Vol 1: Issue 6  |  Home   

VOLUME 1 - ISSUE 6


Institutional Methodology (IM)

IM: What Is It?

The Institutional Methodology (IM), is a set of directions (formula) developed by various private post-secondary institutions in determining a family's ability to pay for school. The end result of this process is an expected family contribution (EFC), which not to be mistaken for FM's EFC, which is found on the SAR (Student Aid Report). In other words, the IM generated EFC is not the same amount calculated by the federal government to determine eligibility for federal student aid dollars. IM is instrumental in figuring how the institution will use its own monies (not Federal funds) regarding financial aid for said family.

A family's contribution is not something most families can realistically take out of one year's income, and most families finance their share of college costs through a combination of saving, paying out of current income, and borrowing.

In other words, it is a system designed to squeeze even more money from a family with a college-bound or an upper-class student. The logic is simple, it's our money (the schools) and we will hand it out in a manner we seem to befit the individual family's financial aspects. The Federal methodology system (FM) apparently isn't enough for private schools: They wish to extract even more money from the family using the Institutional Methodology system. In reality it is double assessment from two systems that are miles apart in many similar aspects: Essentially it is having your income taxed twice; once by the state, and then by the federal government.

Another analogy would be a family going to one bank to secure funding, only to learn, that once they have completed all the required paperwork, they now must complete additional forms with another bank, who uses a different assessment procedure in determining the amount of funding they can attempt to secure.

One final thought: most schools using IM require the family complete the CSS Profile, however some schools avoid this by asking on their financial aid statements the value of your home. Once you see this, you know the school, besides using the FM, they are also using IM to varying degrees.

One IM principle is the fact that a family's ability to pay is based on its income and assets, the first step being the calculation of the family's contribution by defining income in a logical manner. This is accomplished by subtracting all appropriate allowances from the family's income, leaving a certain amount that is available to pay college costs. Under IM there is no income protection allowance (FM there is). IM expects a minimum contribution of $1,150.00 for incoming freshmen and $1,400.00 for upperclassmen.

A similar process for assets takes place: Homes are assessed, though certain schools will limit the assessment of the house at 2.4 the times of the family's income. The list begins to differ even more as under IM they assess farm equity and all assets are assessed even if the family meets FM's simplified needs test. Federal methodology does not assess the family's home value.

The adjusted gross income (AGI) from your federal income tax form is used as the basis in determining family income through the IM methodology. The IM system will adjust the parents' AGI, declaring invalid given losses and adjustments that are permitted in the federal tax system, however they are ones that would not affect your family's ability to pay for college. Other sources as untaxed social security income and child support are components in calculating family total income. Student and parent incomes are used in determining total family income. IM also adds back losses that are on line 12, 13, 14, 17, 18, and 21of the 2005 IRS 1040 as well as adding any tuition and fees deducted on line 34 of the 1040 or line 19 of the 1040A .

If a student has divorced and/or separated parents, the custodial parent's information along with financial information from the spouse of the custodial parent (must be remarried) is used in determining the expected family contribution (EFC). Certain schools will require financial information from both the student's biological parents, expecting they help pay for their student's college costs. The financial belief of these schools are simple and straightforward: Married or not, they are primarily responsible for paying toward their son's and/or daughter's education before college resources are used.

The IM system subtracts six monetary sums from the family's income to calculate what amount of the parents' total income will be considered for college expenses: they consist of all federal income taxes paid, state and local property taxes, the sales tax and the FICA tax Unlike FM, IM permits the family to report high medical and dental expenses in excess of 3.6% of family income and an employment expense allowance for expenses related to working outside the home if both parents are employed or if the parent is single

The IM system gives the schools the option of making allowances for elementary and secondary tuition paid for the student's younger brothers and/or sisters. It also recognizes that your family must save for the younger child's (children's) educational expenses, about 1.5% or about $1,800.00, (called the Annual Education Savings allowance), which, IM expects the family to use this money for college, expecting the family to pay for the remaining expected contribution from current income, assets, and/or borrowing.

The IM system has an Income Protection Allowance (IPA) that permits families with incomes at or lower than the IPA level not to make contributions toward their student's education as their low income has them spending solely on essentials. Conversely family income above the IPA, IM presumes they have income that can be spent on nonessentials and thus should contribute part of their incomes towards their sons and daughter's education

Once taxes and the proper allowances have been deducted from the family's total income, any remaining income goes toward school expenses. The IM system applies 22% to the first dollars of available income (less than $16,070.00) up to an income of $44,191.00 or more where the family is expected to contribute $13,097.00 plus 46% of the adjusted available income more than $44,190.00. Complicated, isn't it?

