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Understanding EFC and How it is Calculated

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financial-literacyIf you are applying for financial aid, one of the most important terms to understand is EFC. EFC stands for Expected Family Contribution, and it is exactly what its name suggests: how much money you and your family can contribute to your college expenses. EFC helps to determine how much financial aid you are qualified for. A higher EFC, the less financial aid you will be able to receive and vice versa. Your EFC can fluctuate from year to year, so it is important to understand how it is calculated. In addition, it is never acceptable to manipulate your information to get a lower EFC.

There are certain questions that you will have to fill out on your Free Application for Federal Student Aid (FAFSA) to determine your EFC. The major factors that determine your EFC are Student Information, Family/Parent Information, Income, and Estimated School Costs. Each factor will be described briefly as follows:

  • Student Information — The major question you will have to answer about yourself is whether you are independent or dependent. There are exceptions, but for the most part an independent student is married, separated entirely from their parents/guardian, or fall under a similar situation. A dependent student has parents/guardian that pay for at least 51% of their living costs. Please be aware that the Department of Education’s dependency status rules do not follow the IRS’ dependency status rules.
  • Family/Parent Information — Both independent and dependent students should answer family questions, which include household size, how many family members are in college, and so on. Dependent students need to provide information about their parents/guardian, including marital status, tax filing status, and so on.
  • Income — Some of the questions you will have to include about your income are your earnings, along with your spouse’s earnings (independent) or your parents’ earnings (dependent), tax information, equity and asset information, and so on. Essentially, any information that can be found on your income statement and/or balance sheet can be used to answer these questions.
  • Estimated School Costs — Your EFC can only be calculated if your estimated school costs have been calculated first. Tuition, fees, books, room and board, transportation, and other personal living expenses all combine to find your total school cost.

Please keep in mind that you do not have to find your own EFC (although there are EFC calculators that allow you to get an estimate). The Department of Education’s Central Processing System (CPS) will calculate your EFC and send that information to your school via the Institutional Student Information Report (ISIR). As long as you provide accurate information, your EFC will reflect how much money you and your family can contribute to your educational expenses.

By Ryan Laspina
Senior Specialist, Red Flags and External Reviews

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