My oldest friend once asked me to help her bright daughter with her college search.
I said sure. And then I told Mary what I absolutely needed from her before we checked out a single college.
I needed to know what her household’s Expected Family Contribution was. A family’s EFC, which is expressed as a dollar figure, represents what a financial aid formula says a household should be able to pay for one year of college.
My friend is a registered nurse and her husband is a carpenter with bouts of unemployment. It would be easy to assume that their EFC is a modest one.
The EFC for the average American household that makes an adjusted gross income of roughly $55,000 is usually going to be in the $2,000 to $4,000 range. These families would be expected to pay at least that much for one year of school. With that kind of modest EFC, my friend would be looking for schools that are generous with financial aid.
I knew, however, that Mary inherited money from her father, who was a successful dentist.
I wasn’t privy to how much she inherited, but the money could make a difference in whether her daughter would qualify for financial aid or not.
Your First Step
I told Mary the same thing that I am telling you right now.
As you begin your search for colleges, obtaining your EFC should be the FIRST STEP you take. You will learn how to generate your EFC in the next lesson.
If cost is a factor – and it is with most families regardless of their income – you need to match up what you will be expected to pay with the generosity of schools.
You will learn how to determine whether individual colleges and universities are generous later in this class!
What If You Have a Lower EFC?
If Mary’s EFC is low and there is not much inheritance left, I would tell her daughter to stay away from expensive schools that are stingy with financial aid.
As you’ll learn in the course, many prominent schools with poor to mediocre financial aid are located in cities on the East and West Coasts because families consider these areas to be highly desirable. These schools can afford to be miserly because there is a huge demand for their freshmen slots.
With a low EFC, Mary should look for colleges and universities that provide generous need-based aid. Regardless of her family’s EFC, Mary’s daughter should also consider public universities within her own state, which in this case is Missouri.
What If You Have a Higher EFC?
On the other hand, if Mary is now a wealthy woman, but doesn’t want to pay full price, I would tell her to look for schools that give healthy merit scholarships to affluent students. Most schools in this country dispense merit scholarships to high-income students. In fact, the average grants/scholarships at private schools are now slashing 55% off the tuition sticker price, which is an historic high. You’ll learn more about this practice in the modules entitled, Targeting Schools for the Most Money, Parts I & II.
Many state universities are aggressively dispensing merit aid to students they covet. To learn more about this strong state trend, read this lesson, State Universities and Merit Aid, which you’ll find in the module entitled, Targeting Schools for the Most Money, Part II.
EFC Factors
Many parents assume that there must be some kind of income cut-off to qualify for financial aid, but automatic cut-offs don’t exist. There are too many variables that play into the determination of whether a family qualifies for financial aid that goes beyond income. The marital status of parents, the number of students in college, the type of assets and, in some cases, home equity will play a role in determining aid eligibility.
That’s why it’s important to obtain your EFC before you start seriously looking at schools. You should not guess that you will qualify for need-based aid or automatically assume that you won’t.
EFC Example: Family Needing Financial Aid
Let’s see how a package might be built at a school that costs $50,000 and the family’s EFC is $3,000. The first thing the school would do is subtract the family’s EFC to determine how much aid is needed.
| Cost of attendance: | $50,000 |
| Minus | $3,000 (EFC) |
| $47,000 Demonstrated need |
Next the school would subtract any eligible state and federal money:
| $47,000 Demonstrated need | |
| Minus | $3,000 (Partial Pell Grant) |
| $6,000 (State aid) | |
| $38,000 Remaining need |
In this example, the college would have to decide whether it would provide $38,000 of its own money to cover the remaining cost of this child’s first year in college.
If the school meets 100% of a student’s financial need, the school would put $38,000 worth of assistance in the package. Ideally, the help would strictly be grants (free money that doesn’t have to be repaid.)
In reality, most colleges and universities will require that families cover more than their EFC for one year of a child’s college.
These schools will not meet 100% of need. Instead these institutions will gap your child. A school might meet 88% of need or 59% of need or 72% of need. Some of these aid packages can be outrageously stingy. If your child is a more valued applicant, the award he or she receives will often be better.
