EFC Guide: What It Is, How to Calculate It, and its Role in Paying for College

How Is EFC Calculated?

EFC Guide: What It Is, How to Calculate It, and its Role in Paying for College

Published July 27, 2023 | Last Updated April 3rd, 2024 at 07:49 am

How Is EFC Calculated?

The Expected Family Contribution (EFC) has played a critical role in how much you’ll pay for your student to attend college. However, a new metric called the Student Aid Index is replacing it starting with the 2024-25 FAFSA, which opened Dec. 31. This EFC guide pertains only to the FAFSA forms for 2023-24 and earlier. The 2023-24 FAFSA remains open through June 30, 2024, the end of the academic year.

If you’re looking for information about the new Student Aid Index, see our SAI Guide.

What is EFC?

Expected Family Contribution (EFC) represents the amount a family is expected to pay toward their student’s college expenses in a year. The federal government determines your EFC based on your tax data and the information you submit annually on the Free Application for Federal Student Aid (FAFSA) form.

The FAFSA and your EFC are the gateway to grants, loans, and scholarships. Colleges, states, and organizations use this information to help determine financial aid packages. For the 2023-24 FAFSA form, results have arrived in a Student Aid Report (SAR). However, FAFSA is being overhauled for the 2024-25 academic year, and the terms EFC and Student Aid Report are going away.

SEE OUR FAFSA GUIDE FOR 2024-25

Name Change to Student Aid Index (SAI)

The Expected Family Contribution (EFC) has been renamed the Student Aid Index (SAI). This change starts with the FAFSA form for the 2024-2025 school year as part of the FAFSA Simplification Act.

The government changed the name from Expected Family Contribution to Student Aid Index to reflect that it’s the estimated amount you and your child “can afford” to pay rather than what you’re “expected” to pay. 

The new SAI reflects calculation changes to the need-analysis section to help identify applicants with the greatest need.

Your SAI may arrive later than usual for this upcoming cycle due to the SAI implementation. Usually, the new FAFSA cycle would open on October 1, but the government delayed it until December 31, 2023, to allow time for the SAI changes. The FAFSA opening date will revert to October in 2024 for the 2025-26 school year. 

What Do the EFC Scores Mean?

The EFC score is a dollar figure representing the amount the federal government thinks you and your family can contribute to annual college costs. It’s not an exact amount but more of a baseline. 

The closer your EFC score is to zero, the more federal dollars you will receive. The EFC score is a six-digit number. An EFC score of zero is reported as 000000, the lowest possible score under the current EFC scoring system. The lowest possible score under the new SAI system, starting in December 2023, will be -$1,500 to broaden the opportunities to receive financial aid for students with greater needs. 

A higher EFC score indicates that you and your family can contribute more toward tuition, books, supplies, accommodations, transportation, and other expenses.

What EFC Is Not

The EFC/SAI is an index used to determine how much you should be able to pay and the amount of student aid you should be eligible to receive. The EFC/SAI is not the amount you’ll end up paying toward your child’s college education.

The FAFSA EFC Formula: How Is EFC Calculated?

The EFC calculation uses multiple factors, including your family income (parent and student), assets (parent and student), the size of your family, the number of family members in college, and the age of the eldest parent if still married to one another.

EFC Parent Contribution

Parent income (or parents’ income for a married couple). Your income as a parent is far more impactful to the EFC than your assets. You can use these guidelines to determine your income:

  • Start with your taxable income
  • Add non-taxable income (such as received child support and 401(k) contributions)
  • Subtract what you paid for taxes and Social Security
  • Subtract the income protection allowance (varies based on household size and the number of children you have in college)
  • Calculate the above for the total parent income to report on the FAFSA

The government’s formula uses between 22 percent and 47 percent of your reported income when calculating EFC. The higher your income, the more it will count toward your EFC. 

The basic principle? As income increases beyond the amount required to maintain a basic standard of living, more is available to contribute to postsecondary educational costs. If the total contribution from the adjusted available income is negative, the parents’ EFC is set to zero.

Parent assets won’t affect your EFC as much as your income. Parent assets counted in the FAFSA application are currently assessed at up to 5.64 percent of the value. The parent assets currently counted in the FAFSA application include: 

  • Cash
  • Bank account balances (savings and checking accounts)
  • Non-retirement investments (brokerage accounts, certificate of deposits (CDs), variable annuities, etc.)
  • Trust funds
  • Real estate holdings (excluding the family’s primary residence)
  • Business (if over 100 full-time employees) or farm ownership including stock options

College savings accounts (529 plan and Coverdell ESA accounts are reported by the owner; the student should be the beneficiary)

Parent assets that are not counted in the FAFSA application include equity in your primary residence, family businesses of less than 100 full-time employees, life insurance policies, retirement plans such as an annuity, 401(k), non-education IRAs, and personal possessions.

TIP: If your child is considered an independent student, your income and assets aren’t included in the EFC calculation.

 EFC Student Contribution

Your child’s income and assets also factor into the EFC as the student’s contribution even if they are considered dependent. 

