The federal government provides many financial aid programs for people in need. These programs aim to help students to realize their educational goals without worrying about finances. Yet, to qualify for these programs, you need to prove an exceptional need for financial aid. The need is determined by two main elements- Expected Family Contribution (EFC) and Cost of Attendance (COA).
This guide focuses explicitly on EFC and its impact on your desired financial aid programs. The expected contribution of the family indicates your parents’ financial performance strength. Based on this information, the officials calculate how much aid you qualify for.
We explain EFC in detail, but it is still advisable to use tools to determine contribution level before applying for federal programs.
What is Expected Family Contribution?
Expected Family Contribution is a factor that indicates a family’s financial performance and strength. It is necessary to know the family’s taxable income, as well as assets and social benefits, to calculate this factor. Besides, the size of the family also affects the estimated Expected Family Contribution. People in need of financial aid need to submit detailed information on these elements in their FAFSAs- Free Application for Federal Student Aid.
Hypothetically, this factor gives some information to the Education Department on the ability of a family’s finances to pay for the student’s education. However, several misconceptions exist. Some people think that the contribution amount shows how much the family should pay for education.
Yet, contribution level does not determine such information. Besides, contribution does not indicate the amount of financial aid you might receive. Lastly, some private and public schools use another institutional methodology that can generate different results than FAFSA Expected Family Contribution.
Why is EFC Important?
If you plan to get federal financial aid for your education, it is necessary to know your Expected Family Contribution. This factor determines how much aid you will receive. Once the contribution amount is calculated, the school officials will deduct this number from the total cost of attendance.
The remaining amount usually indicates how much financial aid you need to get an education. The financial assistance can be a Pell Grant, Direct Loans, work-study opportunities, Supplemental Educational Opportunity Grants, etc.
Sure, some universities, such as Brown University or the University of Pennsylvania, have the necessary funds to pay for the entire cost of education of the students. However, others might lack funds. In such cases, you need to ensure that you receive financial aid to afford your education.
EFC and School Choice
Experts advise calculating Expected Family Contribution before choosing a school. If the contribution level is high, it can be a good idea to apply to schools that provide merit-based scholarships. Notably, this option will be suitable for academically competitive students. However, if the contribution is low, the financial need will be high. Hence, applying to schools that provide the highest levels of need-based aid can be a better option.
Additionally, before applying for aid, it can be a good idea to change your EFC. For example, if you want to get need-based assistance, you should not artificially increase the EFC. Let’s say you have credit card debt or auto loans. Such debt amounts do not impact the contribution level. Hence, you can use your assets, such as savings, to pay off your debt. In this way, your assets decrease, and your contribution lowers.
How is EFC Calculated?
Expected Family Contribution consists of several elements. As mentioned before, taxed and untaxed earnings and some assets are parts of this factor. Besides parents’ assets, students’ income and assets can affect contribution level. In addition, the contribution factor is adjusted considering tax allowances and income that should not be a part of contribution for education.
All this information is provided through FAFSA – Free Application for Federal Student Aid. In addition, applicants of financial aid should submit necessary details regarding the number of children, household size, unemployment or Social Security benefits, pre and after-tax income, etc. Based on these elements, the officials calculate Expected Family Contribution.
Each element has its impact, but it is straightforward to understand. For example, your EFC will be small if your family size is large and your siblings also go to college. Keep in mind that some private and public schools use their methods to calculate contribution rather than FAFSA Expected Family Contribution.
Every year, you need to provide updated information regarding all elements of this factor to get a new contribution number. For example, your family size can grow, or assets might decrease, which will significantly impact the estimated Expected Family Contribution.
Although the factor involves “Family,” you as a student also have a massive impact on contribution. As mentioned, a student’s income and assets can also be involved in the calculation. However, besides that, there exist several elements which change the estimated Expected Family Contribution level.