It will be up to families to scramble to pay more than their EFC figure to compensate for the gap or to walk away.
When you need help with college costs, it makes sense to look for schools that will be as generous as possible that your child has a good chance of getting into. You won’t know what you will need and what you might expect, however, until you obtain your EFC.
2nd EFC Example: High-Income Family
Let’s take a look at the package that a wealthy student with a high EFC received from a private school:
| Cost of attendance: | $50,000 |
| Minus | $45,000 (EFC) |
| $5,000 Actual need |
This student didn’t qualify for state and federal money, but she did capture a $15,000 merit award from the school. In this case, the award would cover the family’s actual need of $5,000 and the excess would allow the family to pay less than their $45,000 EFC. Their total outlay would be $35,000 for the year.
If your child doesn’t qualify for need-based aid, you will pay the sticker price minus any institutional or private scholarships that your teenager receives.
An Important Point About Aid
Schools will use merit awards, outside private scholarships and government aid to first reduce a family’s demonstrated financial need and not the family’s out-of-pocket costs or EFC.
To see how this plays out, let’s take a look at an example of a family with an EFC of $15,000 whose child will attend a $40,000 school. Before any aid, this family would be seeking $25,000 in financial assistance. ($40,000 Cost – $15,000 EFC = $25,000 of demonstrated financial need).
The student, in this example, receives a $12,000 merit award. The parents would like this award to reduce their out-of-pocket costs (EFC), so their contribution would drop to only $3,000. But schools will use any type of aid — merit or need-based – to first reduce the student’s demonstrated financial need.
So after the merit award is applied in this case, the $12,000 award would whittle the family’s demonstrated need down to $13,000 and the family would also be responsible for their EFC of $15,000.
What Colleges Do With Your EFC Figures
You will generate your official federal EFC automatically when you complete the Free Application for Federal Student Aid, which is the federal financial aid document that families must submit to be eligible for financial aid and federal loans. After submitting the FAFSA, you will discover what your EFC is a few days later when you receive your Student Aid Report.
Students who complete the CSS/Financial Aid PROFILE, an additional aid application that 229 mostly private institutions require for eligibility for their own aid programs, will generate a separate EFC for each PROFILE school. Colleges rarely share these EFC figures with families.
When a school looks at your EFC, it will build an aid package based on other sources of money first. A college’s financial aid office, for instance, will put the Pell Grant into the package if your child qualifies for this federal money. The Pell Grant is targeted at low and lower-middle income families.The school will also determine if your child qualifies for any state grants. This aid can vary significantly by state. After all this outside money is plugged into an award, the school itself will decide how much it will kick in to meet the cost beyond the family’s EFC.
Bottom Line:
You need to obtain your EFC before you can start identifying schools with policies most favorable to your financial situation. You will learn how to generate your EFC in the next lesson.
For further reading try…
2017 Guide to FAFSA and PROFILE College Financial Aid and EFC
Troy Onink, a Forbes college contributor and the CEO of Stratagee.com, a college-planning firm in Pennsylvania, wrote an excellent article in Forbes Magazine that you can access in the above link, which provides an in-depth explanation of EFCs and financial aid formulas for the 2017-2018 school year.
Hi Lynn,
Please could you guide us, parents in India about how to calculate EFC? Please could you guide a bit more on International Students applying to the US? What are our chances of getting aids/ grants? How do we identify the right colleges? In case i am asking too may questions, too soon, please let me know and I will wait to go through the entire course.
Regards,
Radha Abrol
Hi Lynn,
My daughter just started Junior year. If I am following your explanation correctly we will use this current year’s (2016) Tax for EFC calculation. I expect 2016 to be in line with our income from 2015. Does it makes sense to calculate EFC using 2015 for now to get an idea of where are we standing.
Hi Igor, You are right. Use the estimated 2016 figures by using your 2015 actual figures. Lynn
Is the EFC calculated by the College Board website typically lower or higher than the EFC calculated by the FAFSA and CSS?
Hi Magnolia,
The College Board calculator actually provides you with the FAFSA calculation (you’ll see it referred to as federal methodology) and the CSS/Financial Aid PROFILE (you’ll see it referred to as institutional methodology.)
