How EFC Affects College Financial Aid

When you're applying for financial aid, it's not just you and your financial situation that's being considered.  If you're a dependent student, which many undergraduates are, then your parents' finances will definitely come into play. Independent students can expect their entire family income and expenses to be considered when they apply for financial aid.

What is Expected Family Contribution?

Expected Family Contribution, or EFC, is an estimate of you and your family's ability to pay for your college education each year.  It measures a few things:

• You and your family's current financial well-being and strength.
• Estimate of the family funds that should be available to help you pay for college.
• Your eligibility for federal financial aid that is need-based.

Because many of your financial aid offerings hinge on this measurement, it's wise to know how EFC is calculated.

How is EFC Calculated for College Financial Aid?

The formula for calculating Expected Family Contribution was set in place by law to ensure that it is measured as fairly as possible and regulated carefully. The EFC formula called Federal Methodology is used by the government, however, when institutions do similar calculations to determine financial need, it's called Institutional Methodology.

There are actually 3 different formulas for the EFC:

• An EFC for dependent students.
• An EFC for independent students with a spouse and no dependents.
• An EFC for independents with a spouse and dependents.

The questions on the FAFSA are used to determine which of these 3 groups a student falls into. Before submitting your FAFSA you can get a good idea of which group you belong in with our guide on student dependency status. The FAFSA is also used to answer the questions that will help the government determine your EFC.  They do so using a number of criteria, including:

• You and your family's taxed income.
• You and your family's untaxed income.
• The assets your family has, such as money in savings accounts.
• Any benefits that your family receives like social security and unemployment benefits.
• The number of people in your household.
• The number of people in your household currently enrolled in college.

The calculation to determine financial need looks like this:

Cost of attendance - Expected Family Income = Financial Need

Your EFC will be represented numerically on your Student Aid Report which you'll receive after submitting the FAFSA.  Keep in mind that your EFC will vary slightly from school to school.

What College Financial Aid Offerings Will EFC Affect?

• Federal grants
• FFEL Stafford Loans that are subsidized
• Direct Stafford Loans that are subsidized
• Federal Perkins Loans
• Federal Work Study Programs
• Some state financial aid programs
• Some college/university financial aid programs
• Some local/community financial aid programs
• Some private or institutional organization financial aid programs

Though federal college financial aid programs are the only ones to require that EFC be used, many other programs use the EFC to qualify students as well, while others have their own formulas for measuring financial need that is based off of the EFC model. It is then that the Institutional Method of calculating financial need comes into play.
 

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