Sec.

190.37 Computation of expected contribution from the student's effective income. 190.38 Computation of expected contribution from students' assets. 190.39 Computation of the total expected family contribution.

Subpart D-Expected Family Contribution for Independent Students

190.41

Indicators of financial strength. 190.42 Special definitions.

190.43

Computation of the expected family contribution from effective income for independent students.

190.44 The expected family contribution for independent students from annual adjusted family income.

190.45 Computation of expected contribution from the assets of the independent student and his or her spouse.

190.46 Computation of expected contribution from the other assets of the independent student and his or her spouse.

190.47 Computation for expected contribution from income, assets, and other assets adjusted for number of family members attending institutions of postsecondary education.

190.48 Computation of the total expected family contribution.

APPENDIX-Expected Family Contribution for Dependent Students, Academic Year,

"Expected family contribution" with respect to each dependent student means the amount which the family of that student may reasonably be expected to contribute toward the cost of his education for an academic year. Each of the following elements of financial strength will be considered in determining the family contribution for dependent students:

(a) The amount of the effective income of the student.

(b) The amount of the effective income of the student's parent(s).

(c) The number of dependents of the student's parent(s).

(d) The number of dependents of the student's parent(s) who are in attendance, on at least a half-time basis, in a program of postsecondary education.

(e) The amount of assets of the student.

(f) The amount of assets and other assets of the student's parent(s).

(g) Unusual expenses of the student and the unusual expenses of the student's parent(s). Such unusual expenses shall be limited to medical and dental expenses and expenses arising from catastrophe.

(h) The additional expenses incurred in providing an income when two parents are employed or when a family is headed by a single parent.

(20 U.S.C. 1070a (a) (3) (B) (11).) § 190.32 Special definitions.

For purposes of this subpart:

(a) "Assets" means cash on hand including amounts in checking accounts, savings accounts and trusts, the current market value at the time of application of stocks, bonds, any other securities, real estate, home (if owned), income producing property, business equipment and business inventory which are held by the student's parents and by the student.

(b) "Other assets" means consumer durables and personal assets such as automobiles, boats, art objects, electronic sound and visual equipment, jewelry, antiques, and cameras, each of which has a value of $500 or more.

(c) (1) "Annual adjusted family income" for any base year means the sum of the following: Adjusted gross income as defined in section 62 of the Internal Revenue Code of the student's parents, investment income of the student's parents upon which no Federal income tax is required to be paid such as interest on municipal and State bonds, other income of the parents upon which on Federal income tax is required to be paid such as child support payments, income of the parents received under income maintenance programs including welfare benefits, social security benefits except those benefits paid to or on account of the student included in paragraph (f) of this section, and veteran's benefits except those veteran's benefits paid under chapters 34 and 35 of title 38 of the United States Code.

(2) In the case of the student whose parents are divorced, or are separated and file separate returns for Federal income tax purposes, only the income as described in paragraph (c) (1) of this section of the parent claiming or eligible to claim the student as an exemption for

Federal income tax purposes for the base year shall be considered in determining the annual adjusted family income. If no parent claims or is eligible to claim the student as an exemption for Federal income tax purposes, the income of both parents shall be combined to determine the annual adjusted family income.

(3) In the case of the student whose parents are married and not separated but file separate returns for Federal income tax purposes, the income as described in paragraph (c) (1) of this section of both parents shall be combined to determine the annual adjusted family income for that student.

(d) "Base year" means the tax year for which information is requested by the Commissioner for the purpose of determining family income.

(e) "Dependent student" means any student who does not qualify as an independent student as defined in § 190.42 (a).

(f) "Effective income of the student" means any amount paid to, or on account of, the student under the Social Security Act which would not be paid if he were not a student, i.e., under section 202(d) of title II of the Social Security Act, 42 U.S.C. 402(d), and one-half of any amount paid the student under chapter 34 of title 38, United States Code (Veterans Educational Assistance-38 U.S.C. 1651 et seq.) and chapter 35 of title 38, United States Code (War Orphans' and Widows' Education Assistance-38 U.S.C. 1700 et seq.). The amount of the effective income of the student is the amount to be received during the academic year for which Basic Grant assistance is requested.

(20 U.S.C. 1070a (a) (3) (B) (iv).)

(g) "Effective family income" of a student's parents means the annual adjusted family income received for the base year minus the Federal income tax paid or payable with respect to such income during the base year.

(20 U.S.C. 1070a (a) (3) (B) (iii).)

(h) "Employment expenses offset" means an allowance to meet expenses relating to employment where both parents are employed or where one parent qualifies as a surviving spouse or as head of a household under section 2 of the Internal Revenue Code.

(i) "Expenses arising from catastrophe" means those types and amounts of

casualty losses which may be deducted under section 165(c) (3) of the Internal Revenue Code which were incurred during the base year by the student, the parents of the student and the parents' dependents.