The federal methodology should hold true for all FAFSA-only schools, but keep in mind that PROFILE schools can tweak the institutional methodology in many different ways. For instance, the College Board calculator considers parents’ full home equity when calculating financial need. There are plenty of PROFILE schools, however, that limit the home equity by linking it with parent income.
I like the College Board EFC calculator because you can get both the federal and institutional calculations in just one place. And, keep in mind, that the College Board is the owner of the PROFILE so this is the best source.
Lynn O’Shaughnessy
Hi Lynn,
Here is a list of questions I am struggling with:
I know that if the school’s sticker price is less than the EFC, the student would be ineligible for need-based financial aid.
1. Is a parent plus loan considered need-based aid? Some parents with a high EFC might still want to borrow using a parent plus loan. Is that possible?
2. If EFC is greater than COA, does that mean the student cannot get any student loans?
3. When looking at public schools as a non-resident, a family’s EFC may be greater than the in-state COA, but not the out-of-state COA. If applying as a non-resident, would this family then be eligible for need-based aid based on the out of state COA?
4. On College Board, regarding % of need met for public schools, does that only apply to the state resident COA. Is the same % of need met for the out of state COA?
5. I am working with a family in the Los Angeles area who have complicated finances. Do you know someone for them to speak to regarding college and money?
6. Is it normal for the FM and IM to be really far apart? I have a family where the difference was over $25,000.
Thank you so, so much!
Hi Linda,
1. Parents can borrow through the PLUS Loan regardless of their Expected Family Contribution. They will need to file the FAFSA to be eligible for the PLUS. Please read the lessons on loans.
2. If the EFC is greater than the cost of attendance, the student can still get a federal Direct Loan.
3. No, the family would not be eligible for need-based aid at as a nonresident of a state school. There could be exceptions, but you should assume a student will not get need-based aid as a nonresident. State universities routinely give merit aid for nonresidents and that is what they would be aiming for. Please read the course’s lesson on state universities and merit aid.
4. The percentage of need met cannot by used when evaluating the generosity of state schools for nonresidents.
5. I’d recommend that the family contact Paula Bishop, a CPA in Bellevue, WA, who is excellent and the person I turn to when I have financial aid questions. Her website is paulabishop.com.
6. It is possible for the FM and IM methodologies to be quite far apart. They might want to use the calculator again to be sure.
Lynn O.
Hi Lynn,
I am reading through your material for the second time and realized what has been confusing me. The terms financial aid and need-based aid are often used interchangeable in the media. For my own clarification, financial aid includes merit scholarships, which are not based on need.
In the article above, the question “How Wealthy is Too Wealthy for Aid?” – Shouldn’t the question really be “How Wealthy is Too Wealthy for Need-Based Aid?” – because the most affluent students receive “aid” in the form of merit scholarships.
Could you please clarify the definitions of the terms “financial aid and “need-based aid.”
Loving the course.
Thank you so much!
Hi Linda,
Sorry for the confusion. When I refer to financial aid, I am referring to need-based financial aid.
Lynn O.
Question… To gain official EFC insight, we need to complete the FAFSA which in our case right now with a rising Senior (grad 2017) we will not fill out the FAFSA until Oct 2016. Is there any way to get a semi official EFC view right NOW without waiting for our turn in Oct? Must we wait until Oct to do a FAFSA to get the official EFC/aid report?
Thanks
Mike
Hi Mike,
Please read the next two lessons – you probably already did by now – How to Use an EFC Calculator and EFC Cheat Sheet – that will provide the information that you are seeking.
Lynn O.
Thanks for the helpful information, Lynn. One class down!
May I make a suggestion? The article/class left me a bit confused. It states that the first thing you should do is calculate your EFC, and says the EFC is determined by filling out the FAFSA. No other options for determining your estimated EFC before you actually fill out the real form are mentioned. The answers about the calculator on the College Board site and other sites are in the comments, but not in the article itself. Adding those up front may help prevent that little moment of panic…
Not trying to be critical–it’s just the former editor in me wanting to help clarify!
I’m so glad to be taking part in your class. I can tell already that it’s going to be extremely valuable.
