Expected Family Contribution
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Expected Family Contribution (EFC) is a term used in the college financial aid process in the United States to determine an applicant's eligibility for need-based federal student aid, and in many cases, state and institutional (college) aid. It is located on the Student Aid Report and Institutional Student Information Record sent after the Free Application for Federal Student Aid (FAFSA) is processed. It is an estimate of the parents' and/or student's ability to contribute to post-secondary education expenses. If the FAFSA has not yet been filed, there are a number of calculators on the Web (see links below) that will give a good approximation of a family's EFC.
Need-based aid has to be reapplied for each year; that is, a new FAFSA must be filed every year, the EFC is recalculated, and the financial aid possibly adjusted.
The federal government does not distribute aid directly to the student or the student's family; it goes through the college. Colleges use the student's federal student aid eligibility and combine it with state financial aid (if any) and their own aid to create a financial aid package (award), which is sent to the student. Generally speaking, the lower the EFC the higher the financial aid award from the college will be. Zero is the lowest EFC number (the family cannot afford to pay anything) and 99,999 is the highest. Dependent students qualify for an automatic zero EFC if their family’s income is below $23,000 for the 2012-2013 year and they either received funding from any of the Federal Benefits programs (SSI, SNAP (formerly known as the Food Stamp program), WIC, or Free/Reduced Price Lunch) or filed 1040A, 1040EZ, or were not required to fill out a tax return, or parent is a dislocated worker.
Some relatively wealthy colleges and universities use the CSS Profile, or have their own form, to calculate their own (private) EFC, which they use in distributing the college's own aid. A major difference between the FAFSA and the CSS Profile is that the CSS Profile takes home equity (value of your house) into account when determining ability to pay, while the FAFSA does not.
The EFC is subtracted from the cost of attendance (COA) of the college or university to determine a student's financial Need. If COA > EFC, then a student has financial Need. Colleges attempt, but often are unable, to see that the student receives all the aid she or he needs.
Items that lower a student's EFC:
- Additional family members supported by the head of the household (e.g., siblings or grandparents who are living at home)
- Additional family members in college. (The EFC is split among the students in college.)
- Lower income (especially student income)
- Fewer assets (especially student assets)
Colleges or universities have the legal authority to lower the EFC if there are unusual circumstances, usually brought to the financial aid office's attention as the result of an appeal of a financial aid award. These circumstances include:
- Loss of Employment
- Loss of Child Support, Alimony, etc.
- Separation or Divorce
- Death of Parent or Spouse
- Medical and Dental Expenses not covered by insurance
- Income was increased the applicable year because of a one-time lump sum that will most likely not occur again.
Parents often want to know how their EFC has been calculated. The formula is complex, changes every year, depends on three tables (dependent students, independent students without dependents other than a spouse, and independent students with dependents other than a spouse), and is published in the Federal Register. An Education Department document explaining how the EFC is determined fills 36 pages. Briefly, it looks at family size, allows for living expenses, and at family and student savings. If the student is a dependent, which is usually the case with a teenage college freshman, the student's savings and income (if any) are considered highly available to pay for college. A student with a college savings fund in his or her name will have a higher EFC (if not qualifying for an automatic zero), and will usually receive less need-based aid.
- The equity in the family's principal home. (Second homes are counted.)
- Parental retirement funds, such as 401ks.
- Consumer debt, such as car and credit card loans.
Residual family payment
A common misconception is that the EFC is a statement of what the family actually will pay. This is usually not the case, and many families have to pay more, sometimes much more, than the EFC. In an ideal world, in which all colleges had enough financial aid to meet all students' financial Need, the EFC would be it. In reality, only wealthy, selective colleges (the hardest to get admitted to) have the resources to cover every student's Need. When the college cannot cover all of the Need, the remainder must come out of the parents' resources.
In a few cases, in which a student qualifies for merit-based (rather than need-based) financial aid, the family pays less than the EFC.
Independent and dependent students
Students who are unmarried and younger than 24 are categorized as Dependent Students, and the parents' income and assets are used in determining the EFC. Even if the parents have no intention of helping pay the student's college expenses, which legally they are not required to do, the student remains dependent and the parents' income and assets are used in determining the EFC and through it, the student's financial aid award. Put differently, if the parents are able but unwilling to help pay for the student's college, financial aid will not be increased because of it. This was determined by the United States Congress.
In exceptional cases, such as parental child abuse and parental communication with the child being prohibited by a court, the college financial aid office can change a student's status from Dependent to Independent.
Legal strategies to lower the EFC
- The most important is moving assets out of the student's name into the parents' name. Due to a legal change which took effect in 2009, college assets should not be in the name of a grandparent or other relative.
- For other legal means, see http://finaid.org's long discussion on "Maximizing Your Financial Aid Eligibility".
- Unofficial EFC Calculator
- College Board EFC Calculator
- Federal Student Aid
- What's the Expected Family Contribution (EFC)?
- Know Your Expected Family Contribution
- Finaid.org, a good independent Web site on college financial aid.
- U.S. Department of Education, Federal Student Aid. Introduction to Federal Student Aid Course. Retrieved from: http://www2.ed.gov/offices/OSFAP/training/fundamentals/module.htm#m-1001-0
- http://ifap.ed.gov/efcformulaguide/attachments/111609EFCFormulaGuide20102011.pdf, consulted May 9, 2015.
- Anne Turgeson, "Grandma's Help Hurts College Aid", Wall Street Journal, July 28, 2012, http://www.wsj.com/articles/SB10000872396390444025204577544910953329298, retrieved 4/27/2015.
- http://www.finaid.org/fafsa/maximize.phtml, retrieved 6/6/2015.