zero.
Reprinted from The EFC Formula, 2016-17 Need Analysis: Lesson 3 91
NASFAA University Self-Study Guide: Need Analysis
Table C1: State and Other Tax Allowance
State Percent of Total Income State Percent of Total Income
$0 - $14,999 $15,000 or more $0 - $14,999 $15,000 or more
Alabama Montana
Alaska 3% 2% Nebraska 4% 3%
American Samoa 2% 1% Nevada 5% 4%
Arizona 2% 1% New Hampshire 2% 1%
Arkansas 4% 3% New Jersey 5% 4%
California 4% 3% New Mexico 9% 8%
Canada and 7% 6% 3% 2%
Canadian Provinces
Colorado 2% 1% New York 9% 8%
Connecticut
4% 3% North Carolina 5% 4%
Delaware
8% 7% North Dakota 2% 1%
District of Columbia
Federated States of 5% 4% Northern Mariana 2% 1%
Micronesia Islands
Florida
Georgia 7% 6% Ohio 5% 4%
Guam
Hawaii 2% 1% Oklahoma 3% 2%
Idaho
Illinois 3% 2% Oregon 7% 6%
Indiana
Iowa 5% 4% Palau 2% 1%
Kansas
Kentucky 2% 1% Pennsylvania 5% 4%
Louisiana
Maine 5% 4% Puerto Rico 2% 1%
Marshall Islands
Maryland 5% 4% Rhode Island 7% 6%
Massachusetts
Mexico 6% 5% South Carolina 4% 3%
Michigan
Minnesota 4% 3% South Dakota 2% 1%
Mississippi
Missouri 5% 4% Tennessee 2% 1%
5% 4% Texas 3% 2%
5% 4% Utah 5% 4%
3% 2% Vermont 6% 5%
6% 5% Virgin Islands 2% 1%
2% 1% Virginia 6% 5%
8% 7% Washington 3% 2%
6% 5% West Virginia 3% 2%
2% 1% Wisconsin 7% 6%
4% 3% Wyoming 1% 0%
6% 5% Blank or Invalid State 2% 1%
3% 2% Other 2% 1%
4% 3%
To calculate the state and other tax allowance, multiply the total income of the student and spouse (EFC
Formula C Worksheet, line 7) by the appropriate rate from the table above to get the “State and Other Tax Al-
lowance” (EFC Formula C Worksheet, line 9). Use the student’s State of Legal Residence (FAFSA/SAR #18)
reported on the FAFSA. If this item is blank or invalid, use the State in the Student’s Mailing Address (FAFSA/
SAR #6). If both items are blank or invalid, use the rate for a blank or invalid state above.
92 Need Analysis: Lesson 3 Reprinted from The EFC Formula, 2016-17
NASFAA University Self-Study Guide: Need Analysis
Table C2: Social Security Tax
Income Earned from Work* Social Security Tax
$0 – $118,500 7.65% of income
$118,501 or greater $9,065.25 + 1.45% of amount over $118,500
Calculate separately the Social Security tax of the student and spouse.
*Student’s 2015 income earned from work is FAFSA/SAR #39
Spouse’s 2015 income earned from work is FAFSA/SAR #40
Social Security Tax will never be less than zero.
Table C3: Income Protection Allowance
Number in student’s Number of college students in the household (FAFSA/SAR #96)
household, including 12345
student
(FAFSA/SAR #95)
2 $25,210 $20,900 not applicable not applicable not applicable
3 $31,390 $27,100 $22,790 not applicable not applicable
4 $38,760 $34,460 $30,170 $25,850 not applicable
5 $45,740 $41,420 $37,130 $32,830 $28,540
6 $53,490 $49,190 $44,910 $40,580 $36,300
Note: For each additional family member, add $6,040.
For each additional college student, subtract $4,290.
Table C4: Business/Farm Net Worth Adjustment
If the net worth of a business or farm is— Then the adjusted network is—
Less than $1 $0
$1 to $125,000 40% of net worth of business/farm
$125,001 to $380,000 $50,000 + 50% of net worth over $125,000
$380,001 to $635,000 $177,500 + 60% of net worth over $380,000
$635,001 or more $330,500 + 100% of net worth over $635,000
Reprinted from The EFC Formula, 2016-17 Need Analysis: Lesson 3 93
NASFAA University Self-Study Guide: Need Analysis
Table C5: Asset Protection Allowance
Age of older Allowance Allowance for Age of older Allowance Allowance for
parent as of for Married Unmarried parent as of for Married Unmarried
12/31/2016* Student 12/31/2016* Student
Student Student
25 or less $0 46 $9,000
26 $0 500 47 $17,800 9,200
27 1,000 1,100 48 18,300 9,400
28 2,100 1,600 49 18,700 9,700
29 3,100 2,100 50 19,200 9,900
30 4,100 2,600 51 19,700 10,100
31 5,200 3,200 52 20,200 10,400
32 6,200 3,700 53 20,700 10,600
33 7,200 4,200 54 21,300 10,900
34 8,300 4,700 55 21,800 11,100
35 9,300 5,300 56 22,400 11,400
36 10,300 5,800 57 23,000 11,700
37 11,400 6,300 58 23,700 12,000
38 12,400 6,800 59 24,300 12,300
39 13,400 7,400 60 25,000 12,600
40 14,500 7,900 61 25,700 12,900
41 15,500 8,100 62 26,400 13,200
42 15,900 8,300 63 27,200 13,600
43 16,300 8,500 64 27,900 13,900
44 16,600 8,600 65 or older 28,800 14,300
45 17,000 8,800 empty 29,600 empty
17,400 empty
* Determine the student’s age as of 12/31/2016 from the student’s date of birth (FAFSA/SAR #9)
Table C6: Student’s Contribution from AAI
If the student’s AAI— Then the student’s contribution from AAI is—
Less than -$3,409 -$750
$-3,409 to $15,900 22% of AAI
$15,901 to $20,000 $3,498 + 25% of AAI over $15,900
$20,001 to $24,100 $4,523 + 29% of AAI over $20,000
$24,101 to $28,200 $5,712 + 34% of AAI over $24,100
$28,201 to $32,200 $7,106 + 40% of AAI over $28,200
$32,201 or more $8,706 + 47% of AAI over $32,200
94 Need Analysis: Lesson 3 Reprinted from The EFC Formula, 2016-17
NASFAA University Self-Study Guide: Need Analysis
Lesson 3 Glossary
Dislocated worker: A person who:
• Meets all of the following:
Was terminated or laid off from employment or received a notice of termination or layoff,
Is eligible for or has exhausted his or her unemployment compensation, or he or she is not eligible
because, even though he or she has been employed long enough to demonstrate attachment to the
workforce, he or she had insufficient earnings or performed services for an employer that were not
covered under a state’s unemployment compensation law, and
Is unlikely to return to a previous occupation;
• 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 within 180
days;
• Was self-employed but is now unemployed due to general economic conditions in his community or natural
disaster; or
• Is a displaced homemaker.