Jennifer
Hi jennifer,
Thanks for taking the class! You will see that the next lessons in this module – How to Use an EFC Calculator and the EFC Cheat Sheet – will answer your questions. In the lesson you just read, I say you should obtain your preliminary EFC and that you will learn your official EFC by filing the FAFSA. I added a sentence in the lesson you just read that says you will learn how to obtain a preliminary EFC in the next lesson. Sorry for the confusion.
Lynn O’Shaughnessy
Dear Lynn,
A friend of mine asked about their financial aid offer yesterday. She did not understand it and wanted me to help. I am thrilled that I was able to help her understand. I am thrilled that I understood it. That’s how much these first few modules have helped me. Thank you very much. Her son benefits from the GI Bill, a Yellow Ribbon Grant and a matching Yellow Ribbon Grant from the school. Will we be learning more about these? There are a lot of military members in our community and my step-daughter will also benefit from the GI Bill because of my husband’s active duty service. I am looking forward to learning and understanding more.
With Aloha,
Lorraine
Hi Lynn,
You made this statement above:
“Obtaining your preliminary EFC, however, can be an excellent way to determine if a family should be seeking need-based aid or looking for schools that award healthy merit scholarships.”
What about the student with great grades and scores (not for the most selective colleges) that requires need-based aid to attend college? Is there a good list of colleges that take both need and merit into consideration?
The link to the “Most Generous Colleges” doesn’t seem to be working.
Thanks Priscilla for letting me know. I fixed it!
Lynn O’Shaughnessy
The link to the most generous colleges does not work – at least it didn’t work for me. When I click on the link I get a window saying “404 – page cannot be found”.
Thanks John for letting me know. I fixed it!
Lynn O.
My daughter has an UTMA Account CA Age 21. My understanding is that we do not need to include this when calculating our EFC until she turns 21. Do you know if this is correct?
Hi Dena,
Is she the college student? The money would be treated as her assets which would be assessed at 20% (FAFSA) and 25% (PROFILE).
Lynn O.
Yes, she is the college student. So it would be assessed at 20% even though she doesn’t have access to it until she turns 21?
Hi Dena,
The age of the college student doesn’t matter. Custodial accounts are always assessed as a child’s assets. So when need-based aid is at stake, it’s best to use the UGMA/UTMA money first before using assets assessed as parental assets.
Lynn O.
Ok – thanks, unfortunately she won’t be able to use it until she turns 21 so it will be assessed at the full value for 3 out of her 4 years even though she can’t use to pay for anything until her 4th year. Correct?
You can use the custodial account to pay for college as soon as you get a bill. I don’t know why you believe your daughter would have to wait until her last year in college to use it.
In fact, you can start using the money in the custodial account before she enters college. Doing so would be a way to reduce the financial aid hit. You could charge your daughter for things not directly related to feeding her and putting a roof over her head. You can charge her for such things as a car, gas, entertainment, tutoring, courses, allowance, vacation etc. You wouldn’t actually be charging her rather you would be taking the money out of the custodial account and putting it into your accounts so you could then have it for college. Doing so would allow the money to be assessed as a parent asset rather than the child’s asset which is much preferable for the financial aid formulas.
Lynn O.
Hi Lynn:
Thanks for your help. I was able to talk to a financial advisor and got the complete scoop. Since it is a UTMA Account CA Age 21, I was thinking she couldn’t access it all until she reached the age of 21. However, she can use it to pay for school prior to the age of 21, but the funds must be paid directly to the school. If there is any money left when she reaches 21 then she can access it for anything. It cannot be used for anything other than school prior to her reaching the age of 21.
D
Hi Dena,
The money can be used for expenses that would benefit her like I mentioned earlier. It doesn’t have to be for schooling. I don’t think it is required to have the money from a custodial account transferred directly to a school. I would ask the financial firm where the custodial account is maintained that question.
Lynn O.
Hi Lynn:
You are very speedy in replying! Thank you!
The first two people I talked to at the financial firm insisted that it must be directly related to school, however, I talked to someone today who agrees with what you have told me. I appreciate your help. I’m getting the forms and the ball rolling to start pulling money out of this account.
