mini graduation cap on rolled up cashWhen identifying affordable colleges, your first step should be to determine your Expected Family Contribution.      

An EFC is a dollar amount that the widely-used federal financial aid formula says your family should be able to pay for one year of college.

When deciding how much financial aid to award a student, colleges pay attention to the applicant’s EFC.

For instance, let’s assume that a household’s EFC is $25,000.

A college would expect a student’s family to pay at least $25,000 towards one year of schooling.

Income cutoffs

Parents often wonder if there is a maximum income above which families are no longer eligible for financial aid. There is, in fact, no income cap. While income is an important factor in determining aid eligibility, there are a myriad of other factors, including the cost of individual colleges and the generosity of their financial aid programs.

In the absence of income limits, calculating your EFC provides a handy shortcut to determining if your student will qualify for financial aid or should instead concentrate on schools that award merit scholarships.

Estimating financial aid eligibility with your EFC.

Determining if a student will be eligible for need-based aid requires subtracting your EFC from a school’s cost of attendance.

Example No.  1:

Cost of public university:          $23,000

Minus EFC:                               $25,000

Demonstrated financial need:  $0

The family’s EFC exceeds the price of the state school so the student wouldn’t qualify for need-based aid.

Example No. 2:

Cost of Private College:            $60,000

Minus EFC:                               $25,000

Demonstrated financial need:  $35,000

In this case, the student would be eligible for up to $35,000 in need-based aid from the private college because the price of the institution far exceeds the family’s EFC.

A wide range of EFCs exists.

In general, the wealthier the family, the higher the EFC.  

The lowest possible EFC is $0.

An EFC of zero means that the financial aid formula has determined that the family cannot afford to pay anything towards college. Families with adjusted gross incomes (AGI) of $25,000 or less have an automatic EFC of $0.

The EFC for the average American household with an AGI of $55,000 will often range from $3,000 to $4,000. These families have significant financial aid needs.

EFC: Affluent family example

There is no upper limit on the EFC. Some very wealthy families will have EFCs that exceed the cost of an expensive private university.

Here is an example of an EFC that a higher-income couple with two children (only one in college) could generate. To obtain this EFC I used the following assumptions:

  • Parents’ adjusted gross income: $175,000

  • Home equity: $200,000

  • Non-retirement assets (including 529 college accounts): $150,000

  • Parents’ income taxes: $30,000

  • Student’s adjusted gross income: $2,000

  • Student’s assets: $750

*I didn’t use retirement assets in this calculation because the EFC formulas exclude them.

Result: The EFC for this household was roughly $42,000.

Obtaining Your EFC

You can determine your EFC by using the free online

EFC calculator on the College Board’s website.

To use the calculator, you will need your federal income tax return and nonretirement investment account statements.

EFC Strategies

Once you know your EFC, you will be equipped to target your college search to schools that will discount the price for your family.

If you have a low EFC, you should look for colleges that provide generous need-based aid. Families with higher EFCs should search for schools that give generous merit scholarships. 

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