Extended foster care payments are typically excluded from a student’s income and from student’s Expected Family Contribution (EFC)

August 15, 2013

Extended foster care payments are generally not reported on the Free Application for Federal Student Aid (FAFSA). Likewise, the payments are not included as Estimated Financial Assistance (EFA).

Extended foster care payments are payments made directly to students who have not yet reached the age of 21. This extension of foster care payments beyond the traditional foster care payments made to foster parents, group homes, etc. while a child is below the age of 18 was enacted into law in 2008 with the Fostering Connections to Success and Increasing Adoptions Act of 2008 (Public Law 11—351). This law amended Title IV – E of the Social Security Act. The law change allows individuals receiving the benefit of foster care to continue receiving such benefit beyond age 18 up to the age of 21. However, the individual does have to meet certain criteria such as being either enrolled in high school, postsecondary education or vocational school, a job training program, or working at least 80 hours per month. Each State may have additional criteria applicable to this provision.

The distinguishing factor of whether the extended foster care payments are included on the FAFSA or not is whether the payments are made under Title IV-E of the Social Security Act. If the payments are paid under this provision of the Social Security Act, then the extended foster care payments are excluded from income and the requirement to include them on the FAFSA. This is because of a provision of the Higher Education Act of 1965 (HEA), as amended. That provision, HEA section 480(e)(5), specifically excludes payments made and services provided under Part E of Title IV of the Social Security Act from being included in the calculation of the EFC. However, if the funds are paid under another authority, e.g., a State foster youth program, the payments would have to be reported on the FAFSA as untaxed income.

To understand the treatment of the extended foster care payments, we have to keep in mind that resources available to a student are either income or Estimated Financial Assistance (EFA), but they cannot be both. As indicated above, the extended foster care payments are either “excludable income” or “untaxed income”, depending upon the source of the benefit. In either case, it is considered income. As such, the extended foster care payment would not be able to be considered EFA.

The outcome of the above discussion would indicate that it is rare that a student would see extended foster care payments impact Federal Student Aid (FSA) eligibility. Again, the exception would be when the payments are paid under the authority of a State or other authority besides the authority of Part E of Title IV of the Social Security Act. In that case, they would be counted as untaxed income on the FAFSA. Thus, it would be helpful for financial aid administrators to become aware of how extended foster care payments work in their own State. That is, how are students who receive these benefits having their payments funded—from the State, or from the authority of the Social Security Act?


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