Jenni, a member of our Paying For College 101 Facebook group, studied her family’s Expected Family Contribution (EFC) early in the college application process. That’s because she knew she had an unusually complex situation. She didn’t have just one student readying for her freshman year. She had two — twin daughters both taking off for college at the same time.
She used this very thorough spreadsheet put together by another member of the group to calculate finances, including the families’ savings and debt, and also to see what the EFC outcome would be if only one daughter went to college and the other didn’t.
“We also played around with numbers to determine if it was worth taking some of our savings and paying down some bills — like a car loan — in our case moving $15,000 from savings to pay off a car loan,” she said.
“That didn’t have all that much effect on the bottom line EFC — so in our case it was better to keep the $15,000 in savings where it is in a high yield savings account earning about 3% interest than paying off a car loan that has a 0.75% interest rate.”
What Does My EFC Number Mean?
The EFC is a number based on the finances that you report on the Free Application for Federal Student Aid (FAFSA).
What does EFC mean on the FAFSA? Colleges take the information from the FAFSA to calculate your EFC with a formula established by Congress. Cost of Attendance (COA) minus Expected Family Contribution (EFC) equals the amount of Financial Need.
All of your taxed and untaxed income, including your student’s income, assets like savings and benefits, including unemployment or Social Security, are used in the EFC formula.
Your family’s size and the number of family members attending college during the year also is figured into the equation. Consumer debt — credit card balances, mortgages and auto loans, for example – are not calculated.
The higher the EFC score, the more you are expected to pay. Families should keep in mind the EFC is usually the minimum a college expects a family to pay. Many times, families will pay much more.
For example, let’s say your family’s EFC number is 3500. Your will be expected to pay at least $3,500 toward your student’s tuition.
Some colleges also use a tweaked version of this federal formula to create their own “institutional methodology.” Many private colleges and universities use the CSS profile, a form in addition to FAFSA, to determine eligibility for non-government needs-based financial aid, such as the institution’s own grants, loans and scholarships.
Your EFC score will begin at zero and continue into the tens of thousands. The higher the EFC, the more money the government thinks you can pay for college because of your financial strength. A high EFC score means your student will receive less need-based federal financial aid to attend college.
The closer you can get to zero, the more federal dollars you’ll have access to for paying for college.
Some schools may offer needs based financial aid, which will help cover the gap between your EFC and the cost of college. But if you can’t even afford your EFC or if there’s still a tuition gap even after receiving financial aid, then loans will likely have to cover that difference.
That means more debt for you and your student after college graduation.
A Net Price Calculator Is Your Friend. Here’s How to Use It.
Many parents use the Net Price Calculator on college websites. These prices vary widely.
For example, one parent testing out different college calculators found costs ranged from $13,000-$63,000. Still, using net price calculators can be helpful.
For some families using the net price calculated helped them eliminate schools that cost too much and in turn they avoided visiting those schools and accumulating unnecessary travel costs to a college that ultimately wouldn’t be a family’s financial fit.
For now, net price calculators are the best tool available to figure out how much a college will actually cost. You can estimate how much you will be expected to pay from your own pocket for the year and figure how much financial aid may be available to fill the gap.
The calculators, whether on a college or on the College Board site, are designed to show college costs for a first-year student. You can create different scenarios, too, in these calculators.
For example, some allow you to model if you have two students in college.
Before you use one of these calculators, you will want to have this paperwork handy to input the information:
- Tax Returns (Three years is often recommended)
- Bank Statements
- Investment Statements (non-retirement accounts)
- Business Statements (if either parent or the student owns a business)
If you do use the EFC calculator on the College Board site, don’t forget to create a College Board account so all of your EFC calculations won’t be lost. You can complete multiple net price calculators and save the results on the College Board account.
All colleges are required to have a net price calculator but not all of them are the same. Some only calculate the need-based aid.
Others want information to help calculate merit aid like more scholarship opportunities.
None of them take the cost of living like food and gas price — all which add to the cost of attending college.
Prevent EFC Sticker Shock
Families often are stunned by their EFC score, because the number doesn’t reflect what they can realistically afford.
Just because two parents may make $100,000 a year and have $50,000 in savings does not mean that they can afford to contribute nearly $18,000 a year or more to a child’s college expenses.
They still have to eat, perhaps enjoy a vacation and put more savings away for their retirement.
Holly Ingebo, a military parent with two students in college, was stunned when she saw her high EFC score on the FAFSA.
“I wouldn’t say I cringed, but it was more like shock or disbelief,” Ingebo said. “Then I would say a feeling of hopelessness that my kids would not be able to receive any help paying for college and we were stuck.
As a result, my kids have often had to drop classes or reduce their course load so they could work more.”
While paying tuition is out of the question for Ingebo to help her children, she helps them in other ways with books, cell phone bills and car insurance.
Ingebo never calculated the EFC number prior to filling out the FAFSA and first saw it on the Student Aid Report. Many parents, though, suggest knowing the score way in advance
“The EFC is not difficult to figure out provided you have all the information ready to go,” Jenni said. “If you financials are straightforward, i.e. you have a somewhat set yearly salary and it doesn’t fluctuate much from year-to-year then you should be fine being able to get a ballpark figure.”
But she warns that families with yearly fluctuating finances — such as a contract worker or a person who receive performance-based bonuses — may find the EFC harder to calculate.
Although at times the EFC may give you a panic attack, it’s critical for you to know your number as soon your child starts the college application process.
Your EFC score will undoubtedly affect your bank account, one way or another.
Understanding your EFC score can also help guide you to try for a lower EFC score, and there are a few ways to make your EFC lower and correct.
It’s worth the investment of time to calculate the EFC to avoid major sticker shock when applying for a particular school. Even with financial aid and scholarships, a college could still be out of your price range.
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