For example, whether you study half-time or part-time will impact the contribution level—moreover, your year of study matters. Usually, federal aid has higher limits for graduate students rather than undergraduate ones. If you have your dependents, such as a child, it will change the result, too.
Which Assets are Involved?
Expected Family Contribution highly depends on students’ and parents’ assets. However, which assets are involved in the calculation depends on the method. Usually, the FAFSA Expected Family Contribution method is employed. Yet, private schools and some public ones can use another technique- CSS Profile.
If your school utilizes the FAFSA method, it considers different types of assets, such as:
- Cash, Savings, Checking Accounts
- Mutual Fund, Money Market Fund, Stocks, Bonds
- Family Business with more than 100 full-time employee
- Investment Farm
- Real estate excluding primary residence etc.
However, the CSS Profile will be different. For example, this method is mainly based on a primary residence as an asset. Besides, small businesses will be involved. With FAFSA, only 529 plans of students and parents are considered. On the contrary, CSS considers 529 plans of others, including aunts, uncles, and grandparents.
There also exist some financial elements that do not have any impact on the FAFSA EFC method. For instance, auto and private loans, credit card debt, retirement accounts, or pensions do not matter.
Example Financial Aid Calculation
As mentioned, Expected Family Contribution does not show much a family needs to pay for education or how much financial aid you will get. Instead, it indicates your family’s financial strength. Later, it is used to calculate how much assistance you need.
Let’s imagine your school requires $50,000, which is the cost of attendance. Your EFC is $10,000. Then your financial need will equal the difference, which is $40,000.
Financial Need= Cost of Education – Expected Family Contribution
$40,000= $50,000- $10,000
This calculation shows that if your family’s contribution is high, you will be eligible for less financial need. Such cases happen when your family’s income is high or there exist lots of assets. On the other hand, if the contribution is low due to low income, several studying children, etc., you will qualify for higher federal financial aid.
However, qualification does not guarantee that you will get that amount of financial aid. Even if your financial need is substantial, you can receive way less. Such variance happens because of the availability of school funds or government budgets. Hence, do not expect that you will get what the equation indicates.
What does Cost of Attendance Include?
Two factors determine financial aid qualification; Expected Family Contribution and Cost of Attendance. We have already discussed what your EFC might involve. In this section, we will focus on the Cost of Attendance.
Cost of Attendance indicates the cost of your education. Usually, 2-year or 4-year schools estimate cost per year. Others might calculate it for a different length of the period rather than a year. Different types of expenses will be parts of these costs. For example, tuition and relevant fees are essential elements.
Besides, schools might consider the accommodation cost, expenses for books, supplies, equipment, etc. If you have children or other dependents, allowance can be granted. Additionally, disability or education abroad costs can be considered.
Sources for EFC Calculation
You might wonder how to calculate Expected Family Contribution? There are several ways for you to determine EFC or at least get a general idea about this factor so that it does not turn out to be a surprise.
First, you can use a free tool on the Student aid platform. The Education Department provides this tool. When you input necessary information, it generates a rough estimation of contribution. Besides, you can also find several pages for EFC calculation, which usually belong to universities or student loan experts.
Lastly, the Education Department also provides a detailed handbook so that you get highly familiar with the EFC calculation. The guide involves an expected family contribution chart regarding tax allowances, net worth adjustment, etc.
Estimating Financial Aid with a Free Tool
As mentioned, one of the ways of estimating EFC and financial aid is the free tool on the Student Aid website. This tool is called FAFSA4caster. It roughly estimates the federal aid you might qualify for, but it does not send the report to the Education Department or the universities.
To fill this information, both student and parent-related information are necessary. It gives the most accurate information when used close to the start of the academic year.
Once you submit income, family size, asset, etc., details, the tool will generate financial aid you might qualify for. Different types of aids, including Pell Grants, Work-study programs, or loans, require Expected Family Contribution details.
