For all the college students or future college students out there, now is the time to estimate every contribution you will be getting from your family in your educational journey. Here’s a tip: focus on the estimated family contribution (EFC) chart the most.
In simple words, EFC is the expected contribution your family is willing to make for you to bear your educational expenses. If you have applied for specific federal grants, the EFC will still be considered a contributor to your financial status, and the grant will be approved keeping the EFC numbers chart in mind. Your EFC doesn’t mean that your parents are actually obliged to contribute the exact amount printed on the EFC contribution chart, it’s just what they can afford to contribute.
Families who do not qualify for assistance based on their documented financial status may still be required to sign the Statement of Educational Purpose form. So check that out too!
Before taking a look at some details about this chart, let’s have a quick peek at all the factors that are taken into consideration while calculating your EFC so you know what might affect your chances of getting federal grants or loans even if you think you have fair chances now.
The following is an unofficial list of items being considered when calculating your expected family contribution:
- Parental income (from the previous tax year, i.e. 2021)
- Number of students in college
- Parent’s education level (higher education means less contribution)
- Size of the family (smaller families mean larger contributions)
- Whether you are male or female (since women generally earn less than men, they pay more to their educational expenses, so women usually get more money in federal grants and loans to cover up for their low earning capabilities.)
As you can see above, your parents’ income has a great impact on your EFC. Remember that income is not considered when calculating EFC for Pell Grants but it does have an effect on all other forms of financial aid. Parents with high incomes might bring down your expected family contribution.
- Student income is not counted in the calculation of the parents’ EFC, whereas student assets are counted in both forms (EFC and CSS Profile).
- The more money you make, the larger contribution your parents will receive from their income for your educational expenses.
- If you are working while studying, make sure to factor in 20% of your total monthly earnings while filling out the FAFSA. It may count as negative income on the EFC numbers chart but that is still considered an advantage on parental contributions since it shows them that you are capable enough to support yourself even if they don’t help you financially. Any child earning more than $3000 per year is presumed independent; however, this presumption can be rebutted.
- The more assets you have, the less financial help your parents will get. If you are planning to rely on your savings while paying for college expenses, it might not affect your EFC much but you must keep in mind that it will decrease the number of federal loans and grants that may be available to you.
- The more affordable colleges that accept your FAFSA are, the better chances are of getting federal funding through loans or grants because there is no need for another form of aid called unsubsidized loans. Those are only provided by private lenders at high-interest rates whereas subsidized loans don’t charge any interest until after you graduate!
How the EFC estimate charts are compiled and how to calculate your EFC?
An EFC chart estimates the total amount your family can contribute to fulfilling your educational expenses. Once the EFC is calculated, the next step of your Free Application for Federal Student Aid (FAFSA) starts.
Remember to carefully estimate the EFC as it will play a key role in determining the amount of grant you will be getting. A small miscalculation can make a huge difference when it comes to receiving the right amount of financial aid.
In order to get an idea about how much your parents can contribute towards paying for college, take a look at this chart based on your FAFSA application.
The Federal Student Aid Office cannot estimate EFC for you unless you have made a mistake in the previous calculation process. It’s important that you try to understand what goes into this formula and output number so that you don’t miss out on any details during your next calculation round or when filling out your FAFSA form.
The Estimated Family Contribution is estimated from these 5 steps:
- Determine Tax Information
- Exclude Untaxed Income and Benefits
- Calculate Adjusted Gross Income (AGI)
- Apply Standard Deduction and Exemption Adjustments
- Take into account the annual untaxed income allowance for college students.
1. Determine tax information:
This includes filing status, number of dependents, whether or not your parents are married (they will be separated if they don’t live together). Ask for a copy of their previous year's federal tax return to get more accurate information about EFC. The more complicated it is, the less money you can expect from them once you file FAFSA and complete all steps towards getting financial aid. Also, note that your parents must provide their marital status on the prior-year tax return and not in the FAFSA form.
2. Exclude untaxed income and benefits:
These include money earned by anyone in your household who does not file taxes (spouse, children, other relatives), Social Security benefits, TANF/AFDC received veteran's noneducation benefits such as VA housing allowance or stipend, workers compensation, and any other untaxed income like child support. You can add up all these values to reach a total of $5350 - this is your expected family contribution from taxable income.
3. Calculate Adjusted Gross Income (AGI):
Once you have removed untaxed income and benefits from the equation (total of step 2), it’s time to tackle your Adjusted Gross Income (AGI).
