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International Students - Assessing Family Contribution
Transcript of International Students - Assessing Family Contribution
National Association of Student Financial Aid Administrators
International Students -Assessing Family Contribution
Arlina DeNardo, Lafayette College Michael Fraher, Vassar CollegeCaesar Storlazzi, Yale University
Slide 2
Discussion Framework
• Identifying policy issues in the recruiting of, and the awarding of financial aid to International Students
• Overview of an excel based formula currently in use for assessing EFC’s from families of International Students
• Examination of the development of a Global Need Analysis Formula – Modified IM (or FM) Formula
International Student Definition: – Any student who is not a US citizen or permanent resident and whose family lives and works outside the United States
Slide 3
Policy Issues What are the institutional objectives to be achieved in the
recruitment of International Students?
- Enrollment- Diversity- Globalization is a reality and education is a way to
build bridges among countries
What are the support services that might need to be in place to enhance the recruitment and retention of International students?
What are the financial resources the institution is willing to make available? What about employment?
Who will process I-20’s, 1042s tax information, federal withholding tax calculation etc.?
Slide 4
Policy Issues Related to Available Resources
Do you award solely on merit ?- Limited resources with inability to meet full need
- Lack of method to assess relative financial strength
Is there a desire to establish some understanding of family financial strength before awarding?
- Budget Construction
- Travel Consideration
- Application and Documentation for Financial Data
- Analysis of financial data
Slide 5
Budget Construction
• Most likely driven by institutional budgets $
• Domestic vs International Budgets?
• Expenses unique to internationals: vacation periods, health insurance, visa, etc.
Slide 6
Developing Travel Allowances
• Cost– Actual Costs at time of travel – Lowest round-trip fares– Funded separately or by general scholarship budget?
• Frequency– Number of round trips per year and per 4 years
• Travel for Freshman year and Senior year only• One trip home during the undergraduate career• Travel allowance from point of entry• Travel to the states not covered at all
Slide 7
Application Documents
• Primary data collection vehicle– CSS International Application or Institutional Form
• Supporting documents:– Income Documents: tax returns, or other income
verification (statement of earnings and benefits from employers)
– Translation Required– Certification of Finances – documentation of available
resources
Slide 8
Currency Conversion IssuesIs this a verification issue?Timing
– At time of analysis– one point of time conversion for all countries (March 1?)– Quarterly– Reconvert: only for volatile currencies (Turkey, South
America, etc.) or only upon review.
Source of conversion rate Reviews of exchange ratesShould currency restrictions affect our analysis of
family financial data?
Slide 9
Formula Issues in Analyzing Financial Data from International Families?
Equity Principle – Allowing full access to educational opportunity and leveling the playing field for access to financial resources for higher education vertical equity – varying contributions according to
available resources – income and assetshorizontal equity – families with relatively equal
resources will be assessed at the same level Can we ensure the same level of equity for International
Student Needs Analysis found in the analysis for domestic students?
Slide 10
Realities of Analyzing Financial Data from International Families?
There are different economic realities, not only among countries but within countries
- many countries lack a middle-class
- wealthy vs subsistence poor
Disparate income levels lead to disparate living expenses that do not mirror US income quintiles and the associated Income Protection Tables used in domestic needs analysis
Lack of safety net services – medical, education & retirement Cultural differences in how people view their resources and
expenses. Money for education is what is left after everything else has been paid – servants – dowry – retirement - private school
Slide 11
One for all?
• Does one analysis work for all?– Eastern and Western Europe– South Africa and Saharan Africa
– China and Japan
• What sensitivity do we build in for different economies?
• Do we separate out Canadian and/or Mexican applicants?
