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 Expected Family Contribution (EFC) is determined from the data a family provides on the Free Application for Federal Student Aid (FAFSA).

The factors most critical in determining what parents are expected to pay include income, assets, the number of family members, and the number of children enrolled in college during the application year. Student summer 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.

Family members in College

For families with multiple children in college at the same time, the parent’s calculate contribution is divided among the students.

Divorce/Separation

In cases of separation or divorce, the parent with whom the student resides (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 finanical aid, income is whatever appears on the bottom line of the tax return, i.e., Adjusted Gross Income (AGI), plus any nontaxable income. 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 institutional 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. F

Untaxed Income

Nontaxable income is also included if appropriate. This could include Social Security Benefits, Veterans’ Benefits, welfare or child support, voluntary annual contributions to tax deferred savings/retirement plans, housing/living allowances, untaxed portions of pensions, annuities, Workers’ compensation and any other from of untaxed income or benefits.

Allowances and Deductions

Once income is established, certain non discretionary expenses are deducted. These allowances include: federal income tax, state and local taxes, mandatory retirement payments, (i.e., Social Security or its equivalent), medical or dental expenses not covered by insurance above a basic level, and an employment allowance; it is a standard amount which varies by family size, but it is the same for all families of a given size. An Annual Education Savings Allowance is also calculated for each younger child in the family. 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. As a rule of thumb, the contribution from the parents’ income that the formula produces will range from a low of 5% to a high of 20% of all taxable and nontaxable income used in the analysis. For high income families, the percentage may go above 20%.

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. An Emergency Reserve Allowance and a cumulative Education Savings Allowance are applied against parents’ total 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.

Student Contribution

Each financial aid recipient is expected to contribute towards his or her educational expenses from vacation time earnings and from assets. The vacation time earnings expectations are set based upon time to earn and wage rates currently in effect. If the students have assets of their own in the form of savings, investments, trusts, real estate, etc., a portion will be included in the student contribution.

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.