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What is the EFC?

One of the most important figures in the financial aid process for you and your family is the Expected Family Contribution or EFC. This figure, which takes into account your family's financial situation, is your family's expected contribution toward paying for college.

How is the EFC Calculated?

There are two methods that can be used to determine a family's EFC. If you apply only to public institutions, or to other institutions using only the FAFSA to determine aid eligibility (by far the majority of colleges), the Federal Methodology (FM) calculation will be used to determine how much aid you'll be eligible for. If you also apply to, or exclusively apply to, institutions using Institutional Methodology (IM), a different EFC will be calculated to determine your aid eligibility at those colleges.

Federal Methodology (FM)

• This is the method the federal government uses to determine financial need.
• Your EFC is calculated on the basis of the information submitted on the FAFSA.
• FM considers the following items in its need analysis formula:
  • Custodial parents' (including stepparents') wages and all other income for the calendar year prior to the student's enrollment in college
  • The student's wages and all other income for the calendar year preceding enrollment
• FM makes allowances for:
  • The number of other children in college at the same time
  • Retirement assets: a portion of retirement assets are protected.
  • Business or farm assets: a significant portion of assets linked to farms or businesses are protected.
  • Students earning up to $2,250 from income and assets are not expected to make any contribution from income.
  • If parents' taxable income is less than $50,000 and parents and students file or are eligible to file IRS 1040A or 1040EZ forms, or are not required to file at all, no assets are included in the FM calculation.
  • If the parents have a taxable income of $12,000 or less and are eligible to file IRS 1040A or 1040EZ forms, or are not required to file at all, the EFC is automatically calculated to be zero.

Institutional Methodology (IM)

• This methodology is used by the colleges that subscribe to the PROFILE service of the College Board, colleges that require the PROFILE in addition to college-specific financial aid forms, and colleges that require only college-specific aid forms.
• Your EFC is calculated on the basis of the information submitted on the PROFILE and any college-specific forms.
• IM considers the following items in its need analysis formula:
  • Custodial parents' (including stepparents') wages and all other income for the calendar year prior to the student's enrollment in college
  • Savings and investments including education IRAs and prepaid tuition plans
  • Home equity, other real estate, and business or farm assets
  • The student's wages and all other income for the calendar year preceding enrollment (the student is expected to contribute at least $1,150 per year regardless of income and assets)
• IM makes allowances for:
  • The number of other children in college at the same time
  • In some cases, any parent enrolled in college at the same time (the colleges may consider parent enrollment on a case-by-case basis).
  • Any younger children at home. IM allows for income protection if there are younger children in the family, since their education will need to be saved for while the older child is in college.
  • Major medical expenses
  • (Sometimes) elementary or secondary private school tuition payments
  • Business or farm assets: a significant portion of assets linked to farms or businesses are protected.

NOTE: Some colleges will also require information and consider income and assets of the noncustodial parent in cases of divorce.