International Students Assessing Family Contribution

1
International Students -Assessing Family
Contribution
Arlina DeNardo, Lafayette College Michael
Fraher, Vassar College Caesar Storlazzi, Yale
University
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 EFCs 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
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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-20s, 1042s tax information,
  federal withholding tax calculation etc.?

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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

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Budget Construction

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

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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

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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

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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?

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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?

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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

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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?

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International Student Need AnalysisISNA The
Spreadsheet Method
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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

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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.

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

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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.
19
Japan Family of Three I D imputed at 4 of
asset value Utilized alternate calculation for
industrialized nation
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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!

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The Modified IM Methodology
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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

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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

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Sample Countries and Coefficients
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Case Study Review
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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

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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

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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

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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

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Middle East

• 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

• 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

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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

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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 doesnt consider
  lower cost of siblings in college in home
  country.
• How do these elements affect the case study
  results?

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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.

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Discussionrequest for spreadsheet with Rober
Donaghey analysismifraher_at_vassar.edu