College Planning: 10 Key Angles on Expected Family Contributions You Should Know
August 9, 2019
One of the biggest questions that parents with college-bound children puzzle over, is whether their child has a chance for financial aid.
This is more confusing than you might think, because at some schools a family could qualify for need-based aid if they make $200,000 a year, and at another school, the ceiling for aid could be $70,000.
The first step that you should take when grappling with this issue is to obtain the Expected Family Contribution (EFC). And you should do this before seriously exploring your teenagers’ college options.
Here are the top 10 ideas parents need to know about this important number and how it affects their college planning.
1. What is an EFC?
An Expected Family Contribution is a dollar figure that represents what financial aid formulas believe a family should be able to pay for one year of a child’s college education.
2. What is the average EFC?
The EFC for the average American household with an AGI of $50,000 will usually range from $3,000 to $4,000. There is no cap on EFCs, so some very wealthy families will have EFCs that exceed the cost of an expensive private university.
3. When should we obtain our EFC?
It’s best to get a ballpark idea of what a family’s EFC will be as early as a child’s freshman year in high school. Obtaining a preliminary EFC will give parents a rough idea of the minimum amount that they would be expected to pay for college. (See “How to obtain an EFC” in No. 8 below.)
4. State vs. private school tuition
Families with household incomes of $60,000-$80,000 and above typically find that they do not qualify for need-based aid at state universities, but they may qualify for need-based aid at private schools. Determining if a student would be eligible for need-based aid requires subtracting the EFC from a school’s cost of attendance.
Cost of In-State Public University: $22,000
Demonstrated financial need: $0
This affluent family’s EFC exceeds the price of the state school, so the student wouldn’t qualify for need-based aid.
Cost of In-State Private University: $60,000
Demonstrated financial need: $25,000
In this scenario, the student would be eligible for up to $25,000 in need-based aid from the private college because the price of this institution is far more expensive and exceeds the family’s EFC.
5. Strategies for no or low EFCs
Families who discover that they have a high EFC and aren’t eligible for need-based financial aid should look for schools that provide merit scholarships that are given regardless of need. Most schools fall into this category.
If an EFC is modest, families should search for schools that provide excellent need-based assistance. Far fewer schools fit into this category
6. Find the most generous schools
Families will usually have to pay more for college than their EFC indicates they can afford, because most schools do not meet 100% of a student’s demonstrated financial need. Consequently, it’s important to identify the most generous colleges that would consider a child an attractive candidate.
7. How to estimate your EFC
Parents can obtain their Expected Family Contribution by using the College Board’s EFC Calculator. Using the calculator with clients can be an excellent way to strengthen your relationship. And the calculator can also be a great prospecting tool when used with potential clients.
With this calculator, parents will want to obtain their EFC using both the federal and institutional formulas. The calculator will produce one EFC using the federal methodology that is linked to the Free Application for Federal Student Aid. The calculator will also produce an EFC using the institutional methodology, which is linked to the CSS/Financial Aid PROFILE. The vast majority of private and public colleges and universities only use the FAFSA, while private, selective schools also use the PROFILE.
8. Getting your official EFC
After completing the FAFSA, students receive their official federal EFC via an electronic document called the Student Aid Report (SAR). The SAR will include the family’s EFC near the top of the report and also provide all the information that the family included on the FAFSA. Parents should check their SAR for accuracy.
PROFILE filers will not receive an EFC from the College Board, which owns and operates this financial aid application. Institutions that use the PROFILE customize their aid applications by choosing from hundreds of different questions, so you will end up with a different EFC for each school. Parents should ask each PROFILE school for their EFC if the institutions do not include this important dollar figure on their children’s financial aid awards.
9. Schools often don’t mention EFC
Unfortunately, many schools don’t include a family’s EFC on their financial aid awards. Some institutions suggest that including the EFC on their aid letters will confuse families. More likely, schools don’t want to share EFC figures with families because they can then determine if the package is stingy.
Once a family has their EFC and the financial aid package, compare the EFC with what a school is offering. Let’s say that the cost of a school after deducting institutional grants is $39,000 and the EFC is $28,000. That means there is an $11,000 gap between what the EFC suggests a family can pay and what the school wants to charge your client. Based on this knowledge, a family can appeal the award.
10. Remember to adjust EFC for life changes
Plug new numbers into the EFC calculator if a family’s financial situation changes due to such things as a divorce, separation, death, disability, job loss, or the care of an elderly parent.