D
Hi Dena,
I try to answer as soon as I can! I am glad you appreciate it. 🙂
Lynn O.
FAFSA question…
As of today (6/6/16) and with a Rising Senior who will graduate HS in 2017, I believe that we cannot initiate a FAFSA to get a view into our EFC until the 2017 process opens in October 2016, is that correct?
I am asking because in your class you list the EFC as the FIRST THING TO DO…. So the first thing to do, is something we actually cannot do until Oct 2016 right? Just making sure I understand the FAFSA / EFC topic and I’m not missing something. 😉
Thanks
Hi Michael,
Thanks for your question!
What I’d like you to do is obtain your preliminary EFC(s) by using the EFC Calculator which you can find on the College Board website.
You are right that you can’t get the official federal EFC until you file the FAFSA, but you should get an idea of what your EFC would be ahead of that time.
Please read the lesson entitled, How to Use an EFC Calculator, and you’ll understand what you need to do.
Lynn O’Shaughnessy
Hi Lynn,
What is considered untaxed income? We funded HSA account from our savings —so is this considered untaxed income? Also my wife maxed out her 401K in 2015 as this was her last year of working full time. Her health will not allow her to continue as a full time PT so our income will reduce in 2016 and beyond —-she will retire in 2 years. Also I came across something called income protection allowance —how does this impact our financial aid calculations.
My wife and I are both in our early 60’s with a high school junior applying for college this coming fall.
Frank Spicer– enjoying your college cost lab
Hi Frank,
Untaxed income includes such things as contributions to a health savings account (HSA), contributions to 401(k), 403(b), traditional IRA, received child support and the untaxed portion of IRA, pension and annuity distributions.
The pretax money that you contributed to your HSA and your wife’s 401(k) will be added back into your income.
The FAFSA formula automatically shelters some nonretirement money from the aid calculation. It depends on the age of the oldest parent and is automatically done by the calculation. The PROFILE also shelters some money, but this part of the aid calculation is proprietary. You will learn about the income and asset allowance by reading the lesson entitled, Investments and Financial Aid and you will see the federal allowance table.
I am glad you are enjoying the class!
Lynn O’Shaughnessy
Hi Lynn, I have 3 asks:
1. as business asset may not be considered, shall we setup LLC for the real estate investment so that its asset net worth is not assessed or minimally assessed?
2. for CSS/Profile, when is the latest time we can submit? or it needs to be submitted prior to application submission
3. for private colleges / universities, should student apply for Early Decision, does it mean that financially the student & family are committed? thus no financial aid or scholarship or grants is needed
Hi Justin,
You can’t protect investment property just because you put it in an LLC. That just won’t work; it would still need to be declared on financial aid applications.
As for the PROFILE, you need to find out what the financial aid deadline is for each school. The deadlines will vary by schools.
If you file Early Decision, you should be committed to attending the school regardless of what the award package is. Filing ED can give an admission advantage at some schools. You can look at the ED stats of schools (for those that release them) and the regular admission stats on the College Board website. Just pull up the school’s profile and then click on the Applying link.
If the award package isn’t adequate a school can’t force you to attend. You can request more money from a school, but you should have solid reasons for requesting it.
Lynn ‘O’Shaughnessy
Troy’s articles are very informative – a very good read!
very enlightening
Hi Lynn,
How can one determine their EFC without submitting yet to FAFSA? My daughter is just entering her Junior year and as I explained in my introductory e-mail In the “Welcome: Introduce Yourself, Child, and Questions” section to the College Cost Lab, we have a very modest income but own property; we have 2 rental income properties which we rely on for our income and are our retirement nest egg. We re-financed one rental property to pay-off our home. Do we put both rental properties into an LLC so that they would be considered “small business assets”? The estimated cost of doing that in Philadelphia would be atleast $16,000. Would this be worthwhile?
We don’t want to fill out a FAFSA if we may be repositioning our assets.
Please advise,
Thank you!
Tracy
Hi Tracy,
Obtaining your preliminary EFC is not connected at all with the FAFSA. Please keep reading the EFC lessons to learn how and why you need to get this number(s) and how to use the EFC calculators on the College Board website.
