2011-12812. Federal Need Analysis Methodology for the 2012-2013 Award Year

AGENCY:

Federal Student Aid, Department of Education.

ACTION:

Notice of revision of the Federal Need Analysis Methodology for the 2012-2013 award year.

Overview Information:

[CFDA Numbers 84.063; 84.038; 84.033; 84.007; 84.268; 84.379].

Federal Need Analysis Methodology for the 2012-2013 award year; Federal Pell Grant, Federal Perkins Loan, Federal Work-Study, Federal Supplemental Educational Opportunity Grant, William D. Ford Federal Direct Loan, and TEACH Grant Programs.

SUMMARY:

The Secretary announces the annual updates to the tables that will be used in the statutory “Federal Need Analysis Methodology” to determine a student's expected family contribution (EFC) for award year 2012-2013 for the student financial aid programs authorized under title IV of the Higher Education Act of 1965, as amended (HEA). An EFC is the amount that a student and his or her family may reasonably be expected to contribute toward the student's postsecondary educational costs for purposes of determining financial aid eligibility. The Title IV programs include the Federal Pell Grant, Federal Perkins Loan, Federal Work-Study, Federal Supplemental Educational Opportunity Grant, William D. Ford Federal Direct Loan, and the Teach Grant Programs (Title IV, HEA Programs).

FOR FURTHER INFORMATION CONTACT:

Ms. Marya Dennis, Management and Program Analyst, U.S. Department of Education, room 63G2, Union Center Plaza, 830 First Street, NE., Washington, DC 20202-5454. Telephone: [phone].

If you use a telecommunications device for the deaf (TDD), call the Federal Relay Service (FRS), toll free, at 1-800-877-8339.

Individuals with disabilities can obtain this document in an accessible format (e.g., braille, large print, audiotape, or computer diskette) on request to the contact person listed under FOR FURTHER INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION:

Part F of Title IV of the HEA specifies the criteria, data elements, calculations, and tables used in the Federal Need Analysis Methodology EFC calculations.

Section 478 of part F of title IV of the HEA requires the Secretary to adjust four of the tables—the Income Protection Allowance, the Adjusted Net Worth of a Business or Farm, the Education Savings and Asset Protection Allowance, and the Assessment Schedules and Rates—each award year for general price inflation. The changes are based, in general, upon increases in the Consumer Price Index.

For award year 2012-2013, the Secretary is charged with updating the income protection allowance for parents of dependent students, adjusted net worth of a business or farm, and the assessment schedules and rates to account for inflation that took place between December 2010 and December 2011. However, because the Secretary must publish these tables before December 2011, the increases in the tables must be based upon a percentage equal to the estimated percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U) for 2011. The Secretary must also account for any misestimation of inflation for the prior year. In developing the table values for the 2011-2012 award year, the Secretary assumed a 1.2 percent increase in the CPI-U for the period December 2009 through December 2010. Actual inflation for this time period was 1.4 percent. The Secretary estimates that the increase in the CPI-U for the period December 2010 through December 2011 will be 0.8 percent. Additionally, section 601 of the College Cost Reduction and Access Act of 2007 (CCRAA, Pub. L. 110-84) amended sections 475 through 478 of the HEA by updating the procedures for determining the income protection allowance for dependent students, as well as the income protection allowance tables for both independent students with dependents other than a spouse, and independent students without dependents other than a spouse. As amended by the CCRAA, the HEA now includes new 2012-2013 award year values for these income protection allowances. The updated tables are in sections 1, 2, and 4 of this notice.

The Secretary must also revise, for each award year, the education savings and asset protection allowances as provided for in section 478(d) of the HEA. The Education Savings and Asset Protection Allowance table for award year 2012-2013 has been updated in section 3 of this notice.

Section 478(h) of the HEA also requires the Secretary to increase the amount specified for the Employment Expense Allowance, adjusted for inflation. This calculation is based upon increases in the Bureau of Labor Statistics budget of the marginal costs for a two-worker family compared to a one-worker family for food away from home, apparel, transportation, and household furnishings and operations. The Employment Expense Allowance table for award year 2012-2013 has been updated in section 5 of this notice.

The HEA provides for the following annual updates:

1. Income Protection Allowance (IPA). This allowance is the amount of living expenses associated with the maintenance of an individual or family that may be offset against the family's income. It varies by family size. The IPA for the dependent student is $6,000. The IPAs for parents of dependent students for award year 2012-2013 are:

The IPAs for independent students with dependents other than a spouse for award year 2012-13 are:

Parents of Dependent Students

Family size	Number in college
	1	2	3	4	5
2	$16,390	$13,590
3	20,410	17,620	$14,820
4	25,210	22,400	19,620	$16,810
5	29,740	26,940	24,150	21,340	$18,560
6	34,790	31,990	29,200	26,390	23,600
For each additional family member add $3,930.
For each additional college student subtract $2,790.

Independent Students With Dependents Other Than a Spouse

Family size	Number in college
	1	2	3	4	5
2	$23,630	$19,590
3	29,420	25,400	$21,360
4	36,330	32,300	28,280	$24,230
5	42,870	38,820	34,800	30,770	$26,750
6	50,130	46,100	42,090	38,030	34,020
For each additional family member add $5,660.
For each additional college student subtract $4,020.

