EFC: Is That What You’ll Actually Pay?

Flickr user TeroVesalainen

According to a few recent studies, students are more worried than ever about the hefty price tag stuck on a four-year education. Nearly 9 in 10 students described financial aid as either “extremely” or “very” necessary for them to make it through college, and about 70% of students said they feel stress about their personal finances. While nothing can take this burden away entirely, there are several federal programs in place to help working families afford college. The Free Application for Federal Student Aid (FAFSA) program is perhaps the best known, taking a multitude of factors into account, including the Expected Family Contribution, or EFC. The EFC can be a complex subject at first, but once broken down, it’s fairly straightforward.

In a nutshell, the EFC is a kind of rating system that determines what kind of financial aid you can receive. The formula for the EFC is available on StudentAid.ed.gov, and the system used to arrive at the final number is relatively easy to understand. Basically, an EFC is a number arrived at through combing through the financial information provided on a FAFSA form, including income, tax brackets, and so on. This number, once obtained, is subtracted from a student’s individual total cost of attendance at a four-year institution. The end result is a number that shows how much financial aid you will receive from FAFSA.

While a majority of students will have an average EFC number, there are certain direct exceptions to this rule. Students who come from homes with a yearly income below the federal poverty line for a family of four (~$25,000) will not have an EFC. Additionally, students whose parents are not required to pay income taxes, or children of dislocated workers, will not have an EFC number. There is a large amount of overlap between these categories, but the end result is the same; an EFC of zero.

The EFC calculation form, available online, asks for a myriad of numbers related to you or your family’s financial status, such as the income of both parents (if applicable), your state tax rate, combined net worth, untaxed income, and the value of investment holdings. Additionally, you’ll be asked to discern what’s known as “Employment Expense Allowance,” which is basically a number calculated off your parents’ salaries. For families with two working parents, they will arrive at a flat rate of $4,000 or 35% of the smaller salary. If the latter number is smaller than $4,000, that’s the number to put on the form.

This all can be a bit overwhelming, but once you put time into the form and figuring out your EFC, it’s clear that the process will ultimately help. However, some families are surprised when they find out their EFC and worry that they will not receive aid. Never fear, though; there’s always a solution. First of all, you’ll most likely receive some form of aid unless your EFC is higher than the cost of tuition (which is relatively rare). Even if this is the case, and you still are worried about the cost of school, there are a myriad of other routes to go down that may provide more relief, like Stafford Loans or other local private loans. Ultimately, it’s important to remember that calculating your EFC is a stepping stone in a process that will eventually help you and your bank account.

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