Your Expected Family Contribution is not necessarily the amount you think your family can afford for college. Learn how your "EFC" is calculated and why it's so important to getting financial aid.
College Cost Minus EFC = Your Financial Need
Your Expected Family Contribution (EFC) is an amount colleges expect you and your family to pay for college. College financial aid officers subtract your EFC from the school's Cost of Attendance (COA), which includes the cost of books, tuition, room and board, and fees. The result is your financial need, and it determines the amount of financial aid you are eligible for.
Calculating Your EFC: The Federal Methodology
To calculate your EFC, the government applies a formula called the Federal Methodology (FM) to information that you provide on the Free Application for Federal Student Aid (FAFSA). The formula evaluates your and your family's income and cash assets (checking, savings, money market accounts, etc.) among other factors, such as how many children in your family are attending college. (For more information, see our article Does It Matter Whose Asset It Is?)
The government sends your EFC to you in the Student Aid Report (SAR), which it also sends to up to four colleges that you listed on the FAFSA. The SAR summarizes the information the government used to calculate your EFC. If you'd like to find out what your EFC might look like using the FM, use CollegeData's EFC Calculator, which uses a formula based on the Federal Methodology.
Calculating Your EFC: The Institutional Methodology
Financial aid officers must use the EFC calculated by the Federal Methodology when awarding federal and state aid. Most colleges also use the FM to determine your eligibility for "institutional aid," which is aid from the college's own resources, such as alumni endowments. But some colleges—particularly private colleges—use another formula to allocate institutional aid, called the Institutional Methodology (IM). These colleges require an additional form, called the CSS/Financial Aid PROFILE.
The IM takes into account additional factors that the FM does not, such as the value of a home your family owns. And, if your parents are divorced or separated, the IM may factor in how much the parent not living with you is expected to contribute toward your education.
FM vs. IM
Most colleges use the EFC calculated with the FM to allocate all of their financial aid. Because the IM takes into account additional income and asset factors, an EFC calculated with the IM may appear higher than an EFC calculated with the FM. However, many financial aid officers claim that looking at EFCs calculated by both methods provides a more accurate view of a family's ability to afford college, and helps them tailor aid packages to a student's personal situation.
Your EFC and the Real Cost of College
It's very important to understand that your EFC is not necessarily what you will wind up paying for college. Your real cost—also called your net price—includes your EFC, plus any financial need that your college doesn't cover and any financial aid in the form of loans or earnings from work-study. You will have to cover any unmet financial need from your own resources, repay loans, and work the hours required for work-study aid. The real cost of attending a college includes all the dollars you must spend out of your own pocket, either now or later.
Some colleges offer more "gift" aid in the form of grants and scholarships (that do not have to be repaid), while others offer large amounts of loans and work-study. Some colleges meet 100 percent of students' financial need, while others meet only a portion. You need to consider these factors when comparing costs and evaluating financial aid packages.
For more information on college net price, see our article Net Price: the Real Story, or use CollegeData's Net Price Calculator, which will estimate your net price to attend any college in a matter of seconds, based on your personal financial aid eligibility and college choices.
Knowledge is Power
Your EFC is one of the most important steps in the financial aid process. Understanding what EFC means and how financial aid officers use it will help you make a more informed—and possibly more affordable—college choice.
Note: Financial information provided on this site is of a general nature and may not apply to your situation. Contact a financial or tax advisor before acting on such information.