International Students -Assessing Family Contribution: International Students - Assessing Family Contribution Arlina DeNardo, Lafayette College Michael Fraher, Vassar College Caesar Storlazzi, Yale University


Discussion Framework: 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


Policy Issues: 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.?


Policy Issues Related to Available Resources: 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


Budget Construction: Budget Construction Most likely driven by institutional budgets $ Domestic vs International Budgets? Expenses unique to internationals: vacation periods, health insurance, visa, etc.


Developing Travel Allowances: 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


Application Documents: 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


Currency Conversion Issues: Currency Conversion Issues Is 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 rates Should currency restrictions affect our analysis of family financial data?


Formula Issues in Analyzing Financial Data from International Families?: 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 assets horizontal 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?


Realities of Analyzing Financial Data from International Families?: 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


One for all?: 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?


International Student Need AnalysisISNA The Spreadsheet Method: International Student Need Analysis ISNA The Spreadsheet Method


Spreadsheet Methodology: 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


ISNA Overview: 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.


Converting Earned Income from Foreign Tax Return: Converting Earned Income from Foreign Tax Return http://www.oanda.com/convert/classic


Converting Foreign Income Tax: Converting Foreign Income Tax


ISNA Overview: 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


Slide18: 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.


Slide19: Japan Family of Three I & D imputed at 4% of asset value Utilized alternate calculation for industrialized nation


Critique of ISNA: 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!


The Modified IM Methodology: The Modified IM Methodology


Modified IM Methodology: 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


GDP per Capita: 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


Sample Countries and Coefficients: Sample Countries and Coefficients


Case Study Review: Case Study Review


Case Studies: 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


Western vs. Eastern Europe: 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


Central vs. South America: 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


Asia vs. Africa: 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


Middle East: 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


A Special Case – Canada: 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


Limitations to the Modified IM Methodology : 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?


Pros and Cons: 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.


Discussionrequest for spreadsheet with Rober Donaghey analysismifraher@vassar.edu: Discussion request for spreadsheet with Rober Donaghey analysis mifraher@vassar.edu