(20 U.S.C. 1070a (a) (3) (B) (11) (V).)

(j) "Family size offset" means an allowance to meet subsistence expenses, including food, shelter, clothing, and other basic needs of a family. For purposes of this part the "Weighted Average Threshold at the Low Income Level," as developed by the Social Security Administration shall be used as a basis to determine the amount for the family size offset.

(k) "Federal income tax" means the tax on income paid to the U.S. Government under chapter 2 of the Internal Revenue Code and the tax on income paid to the Governments of Puerto Rico, Guam, American Samoa, the Virgin Islands, and the Trust Territory of the Pacific Islands under the laws applicable to those jurisdictions.

(20 U.S.C. 1070a (a) (3) (B) (111).)

(1) “Medical expenses" means those types of medical and dental expenses, except premiums for medical insurance, that may be deducted under section 213 of the Internal Revenue Code which were incurred during the base year by the student, the parents of the student and the parents' dependents.

(m) "Net assets" means the current market value of the assets included in paragraph (a) of this section, minus the outstanding liabilities (indebtedness) against such assets at the time of application.

(n) "Net other assets" means the current market value of the assets, included in paragraph (b) of this section, minus the outstanding liabilities (indebtedness) against such assets at the time of application.

(o) "Parent" means the mother or father of the student, unless any other person, except the student's spouse, provides more than one-half of the student's support and claims or is eligible to claim the student as an exemption for Federal income tax purposes for the base year, in which case such person shall be considered the parent.

(20 U.S.C. 1070a (a) (3) (B) unless otherwise noted.)

§ 190.33 The expected family contribution for dependent students from parents' income.

The expected family contribution for dependent students from parents' income for each grant shall be an amount determined in the following manner:

(a) Add to annual adjusted family income the effective income of the student attributable to the dependents of the student who is a veteran.

(b) Determine effective family income by subtracting from the amount determined in paragraph (a) of this section the amount of Federal income tax paid or payable with respect to such income,

(c) Determine discretionary income by deducting the following from effective family income:

(1) Family size offset. A family size offset in the amount specified in the following table. Family size includes the student, the student's parents and persons for whom the parents may claim an exemption under section 151 of the Internal Revenue Code. Family size is to be determined for the base year. If the parents are divorced or separated, family size shall include the student and any parent whose income is taken into account for the purpose of computing the annual adjusted family income and his or her exemptions.

(2) Unusual expenses. The amount by which the sum of medical and dental expenses and losses resulting from catastrophes incurred in the base year and not compensated by insurance exceeds 20 percent of effective family income. Unusual expenses may be deducted if they were incurred by the student and any parent (and any persons for whom an exemption was claimed by that parent) whose income is taken into account for the purpose of computing the annual adjusted family income.

(3) Employment expense offset. An employment expense offset in an amount equal to 50 percent of the adjusted gross

income earned in the base year by the parent earning the lesser income if both parents are employed, or 50 percent of the adjusted gross income of a parent qualifying as surviving spouse or as head of household as defined in section 2 of the Internal Revenue Code, but in no case shall such an offset exceed $1,500. the expense may be claimed only if the income of both parents or the income of the surviving spouse or head of household is taken into account for the purposes of computing the annual adjusted family income.

(d) To determine the expected family contribution from parental income the following rates shall be applied to discretionary income:

(1) Determine the net assets owned by the parents.

(2) If the amount of discretionary income determined in paragraph (c) of § 190.33 is a negative amount, subtract that amount from the amount of net assets determined in paragraph (a)(1) of this section.

(3) Deduct an asset reserve of $7,500 from net assets as determined in paragraph (a) (1) or paragraph (a) (2) of this section whichever is applicable.

(4) The contribution from parental assets shall be an amount equal to 5 percent of the remainder obtained in paragraph (a) (3) of this section.

(b) If the student's parents are divorced or separated only the assets of the parent whose income is taken into account for the purpose of computing annual adjusted family income shall be considered.

(20 U.S.C. 1070a (a) (3) (B).)

§ 190.35 Computation of standard expected contribution from parents' other assets.

(a) The expected contribution from other parental assets shall be an amount determined in the following manner:

(1) Determine the total amount of net other assets owned by the parents and deduct from that amount an asset reserve of $7,500.

(2) The contribution from other parental assets shall be an amount equal to 5 percent of the remainder obtained in subparagraph (1) of this paragraph.

(b) If the student's parents are divorced or separated only the other assets of the parent whose income is taken into account for the purpose of computing annual adjusted family income shall be considered. (20 U.S.C. 1070(a) (3) (B).)

§ 190.36 Computation for expected contribution from parents' income, assets, and other assets adjusted for number of family members attending institutions of postsecondary education.

(a) For each grant the amount expected from parents' income as determined in § 190.33 shall be added to the amount expected from parents' assets as determined in § 190.34 and parent's other assets as determined in § 190.35.

