# Logic behind single parent asset protection amount

<p>Just curious if anyone knows the logic behind the asset protection amounts used for single parents in the EFC calculation. I'm a widow and cannot think of any reason why I would only get approx 1/3 the asset protection amount of a married couple. At a minimum it should be 1/2 and I could think I lots of reasons why it should be more than 1/2.</p>

<p>There really isn’t any logic behind it. Bit it is what it is.</p>

<p>You’re right, it isn’t fair. It is odd.</p>

<p>I can tell you where it comes from, but not the logic behind it – it looks like the numbers are being driven down for single parent over the years by a statistical quirk, not policy.</p>

<p>The numbers are set by title IV of the Higher Education Act - here’s a link to the full text:
<a href=“https://www.mygreatlakes.org/mglstatic/sharedcontent/forms/HEA_Blackline_Title_IV_Part_F.pdf[/url]”>https://www.mygreatlakes.org/mglstatic/sharedcontent/forms/HEA_Blackline_Title_IV_Part_F.pdf</a></p>

<p>If you go to section 478(d), you’ll find the formula used: (*beware, legal gobbledigook ahead)</p>

<p><a href=“d”>quote</a> EDUCATION SAVINGS AND ASSET PROTECTION ALLOWANCE. For each award year after award year 19931994, the Secretary shall publish in the Federal Register a revised table of allowances for the purpose of sections 475(d)(3), 476(c)(3), and
477(c)(3). Such revised table shall be developed by determining the present value cost, rounded to the nearest \$100, of an annuity that would provide, for each age cohort of 40 and above, a supplemental income at age 65 (adjusted for inflation) equal to the
difference between the moderate family income (as most recently determined by the Bureau of Labor Statistics), and the current average social security retirement benefits. For each age cohort below 40, the allowance shall be computed by decreasing the allowance for age 40, as updated, by one-fifteenth for each year of age below age 40 and rounding the result to the nearest \$100. In making such determinations
(1) inflation shall be presumed to be 6 percent per year;
(2) the rate of return of an annuity shall be presumed to be 8 percent; and
(3) the sales commission on an annuity shall be presumed to be 6 percent.

[/quote]
</p>

<p>If you look at the same law under the preceding section, 477(c)(3), you will find the asset protection tables as they were set with the original law. As you will see, the discrepancy you note did not then exist – at age 50, the asset protection for 2 parents was \$41,800, one parent \$29,500 (less, but well over half). If you compare that with the current formula (See Table A5 at page 19: <a href=“http://www.ifap.ed.gov/efcformulaguide/attachments/101310EFCFormulaGuide1112.pdf[/url]”>http://www.ifap.ed.gov/efcformulaguide/attachments/101310EFCFormulaGuide1112.pdf</a> ) - you’ll see that the current protection at age 50 for 2 parents is now \$48,800, for 1 parent now \$16,700. So while the 2-parent family has seen a modest increase in asset protection over the years, the 1 parent family has suffered a 43% decrease in asset protection amount.</p>

<p>I think this is probably a result of the use of the “current average social security benefit” figure in the formula. My guess is that over the years, as women have remained in the workplace longer and employed in higher capacities, the “average” social security benefit for an individual has been driven up. So now the number you get by subtracting out the “average” social security benefit from a “moderate family income” (for a household of 1) – is going down as compared to the number you get by subtracting the “average” social security benefit from a “moderate family income” for a household of 2. </p>

<p>I don’t know the “moderate family income” figures, but I found this quote on wikipedia which is helpful for guesswork:

</p>

<p>I also found a quote somewhere that says “moderate” income is 80-95% of “median” – so let’s be generous and go with 90% of the “per member” income of \$23.5K, to guess that that “moderate” income for one person would be about \$21K. The government is now saying that, on average, if you are single and aged 50, you would only need \$16.7K to buy an annuity to make up the shortfall between your expected social security benefit and that \$21K annual income. </p>

<p>However, the median for a 2-person household (which appears to be \$39.8K, from another wikipedia article) might translate into a “moderate” income of roughly \$36K … and apparently you would need a lot more money to buy an annuity to make up the difference between that \$36K annual income and the average expected social security benefits for a 2 parent household. I am guessing that married women are less likely to be in the workforce full time, maximizing their earnings, than single women – so therefore the “average” social security benefit for married couples has not risen as much over the years as for single women – and instead more closely tracks the amount of social security a couple gets when one is taking their earned benefit, and the other is getting a spousal benefit – or 1.5 x the value of the earned benefit. </p>

