It pays to know how the system works, especially when it comes to college funding solutions. So, you’ve filled out your FAFSA and maybe you’re wondering how a financial aid administrator will determine your if you are legible for financial aid based on the Expected Family Contribution. Learning how would help you better understand your options for financial aid and this is where turning to a financial advisor like John McDonough of The Studemont Group comes in.
What is the Expected Family Contribution (EFC)?
The EFC is a number that college financial aid administrators use find out if you are eligible to receive financial aid. It helps them determine how much would be given to you in order to attend school. The data used for calculating the EFC comes from the information you put in your FAFSA. Certain formulas are then used to calculate your parents’ income and assets added to your income and assets at varying percentages. The result of these is the expected family contribution which is how much the family would need to produce for a year in college. The difference between the EFC and the cost for college will determine how much aid you are entitled to.
Law dictates that the EFC should be calculated using three formulas, each for different situations as per the Higher Education Act of 1965. Using these formulas, your family’s income, assets, benefits, and number of members attending college would be considered. The three formulas are: A) for dependent students, B) for independent students without dependents other than spouse, and C) for independent students with dependents other than spouse.
Determining Dependency Status
Before you can use one of these three formulas, you should first determine what your dependency status is as defined by the U.S. Department of Education. This is an important detail to find out early on since there are three different formulas, two of which are for independent students and one for dependent students. It is highly recommended that you get help from firms that offer solutions for college funding as this is a very complicated matter.
Notification of Results through the SAR
Upon receiving the data, the CPS or Central Processing System calculates the EFC for each student regardless of whether it was filled out online or used the paper application method. However, you can fill out the form online to eliminate mistakes beforehand. Once it has been processed, the CPS sends out a document called Student Aid Report. In it is the report about the student’s EFC.
(Source: Paying for College: How the Financial Aid Formulas Work, Forbes)