As a family prepares to send a graduating high school senior off to college there is an important number that will weigh heavily on parents’ minds. That number is what is known as the Expected Family Contribution or EFC.
The EFC is calculated from your FAFSA. That is the Free Application for Federal Student Aid and the mechanism through which all federal student aid is funneled. The FAFSA evaluates a family’s make up, income, and assets. The number it produces is the EFC which is used to determine how much federal aid a family is eligible for.
Here is how it works. Let’s say the net price of a given college is $30,000. That net price should include all tuition, fees, and books as well as room, board, transportation and any other living expenses needed to attend that school. In theory, that should be the “all-inclusive” cost to attend the school for a year. The EFC that FAFSA produces is the amount the federal government feels the family should be able to contribute to go to a school and to the net price. What is left over is the amount of federal aid a student is eligible for. So, if the net price of a school is $30,000 and your EFC is $10,000, you’ll be eligible for $20,000 in aid at that school. That aid will be award by the school in the form of grants, scholarships, loans, or work study.
It is important to note that whatever your EFC is you won’t necessarily being paying that much out of pocket. The amount of the EFC could come from scholarships awarded by private groups, disbursements from college savings plans, contributions from other family members, private student loans, or other means. You also may be able to find ways to reduce that $30,000 net price but looking at cheaper housing, meal plans, etc than what the college has estimated as a norm. Doing so won’t change the amount of aid you are eligible for.
Anyone’s goal should be to have an EFC as low as possible and an EFC of zero is possible. In fact, there are many families who achieve that goal. The measures you take in financial planning as a child approaches college and the way in which you fill out the FAFSA is how you can dramatically lower your EFC. There are many FAFSA “tricks” you can employ to reduce your EFC and a good financial planner or accountant who is well versed in the FAFSA process can help you strategize. Essentially, all of those “tricks” work to demonstrate a reduced income and assets for parents and their college bound child.
The EFC is not the amount a family will directly pay out of pocket for college, though it is often perceived as such. It is, however, a good jumping off point for that number. There are many ways to reduce the amount you have to pay out of pocket and there are many people who can help figure out how to do that including financial planners, accountants, and guidance counselors. Sending a child to college is sure to not come without some sacrifice on the family’s part and the amount of that sacrifice lies largely in the EFC.