National Association of Student Financial Aid Administrators
International Student Need AnalysisISNA
The Spreadsheet Method
Slide 13
Spreadsheet Methodology Robert Donaghey is the originator of the ISNA
approach The economic soundness of this approach
compared to INAS and US financial data is open to debate, however, this approach does yield students and….
provides a level of consistency in assessing students from different economies previously unavailable
provides consistency in dealing with changes in financial circumstances from one year to the next
Slide 14
ISNA Overview
Requiring tax returns - with translation- is helpful and can be checked for conversion to US dollars by the following website and excel sheet
In the absence of a tax return require statement of earnings and benefits from employer.
Slide 15
Converting Earned Income from Foreign Tax Return
http://www.oanda.com/convert/classic
Slide 16
Converting Foreign Income Tax
Slide 17
ISNA Overview International Students Financial Aid Application
(referred to as ISFAA in the documentation) is the source of family financial data
Data from the application is entered in the need analysis excel sheet as provided by the family
Sheet will do intermediate calculations with the decision as to the appropriate parent contribution left to the discretion of the aid officer
Once the Parent contribution is entered the sheet will calculate any required federal withholding tax
Slide 18
Ghana
Family of 5 - 2 in college
Reported I & D income of $900 and only $5,000 in the bank – Imputed liquid asset value at 4%
Scholarship/Grant exceeds tuition & fees so required federal withholding tax is calculated.
Slide 19
Japan
Family of Three
I & D imputed at 4% of asset value
Utilized alternate calculation for industrialized nation
Slide 20
Critique of ISNA
Lacks vertical and horizontal equity of formulas that are available for US based economy analysis, since family provided expenses are accepted as reported.
In the absence of a better approach, at least this provides some consistency in how we treat families, and consistency from year to year in addressing changes in family finances.
Provides far fewer requests for reconsideration per applicant group than US applicants – less wear and tear!
National Association of Student Financial Aid Administrators
The Modified IM Methodology
Slide 22
Modified IM Methodology
• Uses IM as the Base
• Modifies IPA and ERA using GDP Per Capita Coefficient
• Does Not Allow FICA or State Taxes (All Taxes are Included as Federal Taxes)
• Uses all Assets (Liquid and Real Estate)
• Allows Business Equity Adjustment
• Uses Home Value Cap
Slide 23
GDP per Capita
• Use of a Consistent Measure Globally
• Uses Gross Domestic Product Divided by Population
• Kept by the CIA as “Part of World Factbook” (http://www.cia.gov/cia/publications/factbook/)
• Determine Coefficient– percentage by Country as Compared to US
– Apply percentage to IPA and ERA for Use in Formula
Slide 24
Sample Countries and Coefficients
2.62%$1,100 West Bank208
100.00%$42,000 United States 5
73.57%$30,900 United Kingdom 20
25.48%$10,700 Russia 83
5.71%$2,400 Pakistan 170
24.05%$10,100 Mexico 86
12.62%$5,300 Lebanon 130
48.57%$20,400 Korea, South 51
2.86%$1,200 Kenya 202
73.10%$30,700 Japan 21
67.62%$28,400 Italy 30
53.10%$22,300 Israel 44
8.10%$3,400 India 152
54.29%$22,800 Greece 42
5.71%$2,400 Ghana 168
71.43%$30,000 France 24
24.05%$10,100 Costa Rica 85
15.00%$6,300 China 118
78.33%$32,900 Canada 16
21.43%$9,000 Bulgaria 89
20.00%$8,400 Brazil93
% of US GDP - per capita Country Rank
National Association of Student Financial Aid Administrators