Lynn O.
if you know you won’t qualify for aid, could there be a downside to filling out the FAFSA – do colleges look at this before determining merit as well? I wonder sometimes if too much information in their hands is a bad thing before learning about merit aid awards.
Hi Joni,
If you absolutely know you won’t qualify for financial aid, the only reason to file the FAFSA is to be eligible to borrow federal loans. If you want to do that, you can file the FAFSA after your child gets accepted.
This would not be a strategy, however, for families who don’t want schools to know they are applying for financial aid until after they receive the acceptance. Families who do that will probably end up with nothing.
Lynn O’Shaughnessy
Our daughter is a junior now and we have been told we should fill out the FAFSA right after 1/1/16 based on our income for 2015. Is this true? If we do it now, it will be based on our 2014 income, which will be considerably higher then 2015 (we own a small business) and not give realistic figures for when we actually will be attending in Fall 2016. Are we correct here, or should we fill it out now and guess what our numbers for 2015 will be?
HI Stephen,
You can’t fill out the FAFSA until Jan, 1, 2016 or later. It will be based on your 2015 income.
Lynn O.
Lynn,
Is there a chance for students to receive both merit and need based aid as part of their financial aid package from a school that offers both (for example, Rice or Emory)?
Hi Maya,
Yes students can get both types.
Lynn O.
Lynn,
When I use the 2015-2016 Federal EFC Quick reference calculator/table compared to the calculator for Federal Methodology(FM) on the College Board website I come out with a much lower EFC (about 7k difference for about 100k income and 2 kids-but only one in college). Am I doing the calculation wrong?
Susan
Hi Susan,
I am unfamiliar with the quick reference calculator that you refer to. The College Board’s EFC calculator should be correct.Perhaps you didn’t input all your info correctly.
You could use the FAFSa4caster as a second reference. This is the FAFSA EFC calculator on the federal website. Here is the link: https://fafsa.ed.gov/FAFSA/app/f4cForm?execution=e1s1
Lynn O.
I was referring to the color coded income chart in the 11/24/14 article on the Stratagee.com website also called the 2015-2016 Federal EFC Quick Reference Table.
Is this just to provide parent’s with a rough estimate?
I will try the FAFSa4caster as well.
Do you have a feel for what percentage a parent needs to add to their college budget for unforeseen costs (not including travel)?
Also, you have mentioned College of Idaho a few times. I graduated from there in 1985 with a business degree and had a great experience. I knew a friend who needed a class to graduate in four years but it wasn’t offered the semester he was available to take it. The professor let him take it independently (that is a 1:1 ratio). I also had an upper level business class in the winter with only 7 students once!
Susan
Hi Susan,
That income chart is only intended to be used as a rough estimate. The EFC calculator should be more accurate because it has your actual income and asset information.
Lynn O.
Yes, the chart is just for a rough estimate.
I don’t really have any suggestion about how much to add to your college budget beyond travel, books and personal expenses. Those are the categories that the College Board lists for schools beyond tuition and room/board.
I am glad you had a good experience at College of Idaho!
Lynn O.
This past year we had an inheritance and put $22,900 into a retirement account. I understand now that the FAFSA sees that as money we could use or have used for our children’s education. Would it have “counted against” so to speak in the EFC calculation as much if we had simply put it in an mutual fund, since there’s an exemption for the first $40,000+ (we’re both 61).
Hi David,
I’m not a tax preparer nor do I know how much you make to be able to answer that. You get some of your income sheltered in the formula too.
Lynn
Lynn,
My husband is currently unemployed but is starting his own business. There is no revenue yet and we can’t even begin to estimate how much he will make going forward (there are so many variables). How do we even begin to calculate our EFC? I’m not sure if using last yr’s income will help as I don’t know how far under/over we will be this year…
Hi Maya,
I really appreciate your predicament, but you can’t use an EFC calculator without providing some estimate of income. You can play around with different income scenarios to generate different EFCs, but just as you said these are just going to be guesses.
Lynn O.
Hi Lynn,
Since our EFC is much too high to qualify for any need-based aid, is there any reason to complete the FAFSA form? Does a school still require the FAFSA to consider providing merit aid? Is there a disadvantage if we don’t complete the FAFSA?