This is done by adding taxable earned income like salaries or wages, taxable interest income like saving account passbook, Dividends, and capital gains. Your AGI represents the total of all earnings for tax purposes minus some adjustments permitted by the IRS. The resulting number cannot be more than $49,000 if you are single or filing with no kids on your tax return. If you are married or have children on your tax return, it can reach up to $65,000. Note that parents' earnings don’t count when determining EFC this way because AGI excludes those.
4. Apply Standard Deduction and Exemption Adjustments:
Income from IRA distributions, rental properties, alimony payments is excluded from AGI. This number can be as much as $12,000 for single people or $24,000 if you are married and filing your taxes jointly with your spouse.
5. Allowances against total income:
You must next subtract an annual allowance of around $3900 per year to cover the cost of work-related expenses like transportation on school trips, uniforms, and clothes. If you have any medical expenses related to a disability such as wheelchairs or special equipment at home, this number goes up by $6400. Next comes the number of people in your household (including yourself) who will be attending college so that's another $5750. You also get one allowance for an unemployed parent ($4200 ) and another if that parent has a child ($4700 ). The final number should never exceed $46,200 for single people or $72,400 if you are married with children.
Will the EFC determine the amount of aid you will get?
Yes, the amount of grant you will receive will be calculated by subtracting the EFC with your COA. The COA is the overall estimate of educational expenses (semester fees, books, living expenses, etc.) that you will have to pay during your stay in college/school.
According to the general criteria followed by most federal grants, the difference left after subtracting the EFC from the COA is the amount you are eligible for in the name of a license. But if the EFC chart is already high, there’s a good chance that you will not be getting any grant from federal resources.
EFC is also used to determine eligibility for work-study programs.
The EFC calculation does not include student loans because these are technically not part of financial aid - they are debts that you must repay after graduating from college or university with a degree. However, there are other factors that your lender will consider before giving you the loan, like credit rating and income level.
Even though EFC is an important number to know when it comes to applying for federal grants, it should not be seen as the end-all number in determining your college expenses. For example, Pell Grants can be based on different numbers which are derived from your COA rather than your EFC. There are also some state grant awards where the criteria don't include EFC which means even if it is high, you can still get the money you need to pay for your studies.
The EFC calculations are not without their criticisms and detractors. There's a big question on whether or not the EFCs accurately represent students' real financial status and that of their families. Others complain about how complex and rigid these numbers tend to be; they vary from one institution to another. But those who make the calculations say this method always leads to more transparency in award packages, as well as reduce abuse of government resources like grants - misuse has become rampant over the years.
EFC does serve as a reminder for parents or guardians (if you’re still underage) who will be availing of federal loans on your behalf. Aside from checking your eligibility, it is also important to know the interest rate different lenders will be charging you for each loan so that you can determine which offers the most favorable terms.
Impact of COA and EFC difference
If we talk about federal grants such as Pell Grant, etc., in particular, both EFC and the COA play a vital role in determining the budget you will be getting. The federal resources will cover any amount left under the banner of federal grants, but all such contributions have a specific limit.
For example, the difference between your EFC and COA is around $50,000. You can maximum get a 10,000 USD from Pell Grant and $10,000-$15,000 more from a federal student loan/work-study program. But there’s no way a federal grant will cover a massive difference of $50,000.
Can I receive aid irrespective of my EFC?
You can look for grant options that work irrespectively of your EFC chart in only two conditions. One, if the EFC is so high that you can’t possibly get a federal grant. Two, if the EFC and COA difference is too much to cover up.
In such cases, the best option you have got is to apply for any scholarships and work-study opportunities you are eligible for. There is hardly a chance that you will be able to cover entire educational expenses through these platforms, but they will surely cover a considerable amount in the name of grants.
Is it mandatory to add my parents’ info while filling out FAFSA?
Unfortunately, yes. Even you are currently living on your own and are financially stable, and the EFC chart will be calculated according to your parents’ contribution to your studies. That’s why adding credentials related to your parents’ finances is a mandatory clause while filling out your FAFSA form.
But still, there are some exceptions in this regard. If you are already married, is an active military member, a veteran, orphan, or already over the age limit of 24, you will not be required to use your parents’ financial credentials on the form. Remember, these exceptions are only applicable when filling out the FAFSA form as part of the federal grant programs.
With the help of an EFC chart, there is a possibility to acquire a handsome amount of grants. We hope the above-mentioned article helps you in some way if you are a student who is planning the future.