"Expected Family Contribution" Calculation
A student's eligibility for "need-based" federal financial aid is determined by a formula supplied by the U.S. Congress, and is based on information from the Free Application for Federal Student Aid ("FAFSA") . The results are forwarded to the schools listed on the student's FAFSA to determine aid eligibility.
Your Expected Family Contribution (EFC) is an index that is used to determine your eligibility for federal student financial aid. This number results from the financial information you provided in your Free Application for Federal Student Aid ("FAFSA") application. The EFC is a measure of a family’s financial strength. It is an estimate of the money the government perceives a family can contribute to their student’s educational expenses for a particular year. It is an estimate, NOT the amount a family is expected to pay.
You can find an extremely detailed explanation about the formulas used to calculate your "EFC" in Chapter 3 of the 2010-2011 Application and Verification Guide .
This page gives a short summary of some of the important concepts
There are five different formulas under "Federal Methodology " that can be used to evaluate a student's FAFSA
- Formula A -- used for dependent undergraduate students
- Formula B -- used for independent students without dependents other than a spouse
- Formula C -- used for independent students with dependents other than a spouse
- Simplified Fourmula
- "Auto-Zero EFC"
If you are curious about how your family contribution was calculated, you can utilize the calculators on Finaid: The Smart Student Guide to Financial Aid
The Basic Formula:
Contribution from Income
The basic formula takes information from the FAFSA and first calculates a family's "available income". This calculation looks at the family's total taxable income and untaxed income from a variety of sources (see the FAFSA instructions for what needs to be reported ).
The formula then subtracts several allowances from the total income figure including:
- U.S. Income Tax Paid
- State and Other Tax Allowances
- Social Security Tax
- An Income Protection Allowance (based on family size and number in college) .The "IPA" is a basic allowance , based on family size and number in college, for the following basic living expenses;
- Clothing and Personal Expenses
- Medical expenses not covered by insurance
- Other Miscellaneous Expenses
- Employment Expense Allowance
The difference between total income (taxable and untaxable) and these allowances is refered to as the "available income". This figure could be negative.
Contribution from Assets
The formulas then look at assets that the family controls. The basic formulas take a "snapshot" of the net values of these assets as of the day the family completes the FAFSA:
- Cash, savings and checking
- Net worth of all investments (excluding dedicated retirement plans )
- New worth of businesses/farms
The formula looks at the total of all these assets to calculate a family's total net worth. An "Education Savings and Asset Protection Allowance " (based on the age of the older parent) is applied against the family's total net worth . The difference is the family's discretionary net worth
An Asset Conversion Rate is then applied to the Discretionary Net Worth figure . The result is added into the calculation.
Remember, the net value of the family's primary residence is not included in the federal formulas.
One Final Step
The formulas add the "expected contribution from income" and the "expected contribution from assets" and then divides this figure by the number of students in the household who will be enrolled on at least a half-time basis at a post-secondary institution during the academic year.
"Where Do I Find My "EFC" ?"
Look at the top of the confirmation page that you will receive when you complete an online Free Application for Federal Student Aid (sample below)
Updated January 23, 2013