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CSS PROFILE: An In Depth Explanation

Updated: Oct 1, 2020

Applying for College Financial Aid   During most college financial aid presentations you will hear about the FAFSA and perhaps some will mention the CSS profile.  However, of the two, the CSS Profile is a much more involved form that requires more time and information gathering than the FAFSA. There are about 200 colleges which require that the CSS Profile be completed in addition to the FAFSA (Federal Methodology or FM). Those colleges use the CSS profile to assess the student’s eligibility for the college’s own institutional aid dollars.

CSS Profile colleges are selective private colleges but also include the University of Michigan at Ann Arbor, William & Mary, Georgia Institute of Technology and the University of North Carolina at Chapel Hill. These universities calculate Expected Family Contribution (EFC) on the Institutional Methodology (IM). There is also a group of 23 colleges formed by the presidents of the institutions to assess students’ ability to pay for college using a Consensus Methodology (CM) called 568 Presidents’ Group schools. These schools require the CSS Profile to be completed but treat students’ assets and parents’ home equity different (more favorable to families) than the IM does.

How Expected Family Contribution (EFC) is Calculated

So, there are two financial aid forms but three ways of calculating a student’s Expected Family Contribution (EFC). Beginning with the 2017-18 financial aid cycle, all aid forms will all use “prior-prior” year tax information as the basis for assessing a family’s financial need. This new method is referred to as “prior, prior”, because students’ college financial aid eligibility will now be based off of income from two years prior to when a student enrolls in college, not one year prior the way the rule has been until today.

In the all financial aid formulas, parent income is assessed at a rate as high as 47%after allowances for federal, state and FICA taxes, an income protection allowance worth about $15,000 – $25,000 and a few other allowances. After these allowances are subtracted from your adjusted gross income (AGI), which is line 37 on your IRS 1040 tax form, whatever your AGI is minus allowances, 47% of the net amount is what you will be expected to contribute toward college costs per year from your income.

Now brace yourself, more bad news.

The aid formulas will add back to your adjusted gross income any contributions you made in the previous year to qualified retirement plans (401k, IRA, 403b, etc) and Health Savings Accounts (HSAs). If you earn $110,000 of income and defer $10,000 into a 401k, your adjusted gross income will be $100,000 for tax purposes (line 37 on your 1040), but the $10,000 retirement plan contribution will get added back to your income in the aid formula and for purposes of calculating need-based aid eligibility, your income will be $110,000.

Parent income is counted 9 times more heavily in college aid formulas than parent assets are.  Net income gets counted at 47% and assets in your name are counted at only 5-5.64%, so income is the biggest factor in most family’s EFC. Parents’ total reportable assets will vary depending upon the EFC methodology, and from the reportable asset value a savings allowance of about $17,000 to $30,000 is subtracted to arrive at an Available Asset Value. Parents are expected to use up to 5.64% (Federal) and 5% (Institutional and Consensus), of available assets each year on college.

Be aware, if your child attends a college that requires the CSS Profile in addition to the FAFSA, there is no exclusion for small business assets on the Profile, so rental and other income will be counted on the CSS Profile.

Life insurance cash values are not counted under any of the formulas, but a few highly selective colleges will ask about policy cash values in their supplemental questions on the CSS Profile. Personal assets like cars, clothes and household items do not count under any of the formulas, but collectibles do.

Student’s Income and Assets 

 Students must report the same types of assets as parents, but students do not have a savings allowance, so 100% of the value of student-owned assets gets counted at various rates. For example, if your child has $25,000 in a savings account, the child will be expected to contribute 20% of the asset ($5,000) each year toward the cost of college under the federal methodology, 25% under the IM ($6,250) and 5% under the CM ($1,250). If your child owns a 529 college account of Coverdell ESA the aid treatment is more favorable under the federal calculation. The same $25,000 in a 529 account will only be assessed at a maximum of 5.64%, and sometimes it may not be assessed at all.

Grandparent Owned 529 Accounts

Grandparent’s 529 assets are usually not involved directly in the calculation of the student’s EFC under the institutional methodology. However, distributions from grandparent-owned 529 plans do count against aid eligibility under all of the aid formulas. If the grandparent makes a distribution from that 529 plan to help the grandchild pay for college, that distribution will be considered untaxed income of the student when the student completes the aid forms the following year.

Are you completely confused and overwhelmed now? Contact Us!

The Essential College Coaches will :

  •  Estimate Expected Family Contribution for Multiple Colleges

  • Develop “what-if”  financial models based on your family’s finances

  • Create the Optimal Income Distribution and Asset Protection Plan for your family

  • Complete all Financial Aid Forms

  • Negotiate Financial Aid awards on your student’s behalf.

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