When you get into the world of college applications, the acronym “EFC” comes up constantly.

Mostly you’ll hear parents bemoaning how high theirs is and why it’s unrealistic for them to pay.

Your “expected family contribution,” is a measure of your family’s financial strength in relation to paying for college.

More specifically, it’s an index number generated by financial aid forms, the Free Application for Federal Student Aid (FAFSA) and the CSS PROFILE, that colleges use to determine how much financial aid you would receive if you were to attend their school (Pell grants, federal subsidized and unsubsidized loans, work-study, and institutional need aid and scholarships).

Financial aid is based on the student’s demonstrated financial need, which is the difference between the cost of attendance (COA) and the EFC.

A small group of colleges, mostly selective private colleges, use a second calculation based on the CSS PROFILE or the college’s own financial aid forms for awarding financial aid from the college’s resources.

This form uses the “institutional methodology,” and your EFC can vary from college to college.

However the vast majority of colleges use only the FAFSA.

After the FAFSA is processed, the generated “Student Aid Report” will include an EFC amount for your family.

One would think that your EFC should be the amount of money your family will have to pay for college but in effect, you can expect to pay that amount or more.

Many families pay more because colleges often don’t meet financial need.

Some families pay less if their students win hefty merit scholarships or attend public colleges that cost less than the family EFC.

What FAFSA EFC Numbers Mean

How is your EFC determined? It’s generated by factors like age of oldest parent, how many kids you have in college, family size, parent income and assets, and student income and assets.

Even if you look like other college families from the outside, your EFC may be very different, depending on these factors.

You can get an early estimate by using the College Board’s EFC calculator and I highly recommend you use it before your kid’s senior year to avoid shock.

Dig up your most recent tax return to help.

The FAFSA weighs parents’ income much more heavily than parent assets, assessing income according to a scale of 22 to 47 percent of available income.

(I’m not sure how which percentage is arrived at).

It’s hefty and uncomfortable for most families.

The EFC also assesses assets: savings and checking accounts, stock investments, 529 plans and Coverdell accounts for all your kids, and additional properties such as rentals and farms.

It assesses non-retirement assets at no more than 5.64 percent (so on $100,000 of stock, you’d be asked to contribute $5,640 toward college).

Most people worry their savings accounts will make them look more well-heeled than they are, but income influences your EFC much more than savings.

Thankfully, a portion of parent assets are protected by an asset shield allowance.

For a family of four with one college student, the income protection allowance (Table A3) is $28,580, and for education savings, the protection allowance depends on the age of the older parent.

For a two-parent family with a 50-year-old father, the protection allowance is $12,500 and $6,500 for one parent.

To take a closer look at protection allowances according to age, this document lays out the numbers for 2019-2020 on page 19 .  

In short, there is a method for determining your EFC but it’s not easy to understand.

Student income is assessed at 50 percent and assets at 20 percent.

A student’s hearty savings account can really inflate an EFC, but there is an income protection allowance of $6570.

But, honestly, as a good guideline, plan for students to put all their money toward college.

You’ll likely need them to do that anyway.

Can You Lower Your EFC?

Most people won’t be able to lower their EFC (even though there are some who will receive an EFC score of 00000), but there are a few things you should avoid doing while your child is in college so you don’t artificially inflate it.

Starting in Oct. 2016 and going forward, the tax return you’ll use to fill out the FAFSA is from two years prior to the year your student will start college.

For example, for students entering college in the fall of 2020, families will fill out the FAFSA in October 2019 and use their tax return from 2018. 

Here’s some advice for trying to manage your EFC…

Do pay down consumer debt. Colleges don’t ask about your consumer debt (they don’t care about your cost of living), so before your first FAFSA filing, try to pay it down with your savings.

That way, you’ll have a smaller amount of savings to report.

Skip tying the knot. If your partner isn’t prepared to help pay for college costs, don’t get remarried during the years you’re filling out financial aid forms.

A prenuptial agreement won’t protect a new spouse’s money from being counted in financial aid calculations.

Be careful saving towards and withdrawing from retirement funds. The vast majority of colleges won’t ask how much retirement you’ve saved prior to your first FAFSA filing.

But if you withdraw funds during any year that you’re filing financial aid forms, it counts as income on the forms.

Colleges will also ask about retirement contributions made during the FAFSA-filing years.

Contribute to retirement funds as much as possible in the years before the tax year on which your first FAFSA is based on (and for all other years you need to fill out the FAFSA).

The FAFSA will consider any contributions you make towards retirement accounts (IRA, 401k, etc) as income and add those contributions back to the income they consider for formulating your EFC.

It seems during the years your student goes to college, the government believes paying for college is more important than saving for your retirement…isn’t that special? 

Find out more here:

[10 Tips to Get the Most Financial Aid From Colleges ]

[Thinking About How To Pay For College? You Must See This Chart Of EFCs!]

Avoid putting accounts in kids’ names. If your kids have education accounts in their names, transfer the funds into a custodial 529 plan so it becomes your asset.

It’s always better to save money in the parent’s name because of the way parent and student assets are calculated.

Don’t sell stock. Avoid selling stock because it will be counted as income and may jeopardize financial aid.

Leave stocks alone.

Consider the timing on selling your house. Selling can be a tricky juggling act, but avoid a pile of money sitting in your bank account when you file the FAFSA or CSS Profile, especially if you’re planning to put it toward another house purchase.

While your kids are in college, try to live on your existing income.

If you need to earn more, then earn more, but keep in mind that additional earnings raise your EFC.

Of course, the college won’t take all your earnings, so more money can help.

But in my family, we’ve stopped traveling, don’t eat out, and minimize monthly spending.

It’s like being back in college ourselves.

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