Case Study Review
Slide 26
Case Studies
• 9 Cases Attempting to Represent each Continent:– China
– Greece– Lebanon– West Bank– Costa Rica– Bulgaria– Ghana
– Brazil
– Canada
• Analyzed Using Both Methods:– IM with Adjustments– Spreadsheet Method
• Mix of Low and High Income Analyses
• Some Consensus on Total Expenses, but Left to Individual Reader
Slide 27
Western vs. Eastern Europe• Greece
– 4/2– Total Income $140,892– Reported Tax $39,407– Allowed Expenses
$80,823– Coefficient 54.29%– Modified IPA $13,430– Modified ERA $12,753– Savings $15,000– Home $97,600– PC Spreadsheet
$19,371– PC Modified IM $20,603– Offer $7,500
• Bulgaria– 4/1– Total Income $4,889– Reported Tax $810– Allowed Expenses
$3,560– Coefficient 21.43%– Modified IPA $5,110– Modified ERA $4,698– Savings $2,200– Home $11,774– ORE $32,600– PC Spreadsheet $995– PC Modified IM $1,295– Offer $1,500
Slide 28
Central vs. South America• Brazil
– 5/1– Total Income $58,116– Reported Tax $900– Allowed Expenses $19,900– Coefficient 20.00%– Modified IPA $4,446– Modified ERA $4,088– Savings $78,500– Home $68,000– ORE $88,000– PC Spreadsheet $35,758
(w/ORE)– PC Spreadsheet $26,958
(no ORE)– PC Modified IM $16,447– Offer $25,500
• Costa Rica– 5/1– Total Income $53,000– Reported Tax $1,320– Allowed Expenses
$18,520– Coefficient 24.05%– Modified IPA $6,869– Modified ERA $6,314– Savings $20,500– Home $127,200– PC Spreadsheet $20,315– PC Modified IM $21,637– Offer $6,000
Slide 29
Asia vs. Africa• China
– 5/1– Total Income $10,527– Reported Tax $0– Allowed Expenses $7,952– Coefficient 15.00%– Modified IPA $4,293– Modified ERA $4,342– Savings $0– Home $9,262– PC Spreadsheet $1,328– PC Modified IM $1,173– Offer $4,000
• Ghana– 5/1– Total Income $41,356– Reported Tax $10,672– Allowed Expenses
$35,231– Coefficient 5.71%– Modified IPA $1,623– Modified ERA $1,502– Adj. Bus. $1,440– PC Spreadsheet $3,207– PC Modified IM $5,342– Offer $1,000
Slide 30
Middle East• Lebanon
– 5/1– Total Income $154,234– Reported Tax $27,971– Allowed Expenses
$98,571– Coefficient 12.62%– Modified IPA $3,721– Modified ERA $3,320– Savings $0– PC Spreadsheet $27,832– PC Modified IM $41,246– Offer $19,000
• West Bank– 5/1– Total Income $15,012– Reported Tax $715– Elem/Sec Tuition $6,000– Allowed Expenses
$13,294– Coefficient 2.62%– Modified IPA $859– Modified ERA $689– Savings $0– PC Spreadsheet $859– PC Modified IM $1,536– Offer $1000
Slide 31
A Special Case – Canada
• 4/2• Total Income $28,588• Reported Tax $218• Allowed Expenses $56,551 (Mortgage. $31,000)• Coefficient 78.33%• Modified IPA $19,647• Modified ERA $18,400• Savings $121,043• Home $347,988• PC Spreadsheet $2,505• PC Modified IM $6,264• Offer $8,600
Slide 32
Limitations to the Modified IM Methodology• Coefficient adjustments to allowances other than
IPA and ERA (example, income bands for final contribution).
• Countries with greater than 100% of USA GDP• More complex programming required.• Is the theory behind AESA and CESA
allowances still valid for this population?– If not, what allowance should be used?
• Number in college adjustment doesn’t consider lower cost of siblings in college in home country.
• How do these elements affect the case study results?
Slide 33
Pros and Cons
• Modified IM Method– Pros:
• Uses IM/FM as the Base; Easier to Program• Country Contextual• Vertical and Horizontal Equity
– Cons:• No Individual Context by Student• Not fully adjusted IM• GDP compares economies to U.S. but does not account for
realistic view of the cost of living for some countries.
National Association of Student Financial Aid Administrators
Discussion
request for spreadsheet with Rober Donaghey [email protected]