Displaced homemaker: A person who:
• Previously provided unpaid services to the family (e.g., a stay-at-home parent);
• Is no longer supported by another family member’s income; and
• Is unemployed or underemployed, and is having trouble finding or upgrading employment.
Means-tested federal benefit program: A federal mandatory spending program, other than a Title IV
program, in which eligibility for benefits or the amount of benefits is determined based on income or resources.
Some examples of such programs include:
• Supplemental Security Income (SSI) Program;
• Supplemental Nutrition Assistance Program (SNAP);
• Free and Reduced Price School Lunch Program;
• Temporary Assistance for Needy Families (TANF) Program;
• Special Supplemental Nutrition Programs for Women, Infants, and Children (WIC); and
• Other programs identified by the U.S. Department of Education.
Underemployed individual: A person who is working part time but wants to work full time, or one who is
working below the demonstrated level of his or her education or job skills.
© 2016 NASFAA Need Analysis: Lesson 3 95
NASFAA University Self-Study Guide: Need Analysis
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96 Need Analysis: Lesson 3 © 2016 NASFAA
NASFAA University Self-Study Guide: Need Analysis
Lesson 3 Answer Keys
Learning Activity: Qualifying for an Automatic Zero EFC
1. Nicholas
Nicholas is a dependent student, and his recently widowed mother completed his Free Application for
Federal Student Aid (FAFSA) as the parent of record. Nicholas’ mother works part time as a receptionist
for the local humane society, and earned $18,000 in 2015. For the 2015 tax year, Nicholas’ mother was
required to file a 1040 due to the value of the investments left to her in her late husband’s will. Her AGI
was $36,000.
Nicholas is eligible for an Automatic Zero EFC.
Nicholas is not eligible for an Automatic Zero EFC.
2. Priya
Priya is in her second year at Mile High College. She is the single mother of two small children who live
with her. Between her off-campus job as a checker in a local grocery store and her on-campus Federal
Work-Study (FWS) job, she earned $20,000 in 2015. Based on the advice of her tax professional, she
filed a 1040 for the 2015 tax year, even though she could have filed a 1040A. She reported an AGI of
$20,000. In 2015, Priya received several months of benefits through TANF.
Priya is eligible for an Automatic Zero EFC.
Priya is not eligible for an Automatic Zero EFC.
3. Lupe
Lupe will be an entering freshman Fall 2016. For 2015, her parents reported an AGI of $48,000. Her
father, who works in a local manufacturing plant, just received notice that the plant will be closing in three
months.
Lupe is eligible for an Automatic Zero EFC.
Lupe is not eligible for an Automatic Zero EFC.
© 2016 NASFAA Need Analysis: Lesson 3 97
NASFAA University Self-Study Guide: Need Analysis
Quick Quiz
1. What are the names of the two simplified formulas?
The two simplified formulas are the Automatic Zero EFC and the Simplified Needs Test.
2. What is the maximum AGI or, in the case of a nontax filer, maximum income earned from work an
independent student (and spouse, if married) or the parents of a dependent student can have and
qualify for an Automatic Zero EFC?
The maximum AGI or income earned from work an independent student (and spouse) or parents of a
dependent student can have and qualify for an Automatic Zero EFC is $25,000.
3. Receiving benefits from which means-tested federal benefit programs partially qualifies a student for
the SNT?
Receipt of benefits from SSI, SNAP, Free and Reduced Price School Lunch, TANF, and WIC by a
member of a dependent student’s parents’ household or an independent student’s household during
either of the two years prior to the award year for which the student is applying partially qualifies an
applicant for the SNT.
4. Which formula model is not eligible for an Automatic Zero EFC?
Model B is not eligible for the Automatic Zero EFC.
5. What is the maximum AGI or, in the case of a nontax filer, maximum income earned from work an
independent student (and spouse, if married) or the parents of a dependent student can have and still
qualify for the SNT?
The maximum AGI or income earned from work an independent student (and spouse) or parents of a
dependent student can have and qualify for SNT is $49,999.
98 Need Analysis: Lesson 3 © 2016 NASFAA
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