Thanks,
Kevin
Hi Kevin,
Some schools do require filing the FAFSA to get merit aid. One school that I know that requires this is Georgia Tech. I once asked the admission/financial aid director of Pomona College how common this practice was. He said it’s not common, but it’s not rare. So what I’d suggest is to ask schools that your child is interested in if they require the FAFSA filing to qualify for merit aid.
Lynn O.
Thanks!
sorry i mispoke on my introduction section abt my EFC. My EFC is $20k i.e. what I can afford but when I run the Net Price Cal on the prestigious LA schools like yale, princeton, colgate, haverford, hamilton, bowdoin, carelton, conn college, emory, washington and lee, smith, etc they say my EFC or Net price should be a whopping $50k – $30k over my budget!! So i know I wont qualify for generous grant money from these schools bc according to them my need is low which i dont know how they figured out – uugh!
Hi Vijay,
I would read the lessons on Expected Family Contribution. Your EFC isn’t what you think you can afford to pay, but what the formulas think you can pay based on your income and assets. If you have a high EFC, which it sounds like you do, and you can’t afford the most expensive East Coast schools then you will have to expand your territory to look for less expensive schools that provide good merit aid.
Lynn O.
agreed maam, agreed
Hi. Lynn. What if my EFC is around $21-$24k would I look for merit aid or financial aid? Our AIG is a little above $100K as we don’t have many tax shelters for our money.
We would like our son to go to a fairly prestigious high price (they all are) liberal arts college/university. Thank you.
Vicki
Hi Victoria,
Good question! If you apply to a school that has a very good financial aid policy, your son would qualify for need-based aid. If he got into a school that meets 100% of a child’s financial need, he would get a lot of need-based aid. If he applied to a private school with a mediocre aid policy, he would likely just get a merit award and nothing else. This might be okay if you look at schools that aren’t on the coasts that have lower sticker prices. Some schools fitting this description can be $15,000, $20,000 or even $25,000 cheaper before scholarships are applied.
Lynn O.
Can you speak more about the 568 President’s Group http://568group.org/ and how they might look at/estimate EFC especiallywith regard to monetary assets and home equity? My daughter is interested in two colleges on that list.
Hi Deborah,
I’ve patched in below what I wrote about the 568 President’s Group in the lesson on the CSS/Financial Aid PROFILE.
To minimize dramatically different aid results, 24 prestigious private schools, which require the PROFILE, say they treat a family’s information on the financial aid application in a standardized way by using the so-called Consensus Methodology. The schools that use the Consensus formula, including University of Chicago, Northwestern University, University of Notre Dame, Amherst College, Grinnell College, Vanderbilt University, Duke University and four Ivies, belong to the 568 Presidents Group. Presidents of these schools formed the group in the 1990s when the federal government ruled that a decades-old practice of need-blind schools consulting with each other about need-based financial aid for accepted students was an anti-trust violation.
Under the Consensus methodology, parent and student assets aren’t assessed as harshly as they are with the FAFSA and other PROFILE schools. Parent and student assets are assessed at 5% for financial aid purposes. With other PROFILE schools, parent assets are assessed at 5%, but student assets are assessed at 25%. The FAFSA assesses parents assets at a maximum 5.64% and student assets at 20%. Many of the schools in this group cap home-equity calculations at 1.2 percent of income.
I question whether these schools are all really following these guidelines. For instance, Boston College, which is in this group, assesses financial aid quite harshly and it uses the full home equity against families. I wouldn’t put much stock into the Consensus methodology. Your best bet is to use the net price calculator for each school.
Lynn O.
Lynn,
I’ve been using the NPC at several schools (most of the calculators are through the College Board site as you’ve suggested) and notice that some of the schools NPC’s request GPA’s and SAT/ACT scores while others do not.
Are the schools that request the test scores actually considering academic scholarships in determining their grant/gift awards or are they solely focused on the income from your tax return?
Hi Brian,
Schools that require test scores and GPA’s are asking because they offer merit scholarships and need the information when making the awards. T
Lynn O.
