To help parents and students understand how the College makes its decisions and to acquaint families with the principles and the ground rules of need analysis used by the Office of Student Financial Services, we offer the following explanation of the major factors which determine the financial aid package you have received. We hope this will help you understand what we have done, and anticipate any questions you may have.
Wheaton uses the congressionally mandated Federal Methodology to determine a student’s eligibility for all aid, including Federal Direct Loans, federal grants, state aid, on-campus employment opportunities, and institutional need-based grants. The Student Aid Index (SAI) is determined from the data a family provides on the Free Application for Federal Student Aid (FAFSA) and is used to determine eligibility for aid.
The factors most critical in determining what parents are expected to pay include income, assets and the number of family members. Student earnings plus student assets are considered to determine the student contribution from the total cost of attendance. An award package composed of grant, loan funds, and campus earnings expectation is provided to assist in meeting the need that results. The following factors are central to the need analysis formula:
Family Size
In general, this is the number of family members living in the same household, in college or graduate school. Relatives living outside the home, even when supported by the family, are not included; “adult children” who have finished their education and are capable of working are not included; grandparents living in the home, declared as dependents, may be included, but their income and assets may also be considered.
Divorce/Separation
In cases of separation or divorce, the parent who provides more financial support (and any stepparent) is responsible for completing the FAFSA.
Parent Income
Perhaps the single most important and most often misunderstood factor in determining Parent Contribution is the income used in the need analysis formula. For financial aid, income is whatever appears on the bottom line of the tax return, i.e., Adjusted Gross Income (AGI), plus some untaxed income items from the tax return. How a family spends its money is not a consideration, only the amount available for spending is counted.
Taxable Income
For all families, the income used in the need analysis will include wages or salaries, interest and dividends. When family finances become more involved, it can also include such things as business/farm profit, pensions, annuities, rents, royalties, trust income and other forms of miscellaneous taxable income.
Untaxed Income
Certain types of nontaxable income will be reported on the FAFSA and part of the SAI calculation. These include untaxed pension or IRA distributions, tax exempt income, IRA deductions and payments to self-employed, SEP, Simple, and qualified plans.
Allowances and Deductions
Once income is established, certain non discretionary expenses are deducted. These allowances include: a payroll tax allowance, an employment expense allowance, and an income expense allowance which is designed to cover basic living expenses, including medical expenses. After these allowances are deducted, the need formula assumes that a portion of the remaining income can be used for educational expenses. That portion increases as the remaining income gets larger.
Parent Assets/Debts
Because assets contribute to a family’s financial strength, they play a part in determining a family’s ability to meet educational expenses. Assets included in the formula are equity in real estate, (not including the family home), savings, investments of all kinds, a portion of business/farm net value, trust, annuities, etc. Real estate will rarely be accepted at a value lower than purchase price and national real estate appreciation multipliers are often used to project market value. Automobiles and consumer goods are not included as assets, neither is the value of the parents’ primary retirement fund. Debts are subtracted from asset values to determine net worth, but the only debts that count are those against the assets themselves or those over which the family has no control, such as medical expenses. Consumer debt and debt of choice does not apply. Child support received will also be reported in the asset section of the FAFSA. An asset protection allowance based on the age of the older parent will be deducted from the net worth of all reported assets. A fraction of the remaining net worth is added into parent contribution. In general, the asset contribution from parents will fall between 2% and 5% of the net worth.
Conclusion
Wheaton’s review is based upon principles of equity; those with the same financial strength are expected to contribute the same amount from income and assets. When financial strength is different, the expected contribution is different with the contribution increasing, as financial strength becomes greater. The principles of equity also require that the income and assets be defined the same way for everyone and all allowances be non-discretionary in nature.