<p>Worse, even though the changing status of women in the workplace is what is probably driving the change in formula, and even though statistically, the single parent in the FAFSA analysis is more likely to be female – the “average” social security benefit is not gender specific – so the numbers are driven by what an average single person gets in social security, not what an average single woman gets. See [url=&lt;a href=“http://washingtonpolicywatch.org/2011/08/25/boost-social-security-benefits-to-close-womens-pay-and-caregiving-gap/]Boost”&gt;http://washingtonpolicywatch.org/2011/08/25/boost-social-security-benefits-to-close-womens-pay-and-caregiving-gap/]Boost</a> Social Security benefits to close women’s pay and caregiving gap Washington Policy Watch<a href=“women’s%20social%20security%20benefits%20average%20\$3500%20less%20per%20year%20than%20men”>/url</a>.</p>

<p>^^^ very interesting. Unfortunately, in this political climate, no one is going to do any thing about it.</p>

<p>Thanks mom2collegekids:-)</p>

<p>Wow, calmom. I never thought I would get such a fascinating answer! LOL. It’s nice to know they never intended this odd result. Maybe someday they’ll fix it. I won’t hold my breath, though. Thanks for the indepth analysis!</p>

<p>If it is any consolation,the calculation is different for schools that use institutional methodology - generally CSS Profile schools. “Institutional Methodology” (IM) is something of a misnomer, because there is not one single formula that all the schools use- rather, the College Board has developed a system along with some guidelines, but colleges are able to modify the guidelines somewhat to suit their own purposes. But here’s one article that gives a summary of some of the ways the asset evaluation might differ under IM:</p>

<p>

</p>

<p>See: [Institutional</a> Methodology (IM)](<a href=“financialaidjournal.com”>financialaidjournal.com)</p>

<p>The emergency reserve allowance for a family of 2 for the 2010-2011 school year was \$22,330, for a family of 3 was \$24,560. (Note that family size includes the college student as well as the parent – so under IM instead of counting up parents we are counting all family members – if you have a younger child as well as the college student that would increase your allowance. The minimum educational savings allowance that year was \$23,130 – so as a single parent, IM is exempting at least \$45.5K of your assets from consideration. </p>

<p>Some of these numbers come from the book “Paying for College Without Going Broke” – I didn’t have this book when my kids were in college, but based on just the excerpt I’ve now read, it looks like a good book to have. At least it will help you figure out what the right things to stress over are, and to avoid stressing out over the wrong things. </p>

<p>The FAFSA only schools rarely (if ever) promise to meet full need, so the difference in income protection allowance might not be all that significant in any case. I mean, that discrepancy at age 50 translates to about \$1800 in EFC, as the federal formula taxes assets at 5.6%. So lets say that your EFC is \$10,000, but if you had the same asset protection as a married couple it would be \$9,200 – but your kid wants to attend a college with a \$45K COA and the college offers a grant of \$25K, reducing overall COA to \$20K. It doesn’t reall matter what your EFC was in that situation, because the college expects you to pay far more in any cases. </p>

<p>I do think that any full need school is going to be using IM – though of course a FAFSA only school might provide full need to some, if not all, of its students – but even meeting “full need” can mean different things at different schools, depending on how much of a “self-help” (loans and earnings) burden they shift to the student.</p>

<p>P.S. I don’t think this stuff is “fascinating”… just frustratingly convoluted. But I do happen to have a law degree, so I’ve seen a lot worse in my time.</p>

<p>Thanks again, calmom for all the information. We avoided schools with the IM for my daughter because I thought we could never afford them. Of course, they are also more selective and there are not many she would have considered. This is great to know for my son who is 4 years behind her. Some of these schools he might like do use the IM. I’ll check out that book, too.</p>

<p>Clueless…</p>

<p>Is it possibly for you to qualify for an auto 0 and then your assets would be ignored?</p>