Steps of FAFSA4Caster Tool
This tool aims to help people in need get informed about their EFC and financial aid qualifications. Hence, it is relatively straightforward. In a few steps, you can get the necessary information.
First, you need to gather your documents. For example, tax returns, bank account details, investment papers, etc., are required. However, information regarding your primary residence will not be required.
Next, use the link for estimation for federal aid. It takes around 10 minutes to fill in all required details. Besides, you can use this tool as many times as you wish. It is advisable to utilize the tool several times as your qualifications get updated.
Although you will get some information about Expected Family Contribution and eligible financial aid, there is no guarantee that the results are highly accurate. The contribution level and support can change when you file the FAFSA.
You will be asked about your citizenship in the early stages of the process. If you have U.S citizenship, the process is simple. However, further documentation and details can be necessary for non-citizens with qualifying documentation, such as green cardholders.
The following section requires answers to dependency questions. Dependency matters because independent students get more aid than dependent ones. Dependent students are those older than 24, married, or studying for graduate/professional degrees. Hence, questions like your age, marital status, and type of education will pop up.
Other types of questions revolve around the household, such as family size, number of studying siblings, spouses who study, etc. Following this, you will be required to submit information regarding your income level and assets. Both parents’ and students’ assets and earnings are substantial.
What Level of EFC is Better?
Generally speaking, there exists no level of EFC, which is desirable in all cases. However, the impact of EFC will change depending on your total cost of education or whether you apply to a public or private college. You can also use EFC as a base for your financial aid determination. Go to your officer of financial assistance in school and ask about your financial aid options. If you have not chosen a school yet, it is better to visit different schools and get familiar with your need-based aid qualification.
In case you are new to financial aid and visiting an officer of the aid advisor is intimidating, you can always ask your peers, such as student ambassadors or the student support office, for more information.
What are Need-based Financial Aid Programs?
As mentioned, Expected Family Contribution is essential for need-based financial aid programs. The need for financial aid is estimated by deducting EFC from the Cost of Attendance. But what are these programs?
EFC gains more importance if you apply one of the below programs:
- Pell Grant
- Supplemental Educational Opportunity Grant
- Direct Loans
1. Pell grant
A Pell grant is a type of scholarship granted to undergraduate students who have high financial needs. These students should not have earned a degree yet. Different from loans, students do not need to return this grant. Currently, the maximum grant award is around $6,500. However, this amount changes every year. The grant amount you qualify for will depend on your Expected Family Contribution, Cost of Attendance, half or full-time program, etc.
2. Federal Supplemental Educational Opportunity Grant
Another grant program for undergraduate students is Federal Supplemental Educational Opportunity. Different from the Pell grant, the reward amount is between $100 and $4,000. Similarly, the grant received highly depends on EFC and financial needs. If you can showcase exceptional needs, then you can be eligible. For application, you need to fill out the FAFSA form.
3. Direct Loans
Grants are like gifts. You do not need to return them. However, if you get student loans, you have to repay them.
The Education Department distributes Direct loans to students to help them get their dream education. It has two categories; subsidized and unsubsidized loans. Subsidized loans are need-based and are for undergraduate students. As the financial need is essential, your Expected Family Contribution will play a huge role. Meanwhile, unsubsidized loans are not based on exceptional needs.
4. Federal Work-Study Options
Students can also work part-time to generate some money. They can use the funds for their educational expenses. Some schools provide opportunities to students within the campus to work hourly. Alternatively, they can partner with different companies so that students work in their fields of study.
Your qualification for financial aid highly depends on Expected Family Contribution. This factor does not show how much you will pay for college or how much assistance you will receive. Instead, it indicates the financial strength of your family. If the contribution level is high, you might qualify for a lower aid amount. On the other hand, if the contribution is low, you can be eligible for higher financial aid benefits. This guide also discussed the elements involved in EFC calculation. You can also use the Education Department’s tool on Student Aid to get a rough estimation of financial aid you might qualify for.