It's a given that the FAFSA must be filed for consideration of federal student grants and loans. But what you may not realize is there are a couple of special considerations that affect how your Expected Family Contribution (EFC) is calculated.
The Federal Methodology, which is the formula used by the Department of Education to calculate your EFC, has built in auto-processing features: Simplilfied Formula and Automatic Zero EFC. Each of these will kick in automatically depending on how you complete the FAFSA, even if you provide more information than is needed.
Simplified Formula:
This method means assets will not be included on the FAFSA and will not be counted in the EFC. To qualify for the Simplified Formula, you must meet the following conditions:
- For dependent students, parents Adjusted Gross Income is less than $50,000, and a federal 1040 was not filed (means either a 1040A or 1040EZ was filed instead) or anyone listed in the household size received means-tested federal benefits.
- For independent students, your Adjusted Gross Income is less than $50,000, and a federal 1040 was not filed or someone listed in your household size received means-tested federal benefits.
- Note: if you (as indepedent student) or your parents did not file a tax return at all, the combined earnings from work, which is asked for on the FAFSA, will be used to determine the $50,000 limit.
What are means-tested federal benefits? If you or anyone listed in your household size received one of the following in 2007, you can report that you have received means-tested benefits on your 2008-09 FAFSA. You do not have to receive these benefits for the entire year. If you received any during any part of 2007, you qualify to report these benefits.
- Supplemental Social Security Income (SSI)
- Food Stamps
- Reduced or Free School Lunches
- Temporary Assistance for Needy Families (TANF)
- Special Supplemental Nutrition Program for Women, Infants and Children (WIC)
The FAFSA on the Web will ask both parent (if applicable) and student if any of these benefits were received in 2007. Example: So if you (as an independent student) and your spouse had an AGI of $55,000 and filed a 1040, but received Supplemental Social Security Income (SSI), you will not have to report asset information such as cash/savings/checking, investment net worth, and business/farm net worth. If you do not qualify for the Simplified Formula and fail to report asset information, your FAFSA will be rejected by the federal processor.
Automatic Zero EFC:
To qualify for the Automatic Zero EFC, which means you will have a zero Expected Family Contribution, you must meet the following conditions:
- For dependent students, parents Adjusted Gross Income is $20,000 or less, and a federal 1040 was not filed or anyone listed in the household size received means-tested federal benefits.
- For independent married students or independent students with dependents, your Adjusted Gross Income is $20,000 or less, and a federal 1040 was not filed or someone listed in your household size received means-tested federal benefits. Independent students with no dependents do not qualify for Automatice Zero EFC regardless if they meet the other criteria.
- Note: if you (as independent student) or your parents did not file a tax return at all, the combined earnings from work, which is asked for on the FAFSA, will be used to determine the $20,000 or less limit.
Another consideration: if you filed a 1040 but really could have filed a 1040A or 1040EZ, there is a question on the FAFSA that asks if you could have filed one of these other forms. Sometimes the 1040 is filed to take a certain tax credit, and that does not disqualify you from these special considerations, so be careful how you answer the question about whether a 1040A or 1040EZ could have been filed. If you're not sure, contact a tax preparer for advice. If you answer yes, that you could have filed a 1040A or 1040EZ, you meet this portion of the criteria for either consideration.
Again, if you're not sure if you meet either circumstance, answer the FAFSA questions honestly and let the federal processor make the determination since it's done automatically. If you report asset information and were not required to, the information will still show on your Student Aid Report, but will not be used to determine your Expected Family Contribution.
Remember that the Expected Family Contribution is the figure that is calculated by the Federal Processer from the FAFSA information which is used by your school to determine what types of aid for which you qualify.