<p>I would have qualified for the Simplified Needs Test calculation if I did not put money in their 529’s last year. This gave me a state tax refund and disqualifies me from being eligible for a 1040A form for 2011. I itemized last year. Next year the Simplified Needs Test should work as far as I can tell.</p>

<p>Unfortunately parents tend to find out that stuff too late-- it’s a little nuance you might not have thought about in any case. I figure I would have been an expert on the financial aid stuff if I had a third kid, but by the time kid #2 was through college I was out of money, so its probably just as well that I only had 2 to worry about. ;)</p>

<p>I don’t know how it was calculated, but when my eldest started college, I was also a widow (I have since remarried). Colgate gave her a fantastic financial aid package.</p>

<p>In my experience, what really matters is the institutional formula, not so much the FAFSA EFC.</p>

<p>I’m just starting in to the financial aid process with our 2nd child. We didn’t go through any of this with our 1st child. He got senioritis in 9th grade and was not interested in college!
I’m stunned to find that a lifetime of careful retirement saving, making extra payments on our mortgage, and saving the recommended ‘liquid emergency fund’ is counting against us in the financial aid department. We drove our cars til they were dead, paid our bills in full every month, don’t have fancy cell phones, and never even had cable TV.
My daughter will likely not qualify for any aid (grants or otherwise), so our entire emergency savings (and then some) will be required to pay for her first 2 years of college. To make it even worse, my mom recently passed away and left me a tidy sum of money and even that will need to go toward her tuition.
Just doesn’t seem fair. I feel like if we had lived above our means like the rest of the people in our town, maybe my daughter would be going to school for free. I feel like I should go out and buy that Corvette I’ve always wanted. Cash deal. What do you think?</p>

<p>Re post #13: You clearly don’t understand how the financial aid system works. Financial aid allows people who cannot afford to college to attend, through a combination of grants, work and loans. </p>

<p>Assuming you could qualify for need-based aid, what amount would you like to borrow on your own to subsidize your kid? </p>

<p>How much do you think your kid should borrow? </p>

<p>How many hours do you think your kid should work each week during the school year? What about over the summer? </p>

<p>What percentage of your net income do you think should be paid toward college costs?</p>

<p>

</p>

<p>No they wouldn’t be going for “free” either. </p>

<p>They would be posting on here that their bills were so high that there isn’t enough money to pay the expected EFC. </p>

<p>And that no one understands how high the cost of living is in their area and that they should get a break (note, that I live on Long Island).</p>

<p>And they would be posting that their child “deserves” to go to an Ivy.</p>

<p>What I think is that it is annoying that people come in here and their only post is to detract from the message of a thread and start another fight about the “fairness” of the financial aid system.</p>

<p>Which isn’t fair to the original poster, who asked an honest and interesting question, which I also didn’t know anything about (thanks Calmom!), even after having filled out my first FAFSA 8 years ago.</p>

<p>Paying down your mortgage only hurts in non-FAFSA schools. Look to your in-state publics if you are concerned about how much you might have to pay.</p>

<p>*I’m stunned to find that a lifetime of careful retirement saving, making extra payments on our mortgage, and saving the recommended ‘liquid emergency fund’ is counting against us in the financial aid department. We drove our cars til they were dead, paid our bills in full every month, don’t have fancy cell phones, and never even had cable TV.
My daughter will likely not qualify for any aid (grants or otherwise), so our entire emergency savings (and then some) will be required to pay for her first 2 years of college. To make it even worse, my mom recently passed away and left me a tidy sum of money and even that will need to go toward her tuition.
*</p>

<p>Paying down your mortgage will not hurt you at FAFSA only schools and some top schools that don’t look at equity.</p>

<p>If you’re that upset, then have your child apply to schools where her stats will give her merit scholarships.</p>

<p>Aid is largely dependent upon INCOME. So, even if you had been a spendthrift, your income may have prevented much aid anyway.</p>

<p>Does anyone have some insight about the significant reduction in the amounts for 2013-2014?</p>

<p>What are the new reductions?</p>

<p>Just a sample, 1st column two parents, 2nd column 1 parent:</p>

<p>2012-13:
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</p>

<p>2013-14:
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</p>

<p>Hadn’t noticed before but they did go down significantly. Wish I knew how to post them side by side.</p>