Student income is calculated the same way as parent income, starting with the taxable income and adding/deducting income as described above. Report student income using the student’s  state of legal residence. The government will use 50 percent of a student’s reported income (above the protection allowance) when calculating your EFC.

You can use these guidelines to determine the student income:

  • Taxable income up to $7,040 (income protection allowance)
  • Add non-taxable income (such as 401(k) contributions)
  • Subtract what your child paid for taxes and Social Security 
  • Calculate the above for the total student income to report on the FAFSA

TIP: If your available income is negative, the EFC calculation allows for a reduction in your child’s contribution income. 

Student assets are assessed at a rate of 20 percent, which is a much higher rate than parent assets. The student assets currently counted in the FAFSA application include: 

  • Cash
  • Bank account balances (savings and checking accounts)
  • Non-retirement investments (brokerage accounts, certificate of deposits (CDs), variable annuities, etc.)
  • Trust funds
  • Real estate holdings (excluding a primary residence)

TIP: Besides the FAFSA, if your child is applying to more than one school in this list of over 400 colleges, you and your child will have to fill out another financial aid form called the CSS Profile, which is slightly different. 

TRY THE COLLEGE BOARD’S EFC CALCULATOR BEFORE YOU FILE YOUR FAFSA.

Simplified Needs Test

Although requirements vary for dependent and independent students, the Simplified Needs Test allows students that meet certain criteria to exclude assets from the EFC calculation. You and your child can utilize the Simplified Needs Test if your family has extenuating circumstances and meet any of the following criteria:

  • Means-tested federal benefits program qualification. At least one person in the student’s household qualifies for or receives benefits from a means-tested federal benefit program. These include:
    • Medicaid
    • Social Security Income (SSI)
    • Supplemental Nutrition Assistance Program (SNAP)
    • Free and Reduced-Price School Lunch Program
    • Temporary Assistance for Needy Families (TANF)
    • Special Supplemental Nutrition for Women, Infants and Children (WIC).
  • Dislocated worker status. The primary income provider is considered dislocated if they meet one of the following qualifications:
    • Loss of job and unlikely to return.
    • Laid off from work and receiving unemployment benefits.
    • Self-employed but unemployed due to economic conditions or a natural disaster.
    • Spouse of an active-duty member of the U.S. Armed Forces who has lost employment due to a permanent change in duty station.
  • Income requirement. If either of the following income scenarios apply:
    • Parents’ adjusted gross income (AGI) is less than $50,000 for dependent students; or
    • Combined parent income and income of an independent student does not exceed $50,000.
      TIP: If your income is less than or equal to $25,000, your child could qualify for Auto Zero EFC status and the maximum Federal Pell Grant. 
  • Tax return filing status. If you or your child meet one of the following criteria:
    • A parent or child is not required to file a 1040 return
    • Parents of a dependent student did not file a Schedule 1 with their IRS form 1040*.
    • An independent student (and spouse, if married) did not file a Schedule 1 with their IRS form 1040*.
    • A parent or child filed a return for one of the following Trust Territories: Puerto Rico, Guam, American Samoa, the Virgin Islands, the Republic of the Marshall Islands, the Federated States of Micronesia, or Palau.

*This includes filing a Schedule 1 to report unemployment compensation, Alaska Permanent Fund dividends, educator expenses, IRA deductions, or a student loan interest deduction.

Factors that Determine Need-Based Aid

The two main factors are the college’s cost of attendance and the family’s EFC, now called SAI for Student Aid Index. Need-based aid tries to fill the gap.
Cost of Attendance FactorsEFC Factors
Tuition, fees, books, and suppliesParent income:
* Taxable income + non-taxable income
* Less taxes and Social Security
* Less applicable income protection allowance
Room and boardParent assets:
* Cash and bank account balances
* Non-retirement investments
* Trust funds and investment real estate
* Businesses, farms, and/or stock options
* College savings accounts
TransportationStudent income, including spouse if married:
* Taxable income up to $7,040
* Non-taxable income
* Less taxes and Social Security
Personal expensesStudent assets, including spouse if married:
* Cash and bank account balances
* Non-retirement investments, including College Savings Plans
* Trust funds and investment real estate

How Does EFC Affect Your Financial Aid?

Since the EFC measures your family’s financial strength, it affects how much financial aid a student will receive. The higher your EFC score is, the less financial aid your child will qualify for. Your EFC can change every year depending on your family’s financial situation.

The EFC reduces the Cost of Attendance (COA). For example, add up the total COA at a particular college: tuition and fees, room and board, books, supplies, etc. Let’s say it comes out to $50,000. If the family’s EFC is $30,000, the financial need is $20,000

How Much Financial Aid Will You Get?

The amount of financial aid you and your child are eligible to receive will vary by college or university. The amount of financial aid you will be eligible to receive hinges on the cost of attendance and the minimum amount of money you and your family are deemed able to contribute toward your child’s college expenses as reported in your EFC.

How Do Colleges Use EFC?