The IPAs for single independent students and independent students without dependents other than a spouse for award year 2012-13 are:

Marital status	Number in college	IPA
Single	1	$9,330
Married	2	9,330
Married	1	14,960

2. Adjusted Net Worth (NW) of a Business or Farm. A portion of the full net worth (assets less debts) of a business or farm is excluded from the calculation of an expected contribution because—(1) The income produced from these assets is already assessed in another part of the formula; and (2) the formula protects a portion of the value of the assets. The portion of these assets included in the contribution calculation is computed according to the following schedule. This schedule is used for parents of dependent students, independent students without dependents other than a spouse, and independent students with dependents other than a spouse.

If the Net Worth (NW) of a business or farm is—	Then the Adjusted Net Worth is—
Less than $1	$0
$1 to $115,000	$0 + 40% of NW
$115,00 to $350,000	$46,000 + 50% of NW over $115,000
$350,001 to $585,000	$163,500 + 60% of NW over $350,000
$585,001 or more	$304,500 + 100% of NW over $585,000

3. Education Savings and Asset Protection Allowance. This allowance protects a portion of net worth (assets less debts) from being considered available for postsecondary educational expenses. There are three asset protection allowance tables—one for parents of dependent students, one for independent students without dependents other than a spouse, and one for independent students with dependents other than a spouse.

Dependent Students

If the age of the older parent is	And they are
	Married	Single
	Then the education savings and asset protection allowance is—
25 or less	$0	$0
26	2,400	800
27	4,900	1,700
28	7,300	2,500
29	9,700	3,400
30	12,200	4,200
31	14,600	5,100
32	17,000	5,900
33	19,500	6,800
34	21,900	7,600
35	24,300	8,500
36	26,800	9,300
37	29,200	10,200
38	31,600	11,000
39	34,100	11,900
40	36,500	12,700
41	37,500	13,000
42	38,400	13,300
43	39,300	13,600
44	40,300	13,900
45	41,300	14,200
46	42,300	14,500
47	43,400	14,900
48	44,400	15,200
49	45,500	15,600
50	46,600	16,000
51	48,000	16,300
52	49,200	16,700
53	50,700	17,100
54	51,900	17,500
55	53,400	17,900
56	54,700	18,500
57	56,300	18,900
58	58,000	19,400
59	59,700	19,900
60	61,400	20,400
61	63,100	20,900
62	65,000	21,500
63	66,800	22,100
64	68,700	22,700
65 or older	71,000	23,300

Independent Students Without Dependents Other Than a Spouse

If the age of the student is	And they are
	Married	Single
	Then the education savings and asset protection allowance is—
25 or less	$0	$0
26	2,400	800
27	4,900	1,700
28	7,300	2,500
29	9,700	3,400
30	12,200	4,200
31	14,600	5,100
32	17,000	5,900
33	19,500	6,800
34	21,900	7,600
35	24,300	8,500
36	26,800	9,300
37	29,200	10,200
38	31,600	11,000
39	34,100	11,900
40	36,500	12,700
41	37,500	13,000
42	38,400	13,300
43	39,300	13,600
44	40,300	13,900
45	41,300	14,200
46	42,300	14,500
47	43,400	14,900
48	44,400	15,200
49	45,500	15,600
50	46,600	16,000
51	48,000	16,300
52	49,200	16,700
53	50,700	17,100
54	51,900	17,500
55	53,400	17,900
56	54,700	18,500
57	56,300	18,900
58	58,000	19,400
59	59,700	19,900
60	61,400	20,400
61	63,100	20,900
62	65,000	21,500
63	66,800	22,100
64	68,700	22,700
65 or older	71,000	23,300

Independent Students With Dependents Other Than a Spouse

If the age of the student is	And they are
	Married	Single
	Then the education savings and asset protection allowance is—
25 or less	$0	$0
26	2,400	800
27	4,900	1,700
28	7,300	2,500
29	9,700	3,400
30	12,200	4,200
31	14,600	5,100
32	17,000	5,900
33	19,500	6,800
34	21,900	7,600
35	24,300	8,500
36	26,800	9,300
37	29,200	10,200
38	31,600	11,000
39	34,100	11,900
40	36,500	12,700
41	37,500	13,000
42	38,400	13,300
43	39,300	13,600
44	40,300	13,900
45	41,300	14,200
46	42,300	14,500
47	43,400	14,900
48	44,400	15,200
49	45,500	15,600
50	46,600	16,000
51	48,000	16,300
52	49,200	16,700
53	50,700	17,100
54	51,900	17,500
55	53,400	17,900
56	54,700	18,500
57	56,300	18,900
58	58,000	19,400
59	59,700	19,900
60	61,400	20,400
61	63,100	20,900
62	65,000	21,500
63	66,800	22,100
64	68,700	22,700
65 or older	71,000	23,300

4. Assessment Schedules and Rates. Two schedules that are subject to updates, one for parents of dependent students and one for independent students with dependents other than a spouse, are used to determine the EFC toward educational expenses from family financial resources. For dependent students, the EFC is derived from an assessment of the parents' adjusted available income (AAI). For independent students with dependents other than a spouse, the EFC is derived from an assessment of the family's AAI. The AAI represents a measure of a family's financial strength, which considers both income and assets.