IM assesses student income at 50% as the schools figure the student's major goal is to save for college. Regardless of income, a freshman is expected to contribute a minimum of $1,150.00 and an upperclassman, a minimum of $1,400.00. However this may be altered by a school if it has set different minimum income requirements.

Assets are another complicated aspect of IM: IM considers assets in determining a family's ability to pay for education because families with assets are in a stronger financial position than families with the same income but no assets. Essentially what they said is the assets can be liquid or in a home, that a homeowner pays lower income taxes. This is true whether a family's assets are liquid or tied up in the family's home: A homeowner is normally in a stronger financial position than a renter. Generally speaking, a homeowner pays lower income taxes, has stable mortgage payments, and may be able to tap into the equity in the home to finance a portion of college expense.

A family's EFC is generally a bit more if assets are present, as opposed if a family had not saved at all. However, it is normally true that a family who saved is in advantageous financial position than a family who has no alternative but to finance the EFC from income and loans. The IM system uses a very small % of a family's assets as used to pay for school.

Five additional factors the reader should be made aware: one, asset assessment is not related to income saved for families with negative available income. Two, a parent's assets held in the name of their children's names are considered assets. Three, asset allowances are based on emergency family reserves, educational savings and low income supplements. Four, prepaid tuition plans are considered an asset of the contributor and five, Coverdell ESAs are viewed as a parental asset.

The IM system deems it impractical to consider all categories of assets. IM's definition is extremely comprehensive; assets that escapes are pension assets because many families have little knowledge knowing the value of this asset, as thus IM is magnanimous in not including this asset.

We've covered most of the assets that have been taken into account: . It is important to remember that IM methodology doesn't expect a family to deplete its assets, as assets are important in measuring the family's overall financial strength.

The IM system, however, make two allowances that are designed to actually assist families: The Emergency Reserve Allowance and the Cumulative Education Savings Protection Allowance. IM subtracts both allowances from assets before it calculates what the family's net worth would be to pay for college expenses.

To better understand these two allowances, a brief, succinct explanation of both is in order. The Emergency Reserve Allowance or ERA, protects a family's assets for unexpected expenses such as illness and unemployment. The amount protected is based on the size of the family and six months of what average family expenses are in a survey called the Federal Consumer Expenditure Survey.

The other explanation is CESA or the Cumulative Education Savings Protection Allowance, which realizes the family's need to save in order to help pay for school. The protection focuses on the amount of assets that would be equal to the amount said family would have saved if they set aside a specific amount of family income each year for each child. Essentially it is a plan to prevent the family's EFC from increasing because the family faithfully put money away for school.

To provide even more assistance, low-income families are given more asset protection. Low Income Asset Allowance recognizes that a family with very low income needs additional asset protection because that family may need to draw on assets to cover basic living expenses

Only a small portion of a family's net assets is expected for college expenses. Assets are assessed using a graduated rate structure as is income. IM asks families to contribute 3 % of the first $25,000 of their net worth (total asset worth minus appropriate allowances). If their net worth is higher, the additional assets are taxed at 4 %t and then at 5 %. Student's assets are assessed more heavily than parents' assets. Because education should be the first priority for students, they are expected to contribute 25 % of the value of their assets to pay for educational expenses.

Families who have more than one student in school, regardless of the spacing of those students, have to pay more for school than families who have one student . The IM system is not without heart, however, as it recognizes the financial burden on families having two students in school, thus reducing the expected contribution for each student when more than one is enrolled. Having two students in school, the IM system expects their family to pay 60% of the parent contribution for each student, and if three students are in school, the IM system expects their family to pay 45 % of the parent contribution for each student. In other words, with two students, you pay 120% or 20% more than for one student, and for three students, you pay a whopping 135% or 35% more than you would for a single student.

The final determination of how much a family will be asked to pay is determined by the school's financial aid administrator (FAA). The IM system can't account for all of the factors that affect a family. What IM can do is to provide the schools FAA (financial aid administrator), the most accurate indicators available of how that family's financial strength matches with families in the same applicant pool. The FAA must take analyze all available information about the family's income, assets, and circumstances..

 

Federal Updates

A Federal Court Has Ruled that a collection of some 270,000 blood, tissue, and DNA samples at Washington University in St. Louis belongs to the university, not to the researchers who amassed the materials or the patients who donated them.

