Expected Family Contribution (EFC)
Every school uses the same formula to determine how much federal financial aid to award to students: The cost of education minus the Expected Family Contribution. The EFC is the amount a family is expected to contribute before the student is considered for federal funding. The EFC number is calculated by taking into account student and parent income and assets, not including the value of the family home.
For independent students, only the student's income and assets are considered – as well as those of his / her spouse, if applicable. To qualify as an independent student, you must meet at least one of the following criteria:
- Be at least 24 years old
- Be an orphan
- Have a dependent other than a spouse
- Be a graduate or professional student
- Be a veteran of the Armed Forces
- Be married
- Be a ward of the court
Financial Aid EFC Formula
Refer to the following EFC calculator formula, as an indicator of the assistance you’ll be eligible to receive. The determination of financial need at any institution depends on two numbers:
> Cost Of Attendance (COA) for your school, also called the school's budget. The school's COA will include tuition, fees, room and board, books and supplies, travel, and personal and incidental expenses. In many cases, there is a standard fixed budget amount for some of these categories. The budget amount for travel may vary depending on the student's home state. Similarly, room and board expenses may be reduced and travel expenses increased for commuter students.
> Expected Family Contribution (EFC) – the amount of money you or your family is expected to contribute to your education. The EFC number is the sum of the student contribution and the parent contribution.
- Student Contribution. The calculation of the expected student contribution is generally 35 percent of the student's assets and 50 percent of the student's prior year earnings. (The federal calculation is 50 percent of the net earnings above $2,200 and 35 percent of the student's reported assets.)
- Parent Contribution. The parent contribution depends on the number of parents with earned income, their income and assets, the age of the older parent, the family size, and the number of family members enrolled in post-secondary education. Income is both the adjusted gross income from the tax return and non-taxable income such as social security benefits and child support. The Higher Education Amendments of 1992 eliminated home equity from the Expected Family Contribution, but many private colleges and universities still use a parent's home equity as a way of rationing their school's own grant and scholarship funds. Money set aside for retirement in a pension plan such as a 401K, IRA, Keogh, or 403b is usually not counted as an asset. However, the funds contributed to a tax-deferred retirement program during the previous year must be included on the FAFSA as other untaxed income. In addition, an asset protection allowance shelters a portion of the assets from the calculation of the parent contribution. The asset protection allowance increases with the age of the parents to allow for emergencies and retirement needs.
Your financial need is the difference between the COA and EFC, and the amount of financial aid for which you are eligible will be based on this number.