(b) For each grant the combined expectation calculated on the basis of the above formula shall be further adjusted in the following manner to take into consideration the number of family members who will be in attendance, on at least a half-time basis, in programs of postsecondary education during the academic year for which basic grant assistance is required:

the parent may claim an exemption under section 151 of the Internal Revenue Code. When the student's parents are divorced or separated and are filing separate returns for Federal income tax purposes, family members shall include the student and any parent whose income is taken into account for the purpose of computing annual adjusted family income and his or her exemptions. (20 U.S.C. 1070a (a) (3) (B).)

§ 190.37 Computation of expected contribution from the student's effective income.

The expected family contribution shall include 100 percent of the student's effective income for the academic year for which aid is requested; except that, that portion of effective income of the student attributable to the dependents of a veteran shall instead be included as a part of, and treated as, annual adjusted family income.

(20 U.S.C. 1070a (a) (3) (B).)

§ 190.38 Computation of expected contribution from student's assets.

For each grant the contribution from the student's assets shall be an amount equal to 33 per centum of his net assets as defined in § 190.32 (m). (20 U.S.C. 1070a (a) (3) (B).)

§ 190.39 Computation of the total expected family contribution.

For each grant the total expected family contribution shall be the sum of:

(a) The expected contribution from parents' discretionary income, parents' assets, and other assets as determined in § 190.36.

(b) The expected contribution from the student's effective income a determined in § 190.37, and

(c) The expected contribution from the student's assets as determined in § 190.38.

Subpart D-Expected Family Contribution for Independent Students SOURCE: 38 FR 15421, June 11, 1973, unless otherwise noted.

§ 190.41 Indicators of financial strength.

"Expected Family Contribution" with respect to each independent student means the amount which that student, and his or her spouse, if any, may reasonably be expected to contribute toward the cost of his or her education for an academic year. Each of the following

elements of financial strength will be considered in determining the family contribution for independent students:

(a) The amount of effective income of the independent student.

(b) The amount of annual adjusted family income of the independent student and the independent student's spouse.

(c) The number of persons whom the independent student can claim as an exemption.

(d) The number of dependents of the independent student who in addition to the student will be in attendance, on at least a half-time basis, in a program of postsecondary education.

(e) The amount of the assets and the other assets of the independent student and his or her spouse.

(f) The unusual expenses of the independent student, and his or their dependents. Such unusual expenses shall be limited to medical and dental expenses and expenses arisng from catastrophe.

(g) The additional expenses incurred in providing an income where both the independent student and his spouse are employed or where the independent stuent qualifies as a surviving spouse or as head of the household under section 2 of the Internal Revenue Code.

(20 U.S.C. 1070a (a) (3) (C).)

For the purposes of this subpart: (a) "Independent Student" means a student who:

(1) Has not and will not be claimed as an exemption for Federal income tax purposes by any person except his or her spouse for the calendar year(s) in which aid is received and the calendar year prior to the academic year for which aid is requested.

(2) Has not received and will not receive financial assistance of more than $600 from his or her parent(s) in the calendar year(s) in which aid is received and the calendar year prior to the academic year for which aid is requested, and

(3) Has not lived or will not live for more than 2 consecutive weeks in the home of a parent during the calendar year in which aid is received and the calendar year prior to the academic year for which aid is requested.

(b) "Assets" means cash on hand including amounts in checking accounts, savings accounts and trusts, the current

market value at the time of application of stocks, bonds, and other securities, real estate, home (if owned), income producing property, business equipment and business inventory which are held by the independent student and/or his spouse.

(c) "Other assets" means consumer durables and personal assets such as automobiles, boats, art objects, electronic sound and visual equipment, jewelry, antiques, and cameras, each of which has a value of $500 or more.

(d) (1) "Annual Adjusted Family Income" for any base year means the sum of the following: Adjusted gross income as defined in section 62 of the Internal Revenue Code of the student and the student's spouse, investment income upon which no Federal income tax is required to be paid such as interest on municipal and State bonds, other income of the student and the student's spouse upon which no Federal income tax is required to be paid such as child support payments, income of the student and the student's spouse received under income maintenance programs including welfare benefits, soical security benefits except those benefits paid to or on account of the student included in paragraph (g) of this section, and veterans's benefits except those veterans's benefits paid to the independent student under chapters 34 and 35 of title 38 of the United States Code.

(2) In the case of the student who is divorced, or is separated and files a separate return for Federal income tax purposes, only the student's own income shall be considered in determining the annual adjusted family income.

(3) In the case where the student and his spouse are married and not separated but file separate returns for Federal income tax purposes, the income as described in paragraph (d)(1) of this section of both the applicant and spouse shall be combined to determine the annual adjusted family income for that student.

(e) "Base year" means the tax year for which information is requested by the Commissioner for the purpose of determining family income.

(f) "Dependent" means the independent student's spouse and such other persons who are eligible to be claimed as an exemption for Federal income tax purposes by the student during the base

year.