Each college has its own financial aid policies, but they all calculate financial need similarly. They will use your EFC to reduce the school’s attendance cost. The basic formula all colleges use is:

 Cost of Attendance (COA) – Expected Family Contribution (EFC) = Financial Need

Once a college has calculated your child’s financial need with this formula, it decides how much need-based aid to offer. Most colleges do not fund 100 percent of a student’s financial needs, but you can maximize financial aid by choosing the right school.

Financial aid is typically a combination of loans, work-study opportunities, and/or grants. Some colleges also use the EFC when allocating merit-based aid, like scholarships.

Why Isn’t My EFC Score the Same at Every College?

Financial aid policies vary from school to school. Your EFC score can vary based on whether the college considers special circumstances such as unanticipated medical expenses or other economic or financial conditions, including job loss. 

Many families pay more than their EFC because not all colleges meet the required financial aid. To find out which colleges meet 100% of your financial need you can download our list of colleges to help you in your financial planning and the college application process.

What Is a Good EFC?

A good EFC will differ by family and the need for assistance. Since a higher EFC score indicates that you and your family have more resources to contribute toward the cost of college, a lower EFC score generally means you will be offered more financial aid. 

What If My EFC is Zero?

The closer your EFC is to zero, the more financial aid you and your child can access for college expenses. Remember that financial aid also depends on the cost of the college your child plans to attend. For example, if your EFC score is $15,000, your child would qualify for more financial aid from a more expensive private college and less financial aid to attend a lower-cost state school.

Why Is My EFC So High?

For many parents, the biggest FAFSA question is, “Why is my EFC so high?” There are many reasons an EFC score can be high. One of the biggest factors is that in 2023-24 the asset protection allowance dropped to zero.

The asset protection allowance helped shield some parent assets from factoring into EFC calculations. Unfortunately, the threshold has decreased for the last several years, and now all parental assets are considered in the FAFSA calculation.

Tips to Lower EFC

Since it’s not typically possible to reduce your EFC after it’s calculated, planning for college can be critical in obtaining a lower EFC score. To minimize your EFC score, your income and assets must be as low as possible during the base year.

Here are ways to lower your EFC:

  • Lower savings account balances by paying off consumer debt. Unfortunately, consumer debt and the cost of living are not considered relevant.
  • Avoid taking Roth IRA or other retirement account distributions.
  • Maximize contributions in a health savings account (HSA), profit-sharing plans, pensions, or retirement accounts such as a 401(k), 403(b), or IRA two years prior to applying for financial aid. Account balances are shielded from FAFSA, but contributions are added back into income.
  • Max out contributions to college savings plans (529 plan or Coverdell) as distributions do not impact financial aid eligibility.
  • Spend down student assets and transfer savings accounts into your name. Student assets are assessed at 20 percent, and parent assets are assessed at 5.64 percent. This includes transferring funds into a custodial 529 account, so it becomes your asset and not your child’s.  
  • Don’t realize capital gains by selling stocks or other investments for profit. Offset any capital gains with losses where possible.
  • Reduce available cash by accelerating necessary expenses such as a new car or upgrades to your primary residence.
  • Consider the implications of funds coming from grandparents. It’s best to have them contribute to a 529 plan in your name, or assist with paying off loans to avoid putting money into your child’s name.
  • Wait to remarry to avoid having to list your new spouse’s income/assets on the FAFSA.

Remember, FAFSA requires financial information from the “prior-prior” year on the application so you’ll need to think ahead when making financial plans for the college years. For example, the 2023-24 FAFSA used tax information from 2021 (two years prior).

How You Will Find Out Your EFC Score

You will receive your EFC score on your child’s Student Aid Report (SAR). To review the report, log into your FAFSA form on the Federal Student Aid website.   

What Should I Do If Financial Aid Isn’t Enough?

Unfortunately, many families find themselves in a position of needing more financial aid to pay for college. Fortunately, there are ways that you and your child can supplement the gap between the cost of attendance and the amount of financial aid received:

Who Can I Contact for EFC Help?

Do you have questions about the FAFSA form or process? You can email or chat with a Federal Student Aid representative by logging into the Federal Student Aid Information Center or calling 1-800-433-3243.

How to Use R2C Insights to Find Financial Aid

Road2College offers a college search and comparison tool called R2C Insights. Try it for free to see which colleges provide the most financial aid for your situation. We offer a free version to get started and a premium version to go deeper. 

R2C Insights has data on which colleges require only the FAFSA and which colleges require the FAFSA and the CSS Profile. This information can be helpful for divorced families and families with low income but high retirement assets (since the FAFSA does not include assets in qualified retirement accounts). 

R2C Insights users can identify schools that only require FAFSA. Depending on your financial situation, some families should consider having their student apply to at least one or more of these schools.  

Amanda Holland contributed to this article.

Other Articles You Might Like:

Merit Scholarships Guide: Factors, Tips, Full List and Search Tool

FAFSA Application Ultimate Guide: How to Apply, Steps, Tips, FAQs

FAFSA Independent Student Guide: Challenges, Benefits, Criteria, How to Decide and How to File

JOIN ONE OF OUR FACEBOOK GROUPS & CONNECT WITH OTHER PARENTS: 

PAYING FOR COLLEGE 101

HOW TO FIND MERIT SCHOLARSHIPS

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