The U.S. Supreme Court declined on Monday to hear a case involving a whistle-blower's lawsuit against Oakland City University, letting stand a lower court's ruling that lawyers say will increase colleges' exposure to such litigation.

 

Odds N' Ends

The Muckraking Journalist Jack Anderson, who died last December, left some 200 boxes of papers to George Washington University's library, an archive that could be a trove of information about state secrets and old-fashioned investigative journalism for historians and reporters. But the transfer is on hold while federal agents try to get a look at the papers first.

CLARK ATLANTA UNIVERSITY has agreed to pay $5-million to settle allegations that it misused funds from a U.S. Department of Energy contract that was supposed to help train minority students in environmental science. The university was not able to account for much of the $24-million it administered from 1990 to 2002 on behalf of a consortium of colleges, a federal prosecutor said on Monday.

FIVE PROFESSORS and a university fellow are among the seven winners of the 2006 Pulitzer Prizes in letters and music. Columbia University named the winners on Monday. Each prize carries an award of $10,000.

A POLICE INVESTIGATION into a sexual assault that allegedly occurred at the home of John E. Neal led to his resignation last week as president of Maryville University of St. Louis. A 23-year-old woman was allegedly assaulted in Mr. Neal's university-owned campus residence sometime in the four days before January 3, according to a brief police memorandum

GEOGRAPHY, ETHNICITY, AND ACADEMIC PREPARATION are more significant factors in determining who attends college than rising tuition is, according to a report being released today on higher education in Pennsylvania. The report concludes that the notion of a "cost crisis" in higher education is flawed.

SAMI AL-ARIAN, the former University of South Florida professor whose trial on terrorism charges ended with a partial acquittal last year, has reached a deal with federal prosecutors under which he will be deported, though the details of the agreement have not been released.

A KENTUCKY JUDGE HAS RULED that the state's General Assembly acted unconstitutionally when it tried to take $13.7-million from Kentucky's Affordable Prepaid Tuition program, which permits families to lock in college-tuition costs at today's rates by paying in advance.

A NEW YORK CIVIL-RIGHTS GROUP filed a federal complaint on Tuesday challenging as discriminatory a City University of New York effort to help black, male students, as well as several programs at CUNY's Medgar Evers College that the university system could end up replicating elsewhere.

THE ARRESTS OF TWO DUKE UNIVERSITY lacrosse players early on Tuesday morning brought into the judicial system a case that the court of public opinion has been considering for the past month in Durham, N.C., and across the country.

TEXAS SOUTHERN UNIVERSITY'S governing board voted this week to dismiss Priscilla D. Slade, the university's president, after an internal audit found that she had misspent $647,949 in university money on personal expenses over the last seven years. Ms. Slade, who has contested the audit's findings, also faces a criminal investigation.

THE PRESIDENT OF NORTHERN KENTUCKY UNIVERSITY has placed a literature professor on leave for the remainder of the semester because the professor led a group of her students in tearing down a conservative student group's anti-abortion display.

 

COLLEGE HUMOR

A Plumber, and a Gem

After 24 years as a plumber for Mount St. Mary's University, Ron Bledsoe knows the Maryland campus's pipes like the back of his hand. It's that institutional knowledge that led to a lucky hunch last month when he opened up a manhole and found an engagement ring worth an estimated $15,000.

Debbie Squiccimarri, a New Jersey high-school teacher, had lost the ring on a campus visit in February. It was a cold day, and when she blew her nose and tossed the tissue into an automatic-flush toilet in the student union, the ring and its 2.2-carat diamond went with it.

Ms. Squiccimarri returned home shocked by the loss. Mr. Bledsoe tore apart the toilet and the pipes under the building. Nothing.

As the weeks passed, he thought about a certain manhole 150 yards away, where a new plastic sewer line dropped straight down into the old line. If the ring had bounced out of the flow of the water, just maybe it would be there. One month after it was lost, he found the ring right where he thought it might be.

The longtime plumber says he wanted to make sure that Ms. Squiccimarri didn't forever remember Mount St. Mary's as the place where she had lost her engagement ring.

"The day she lost it she was devastated," he says, "and I just wanted to do what I could to change that and make that story have a happy ending."

Ms. Squiccimarri, who says the ring's cost was nothing compared with its sentimental value, gave Mr. Bledsoe an undisclosed sum as a reward.

Then she went directly to a jeweler and had the ring sized down. And cleaned.

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