So Lynn, do you suggest filling out a FAFSA for my son now, as a highschool junior? Will the fact that we already have a daughter in college be factored in to our EFC figure?
Hi Sharon,
Thanks for your question.
Actually, the first day that you can file the FAFSA is Jan. 1 of your son’s senior year in high school.
The fact that you will have two children in college at once will lower your EFC. With the federal formula (FAFSA), your EFC will decline by roughly 50% and if you apply to schools that use the CSS/Financial Aid PROFILE form (nearly all of these will be private schools), your EFC would decline by about 40%.
You’ll learn more about the methodology for the FAFSA and the PROFILE in the Financial Aid Basics module.
Lynn O.
Thanks, Lynn. I would imagine going back to work, however, would raise the EFC for the following year? And the plot would thicken if I both worked and went back to school myself—is this correct?
Hi Sharon,
If you went back to work your income will raise your EFC, but I assume you will have more money to help pay for college. Having more money for college is a good thing. Remember that a decrease in EFC doesn’t mean that a student will receive more aid. He or she could send up with just more loans.
Schools typically don’t give families a break if a parent attends college at the same time. You could, however, ask for a professional judgement after an acceptance.
Lynn O.
Ok. I am wondering how to go about looking at colleges now, in his junior year, if we can’t obtain an EFC until senior year?
Hi Sharon,
Thanks for your question. Getting an idea what your EFC(s) is will be is important and should be done long before your child is a senior in high school. Understanding what your EFC should help you target what kind of schools your child should be looking for when affordability is important. If you have a lower EFC, you’ll want to look for schools that are generous with need-based aid and if you have a higher EFC, you’ll want to look for schools that provide merit scholarships to high-income students. If your income/assets change significantly, you’ll want to use the EFC calculator again.
Lynn O.
Pardon my ignorance about the EFC but this a good site
http://www.aie.org/pay-for-college/understand-college-costs/efc-calculator/EFC_Index.cfm
or do you recommend another
to get an unofficial EFC since the “real one” won’t be tabulated until he is actually applying with a FAFSA?
Hi Sharon,
I recommend using the College Board’s EFC calculator since this organization is the creator of the CSS/Financial Aid PROFILE. I think it’ makes sense to get your institutional EFC from the source!
Here is the link: https://bigfuture.collegeboard.org/pay-for-college/paying-your-share/expected-family-contribution-calculator
Lynn O’Shaughnessy
Hi Lynn,
There is a comment Box showing up on the EFC lesson so I will introduce myself on this box:
1. Where are you from and what can you tell us about your child(ren)?
I am a middle-aged divorced working mom (lower middle-income/Caucasian) from El Cajon, CA (East San Diego County). My oldest daughter is a Senior in the Engineering Pathway at Santana High School (4.5 GPA, SAT Score of 2140 but only 1360 without the writing component) who last weekend took the SAT Chemistry & Math II tests totally unprepared/sleep-deprived so those scores may hurt her choice of colleges. She is active in clubs at school, on the golf team, active in church and Is the Honored Queen, aka presiding officer in Job’s Daughters – a community service-type of organization.
My younger daughter is a Freshman at the same high school and is currently hoping to pursue some type of health/medical career and is in the Medical Pathway. She had a 4.0 GPA in Jr. High and received the Academic Achievement award at her school (the highest GPA of the 8th grade class – all A+’s.) She is also active in a few clubs at school, on the JV tennis team, active in church and in the position of Guide in Job’s Daughters (a leadership position in line to be the Honored Queen in 1.5 years…)
2. What do you consider your biggest challenges as you contemplate surviving the college admission process?
Helping my daughter select the best college for her Engineering major (Civil or architecture) and one which can offer her a package which covers more than 100% Financial Need as I cannot put any $ towards her college other than her home living expenses & bus fares as I am currently doing. I was excited to find out from a previous lecture of yours that it is sometimes possible for a honor student to receive great offers, even ones which cover tuition & room & board and that is what we are hoping for. SDSU is our backup choice as her high school has an agreement with the Engineering program there.
3. What do you hope to get out of this course?
Answers on how to make the wisest decisions and to understand the process correctly.