Parents' contribution for a dependent student is computed according to the following schedule:

If AAI is—	Then the contribution is—
Less than −$3,409	−$750
($3,409) to $14,600	22% of AAI
$14,601 to $18,400	$3,212 + 25% of AAI over $14,600
$18,401 to $22,100	$4,162 + 29% of AAI over $18,400
$22,101 to $25,900	$5,235 + 34% of AAI over $22,100
$25,901 to $29,600	$6,527 + 40% of AAI over $25,900
$29,601 or more	$8,007 + 47% of AAI over $29,600

The contribution for an independent student with dependents other than a spouse is computed according to the following schedule:

If AAI is—	Then the contribution is—
Less than −$3,409	−$750
($3,409) to $14,600	22% of AAI
$14,601 to $18,400	$3,212 + 25% of AAI over $14,600
$18,401 to $22,100	$4,162 + 29% of AAI over $18,400
$22,101 to $25,900	$5,235 + 34% of AAI over $22,100
$25,901 to $29,600	$6,527 + 40% of AAI over $25,900
$29,601 or more	$8,007 + 47% of AAI over $29,600

5. Employment Expense Allowance. This allowance for employment-related expenses, which is used for the parents of dependent students and for married independent students, recognizes additional expenses incurred by working spouses and single-parent households. The allowance is based upon the marginal differences in costs for a two-worker family compared to a one-worker family for food away from home, apparel, transportation, and household furnishings and operations.

The employment expense allowance for parents of dependent students, married independent students without dependents other than a spouse, and independent students with dependents other than a spouse is the lesser of $3,600 or 35 percent of earned income.

6. Allowance for State and Other Taxes. The allowance for State and other taxes protects a portion of the parents' and students' income from being considered available for postsecondary educational expenses. There are four categories for State and other taxes, one each for parents of dependent students, independent students with dependents other than a spouse, dependent students, and independent students without dependents other than a spouse. Section 478(g) of the HEA directs the Secretary to update the tables for State and other taxes after reviewing the Statistics of Income file data maintained by the Internal Revenue Service.

State	Parents of dependents and independents with dependents other than a spouse		Dependents and independents without dependents other than a spouse
	Percent of total income		All (%)
	Under $15,000	$15,000 & up
Alabama	3	2	2
Alaska	2	1	0
Arizona	5	4	3
Arkansas	4	3	3
California	8	7	5
Colorado	5	4	3
Connecticut	8	7	5
Delaware	5	4	4
District of Columbia	8	7	6
Florida	4	3	1
Georgia	6	5	4
Hawaii	5	4	4
Idaho	5	4	4
Illinois	5	4	2
Indiana	4	3	3
Iowa	5	4	3
Kansas	5	4	3
Kentucky	6	5	4
Louisiana	4	3	2
Maine	6	5	4
Maryland	9	8	6
Massachusetts	7	6	4
Michigan	5	4	3
Minnesota	7	6	5
Mississippi	3	2	2
Missouri	5	4	3
Montana	5	4	3
Nebraska	5	4	3
Nevada	3	2	1
New Hampshire	5	4	1
New Jersey	9	8	5
New Mexico	3	2	2
New York	10	9	7
North Carolina	6	5	4
North Dakota	3	2	1
Ohio	6	5	4
Oklahoma	4	3	3
Oregon	8	7	5
Pennsylvania	6	5	3
Rhode Island	7	6	4
South Carolina	5	4	4
South Dakota	2	1	1
Tennessee	2	1	1
Texas	3	2	1
Utah	5	4	4
Vermont	6	5	3
Virginia	6	5	4
Washington	4	3	1
West Virginia	3	2	3
Wisconsin	8	7	4
Wyoming	2	1	1
Other	3	2	3

Electronic Access to This Document: You can view this document, as well as all other documents of this Department published in the Federal Register, in text or Adobe Portable Document Format (PDF) on the Internet at the following site: http://www.ed.gov/​news/​fedregister. To use PDF you must have Adobe Acrobat Reader, which is available free at this site.

Note:

The official version of this document is the document published in the Federal Register. Free Internet access to the official edition of the Federal Register and the Code of Federal Regulations is available on GPO Access at: http://www.gpoaccess.gov/​nara/​index.html.

(Catalog of Federal Domestic Assistance Numbers: 84.063 Federal Pell Grant Program; 84.038 Federal Perkins Loan Program; 84.033 Federal Work-Study Programs; 84.007 Federal Supplemental Educational Opportunity Grant Program; 84.268 William D. Ford Federal Direct Loan Program; 84.379 TEACH Grant Program)

Program Authority: 20 U.S.C. 1087rr.

Dated: May 19, 2011.

James Runcie,

Deputy Chief Operating Officer, Federal Student Aid.