2012-12939. Federal Need Analysis Methodology for the 2013-2014 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 ...

AGENCY:

Federal Student Aid, Department of Education.

ACTION:

Notice.

Overview Information: Catalog of Federal Domestic Assistance (CFDA) 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.

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 2013-2014 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) or a text telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-800-877-8339.

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 (CPI).

For award year 2013-2014, 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 2011 and December 2012. However, because the Secretary must publish these tables before December 2012, 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 2012. The Secretary must also account for any misestimation of inflation for the prior year. In developing the table values for the 2012-13 award year, the Secretary assumed a 0.8 percent increase in the CPI-U for the period December 2010 through December 2011. Actual inflation for this time period was 2.9 percent. The Secretary estimates that the increase in the CPI-U for the period December 2011 through December 2012 will be 2.2 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 2013-2014 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 2013-2014 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 2013-2014 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 $6,130. The IPAs for parents of dependent students for award year 2013-2014 are:

Parents of Dependent Students

Family size	Number in college
	1	2	3	4	5
2	$17,100	$14,170
3	21,290	18,380	15,450
4	26,290	23,370	20,460	17,530
5	31,020	28,100	25,190	22,260	19,350
6	36,290	33,360	30,450	27,530	24,620

For each additional family member add $4,100.

For each additional college student subtract $2,910.

The IPAs for independent students with dependents other than a spouse for award year 2013-14 are:

Independent Students With Dependents Other Than a Spouse

Family size	Number in college
	1	2	3	4	5
2	$24,150	$20,020
3	30,070	25,960	21,830
4	37,130	33,010	28,900	24,760
5	43,810	39,670	35,570	31,450	27,340
6	51,230	47,110	43,020	38,870	34,770

For each additional family member add $5,780.

For each additional college student subtract $4,110.

The IPAs for single independent students and independent students without dependents other than a spouse for award year 2013-14 are:

Marital status	Number in college	IPA
Single	1	$9,540
Married	2	9,540
Married	1	15,290

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 $120,000	0 + 40% of NW.
$120,001 to $365,000	48,000 + 50% of NW over $120,000.
$365,001 to $610,000	170,500 + 60% of NW over $365,000.
$610,001 or more	317,500 + 100% of NW over $610,000.

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.

Parents of 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	2,100	600
27	4,300	1,300
28	6,400	1,900
29	8,600	2,500
30	10,700	3,200
31	12,800	3,800
32	15,000	4,400
33	17,100	5,100
34	19,300	5,700
35	21,400	6,300
36	23,500	7,000
37	25,700	7,600
38	27,800	8,200
39	30,000	8,900
40	32,100	9,500
41	32,900	9,700
42	33,700	9,900
43	34,500	10,100
44	35,400	10,300
45	36,200	10,600
46	37,100	10,800
47	38,000	11,100
48	39,000	11,300
49	39,900	11,600
50	40,900	11,900
51	42,100	12,200
52	43,100	12,500
53	44,200	12,800
54	45,500	13,100
55	46,800	13,400
56	47,900	13,700
57	49,300	14,100
58	50,800	14,400
59	52,200	14,800
60	53,500	15,100
61	55,000	15,600
62	56,900	16,000
63	58,500	16,400
64	60,100	16,900
65 or older	61,800	17,400

Independent Students Without Dependents Other Than a Spouse

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

Independent Students With Dependents Other Than a Spouse

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

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 $15,300	22% of AAI
$15,301 to $19,200	$3,366 + 25% of AAI over $15,300
$19,201 to $23,100	$4,341 + 29% of AAI over $19,200
$23,101 to $27,000	$5,472 + 34% of AAI over $23,100
$27,001 to $30,900	$6,798 + 40% of AAI over $27,000
$30,901 or more	$8,358 + 47% of AAI over $30,900

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 $15,300	22% of AAI
$15,301 to $19,200	$3,366 + 25% of AAI over $15,300
$19,201 to $23,100	$4,341 + 29% of AAI over $19,200
$23,101 to $27,000	$5,472 + 34% of AAI over $23,100
$27,001 to $30,900	$6,798 + 40% of AAI over $27,000
$30,901 or more	$8,358 + 47% of AAI over $30,900

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 $3,900 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	4	3	2
Arkansas	4	3	3
California	8	7	5
Colorado	5	4	3
Connecticut	8	7	5
Delaware	5	4	3
District of Columbia	7	6	5
Florida	3	2	1
Georgia	6	5	3
Hawaii	4	3	3
Idaho	5	4	3
Illinois	5	4	2
Indiana	4	3	3
Iowa	5	4	3
Kansas	5	4	3
Kentucky	5	4	4
Louisiana	3	2	2
Maine	6	5	4
Maryland	8	7	6
Massachusetts	7	6	4
Michigan	5	4	3
Minnesota	6	5	4
Mississippi	3	2	3
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	4
New Mexico	3	2	2
New York	9	8	6
North Carolina	6	5	4
North Dakota	3	2	1
Ohio	6	5	3
Oklahoma	4	3	3
Oregon	7	6	5
Pennsylvania	5	4	3
Rhode Island	7	6	4
South Carolina	5	4	3
South Dakota	2	1	1
Tennessee	2	1	1
Texas	3	2	1
Utah	5	4	3
Vermont	6	5	3
Virginia	6	5	4
Washington	4	3	1
West Virginia	3	2	2
Wisconsin	7	6	4
Wyoming	2	1	1
Other	2	1	2

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

Dated: May 23, 2012.

James W. Runcie,

Chief Operating Officer, Federal Student Aid.