Paying for College

Here's How Colleges Calculate Your SAI

We break down the SAI formula, including how to determine both your Parent Contribution and Student Contribution based on income and assets.
A college administrator calculating an SAI

If you have a high school student applying to college soon, it won't be long before you learn about the Student Aid Index (SAI) (formerly known as EFC). Probably the most prevalent acronym in the world of college financial aid, the SAI is a number personalized to your family and used by colleges to determine your eligibility for financial aid. The SAI is calculated by inputting your family's finances into a standard formula set by Congress.

Your SAI is intended to indicate your family's financial strength. Colleges use it when determining how much financial aid to offer each student. It's often higher than some families think it should be, but in some cases, it can end up lower. The SAI calculation determines both a parent contribution and a student contribution toward college costs, and then combines them.

The formula intends to determine your total financial resources, and then subtract the minimum amount of money your family needs for living expenses each year. It assumes the remaining amount can, in part, be used for college. Here's a simplified explanation of how it works:

SAI Parent Contribution

  1. Add up total annual parent income. Use any taxable and nontaxable income that you find on your federal tax return
  2. Subtract the amount of federal income tax paid
  3. Subtract an Income Protection Allowance (IPA). Here's the real surprise in the formula. The IPA is intended to represent the amount a family needs from its income for necessities (think housing and food). It's based on the size of your family. But for a family of four, it's only $35,870 for the current year. You likely spend more than that on living, right?
  4. Subtract an Employment Expense Allowance. This is only for households where all parents are working, and equals 35% of earned income or $4,000, whichever is less. It's intended to cover those expenses that all working parents have, such as buying lunch and commuting.

The number you've reached based on the calculations above is called your

Parents' Available Income (AI)

and is intended to represent how much of your income can be considered for college costs. Set that number aside for a moment.

  1. Add up total parent assets. Include all cash, bank accounts, net investments, net real estate, and net business/farm value, but don't include your primary home or your retirement accounts. Add in any child support received for the last complete calendar year.
  2. Subtract an Asset Protection Allowance. This number is intended to protect an amount of your assets that you have saved for emergencies.
  3. Multiply your current total by 12%. This calculation ends up protecting most of your remaining assets for other needs, which is good news.

The number you've reached here is your

Parent Contribution from Assets (PCA).

  1. Add Parents' Available Income to the Parent Contribution from Assets to determine the Parent Adjusted Available Income (PAAI).
  2. Insert your PAAI into a complicated table. The calculations within the table change as your PAAI gets larger. To give you an idea of the table outcome, if your PAAI is $100,000, your calculated number is $39,997.

This resulting number is your Parent Contribution. Set that number aside.

SAI Student Contribution

  1. Add up total annual student income. Use any taxable and nontaxable income that you find on your federal tax return. If the student didn't pay taxes, assume the income is $0
  2. Subtract the amount of federal income tax paid
  3. Subtract an Income Protection Allowance (IPA). This number increases a bit each year. Right now it's $9,410, which is a pretty generous figure. Many students don't have income that exceeds this amount.
  4. Determine Student's Contribution from Income. Take 50% of your current total to determine this figure.

Set that number aside for a moment.

  1. Add up total student assets. Include all cash, bank accounts, and net investments
  2. Determine Student's Contribution from Assets. Take 20% of your current asset total
  3. Determine Total Student Contribution. Add Student's Contribution from Income to Student's Contribution from Assets. The resulting sum is your Student Contribution.

Ready to calculation your SAI? Add your Parent Contribution to your Student Contribution. The resulting sum is your family's SAI. Though it doesn't represent the amount that you'll pay for college costs, colleges will assume you can contribute this amount when they determine how much financial aid to offer your family.

Though Federal Student Aid provides worksheets that allow you to hand calculate your own SAI, you can much more easily use our SAI Calculator to reach the same result. If you'd like to talk with us once you have your estimated SAI, give us a call. We're happy to walk through the numbers and answer any questions. You can reach us at (800) 449-MEFA (6332).