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Dramatically different EFC from one year to next

FafsaQuestionsFafsaQuestions 16 replies2 threads Junior Member
I am an adult (mid-30s) working on getting my bachelor's degree while working full time. I haven't used financial aid up until this point, but now need to look at getting loans.

Today I filled out both the 2018-2019 FAFSA and the 2019-2020 FAFSA and got dramatically different EFCs with very similar information filed in both. My 2016 and 2017 tax returns were used. They're not dramatically different.

My 2018-2019 FAFSA came out with an EFC of $6970
My 2019-2020 FAFSA came out with an EFC of $17,706

The information on number of students in college was the same on both and the info on current investments and amount in savings was identical on both.

For the 2018-2019 FAFSA, here's the info from my 2016 tax return:
AGI: $89,085
Taxable Income: $60,285
Tax paid: $8114

For the 2019-2020 FAFSA, here's the info from my 2017 tax return:
AGI: $83,001
Taxable Income: $48,707
Tax paid: $4376

The only other difference between the two is that I named two colleges on the 2019-2020 FAFSA and only one college on the 2018-2019 FAFSA. I wouldn't think that would have any impact on the EFC.

From just looking at the above info, I would think my 2019-2020 would have a lower EFC, instead of it being significantly higher.

Any insight on why they could be so different? Thanks in advance for the help!
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Replies to: Dramatically different EFC from one year to next

  • thumper1thumper1 75496 replies3310 threads Senior Member
    Your EFC won’t affect your ability to take either the Direct Loan. In neither case would you be eligible for federally funded grant money.

    Any chance you did a retirement rollover in 2017?
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  • FafsaQuestionsFafsaQuestions 16 replies2 threads Junior Member
    I think that must be it! I had a Universal Life Insurance policy that we closed in 2017, so I got just over $35,000 from that (most of which we ended up putting into our IRAs over the next couple of years). But that lump sum must have shown up on that tax return. Thanks for helping me solve the mystery.

    Great that the EFC won't affect my ability to take out Direct Loans, as that's all I'm really hoping to do at this time.

    One other reason I was trying to figure this out is that my daughter will be entering college in Fall 2020. I'm hoping she'll get some grants and scholarships, but I was trying to also get a ballpark prediction on what our EFC would be when she enters college.

    Thanks again for your help!
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  • thumper1thumper1 75496 replies3310 threads Senior Member
    I have to say...with an AGI of $89,000....I think a $6970 EFC is LOW. Seems like it should be more like $25,000.
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  • happymomof1happymomof1 29813 replies177 threads Senior Member
    For any FAFSA year up through 2019-2020, you can run a quick google for EFC formula and the year in question. This will get you the PDF of the formula itself that you can print out and work through on paper. As soon as the 20-21 formula comes available, chances are that someone will post a link in this forum.
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  • FafsaQuestionsFafsaQuestions 16 replies2 threads Junior Member
    @thumper1 I did think that $6970 seemed low, but I'll take it! ;) I'm hoping it won't be as high as $25,000, though. I'm sure that's how most people feel!

    @happymomof1 Thanks very much for that tip!
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  • thumper1thumper1 75496 replies3310 threads Senior Member
    @FafsaQuestions

    For your daughter...

    Are you divorced? Do you own a business? Are you self employed! Do you own real estate in addition to your primary residence?

    If NO to all,of those...and you have w2 income and really nothing complicated...there are Net Price Calculators on each college website that can give you an estimate of your net costs for your daughter. The ones for 2020-2021 academic year won’t really be online until summer or early fall 2020...but you could get a rough estimate looking at some now.
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  • mom2collegekidsmom2collegekids 84191 replies1035 threadsForum Champion Financial Aid, Forum Champion Alabama Forum Champion
    One other reason I was trying to figure this out is that my daughter will be entering college in Fall 2020. I'm hoping she'll get some grants and scholarships, but I was trying to also get a ballpark prediction on what our EFC would be when she enters college.


    Your daughter won’t be able to count that you’re in college on her FAFSA. So when filling out the Net Price Calculators and her FAFSA, you can only indicate one in college for her. But you’d be able to count her if you’re still in school then.

    That low EFC is some mistake. Don’t expect it to be that low when your daughter goes to college.

    Run some Net Price Calculators at schools she might consider to see what you’d be expected to pay.
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  • twoinanddonetwoinanddone 23399 replies17 threads Senior Member
    Paying that much in taxes in 2016 makes a big difference in the EFC. I ran one for a friend, just using rough numbers, and she had an EFC of about $7k on almost a $90k income. She paid huge taxes, had 3 kids (only one in college). I was shocked at the outcome.

    So it can happen.
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  • FafsaQuestionsFafsaQuestions 16 replies2 threads Junior Member
    Thanks for all the responses!

    @thumper1 @mom2collegekids Thanks for the tip. I have done a few of the online calculators at colleges she's looking at. I'll continue to think with that as a rough estimate.

    @twoinanddone interesting! Good to know it's possible that it's right. I'm going to also try the EFC formula that @happymomof1 mentioned and get a better understanding of the factors that influence the outcome so I can think with it a bit better for my future planning.

    I appreciate all of your help!
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  • thumper1thumper1 75496 replies3310 threads Senior Member
    @joecoletta
    Could you send this poster the worksheet with an explanation?
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  • thumper1thumper1 75496 replies3310 threads Senior Member
    @FafsaQuestions

    Are you self employed?
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  • mommdcmommdc 11511 replies31 threads Senior Member
    I agree that $7,000 EFC on $80,000 plus income seems low. Did you indicate two in college?
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  • mommdcmommdc 11511 replies31 threads Senior Member
    If the EFC on the 2018/19 FAFSA was $14,000 and on the 2019/20 was $17,000, that would make more sense and would reflect the difference in income, taxes paid and asset protection allowance between the two years.
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  • mommdcmommdc 11511 replies31 threads Senior Member
    Your tax situation seems to be very different from 2016 to 2017. In 2016 you had less in deductions and much higher tax than in 2017.

    Did you have a different marital status or fewer dependents?

    That could also affect the FAFSA EFC.
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  • FafsaQuestionsFafsaQuestions 16 replies2 threads Junior Member
    @thumper1 My husband I have our own business on the side but we're also both employed at other companies.

    @mommdc No, I only indicated 1 in college. I had the same number of dependents and same marital status both years. I did have significantly more deductions one year than the other, but I can't remember off the top of my head the exact reasons. I'd have to take a closer look at my tax return to recall exactly how that came about. I think it was a combination of factors.

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  • thumper1thumper1 75496 replies3310 threads Senior Member
    Do you take deductions for your business on your taxes? Some deductions for IRS tax purposes are not allowed for financial aid purposes...and those are added back in as income.

    When you start looking seriously for colleges for your child...keep in mind that the net price calculators are not particularly accurate for folks who own a business or are self employed...even partly.
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  • FafsaQuestionsFafsaQuestions 16 replies2 threads Junior Member
    Yes, there were probably some business deductions there. Thanks for the heads up that the net price calculator won't necessarily give us an accurate representation.
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  • joecolettajoecoletta 33 replies3 threads Junior Member
    edited February 8
    @thumper1

    Could you send this poster the worksheet with an explanation?


    Yes.

    @FafsaQuestions

    Please look for a PM from me.

    Joe

    edited February 8
    Post edited by sybbie719 on
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  • FafsaQuestionsFafsaQuestions 16 replies2 threads Junior Member
    @joecoletta Thank you!
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  • joecolettajoecoletta 33 replies3 threads Junior Member
    IMO, Option 1 is more user-friendly than Option 2, but that's me.
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