Question For Jean: “What exactly is an EFC?”

Dear Jean,

We attended a college financial aid night at our daughter’s school and the state representative kept using the term EFC but never truly explained it. What is it and why is it important?

Signed,

Confused in Nesconset, NY

Dear Confused,

The “EFC” is financial aid lingo for Expected Family Contribution and is the single most important number you need to know if you’re serious about college planning. It’s important because it is the MINIMUM amount the colleges are going to expect you to pay for your child’s college education.

Your EFC is determined when you file the FAFSA, the CSS PROFILE and/or a college’s own financial aid form. Every family has TWO family contribution numbers: a FEDERAL EFC, which is determined by the FAFSA; and, an INSTITUTIONAL EFC which is determined by the school itself, usually by using the CSS PROFILE or their own financial aid form.

Sometimes the school’s institutional EFC and the FAFSA’s EFC are the same; sometimes they’re not.

What’s important to understand is that the Federal and Institutional EFCs are merely starting points for the schools. That is why it is so critical to get this number as low as possible.

Your EFC determines how much, if any, need-based financial aid you’re eligible to receive. For example, if your EFC is $10,000 and a school costs $25,000, you are eligible for $15,000 in need based financial aid at that school.

Since College Financial Aid Officers have a lot of discretion when it comes to manipulating the family contribution numbers, you want yours as low as possible.

The lower your expected family contribution, the less you’ll ultimately pay.

Both the Federal and Institutional calculations of the Family Contribution work under the following premises:

$ The Expected Family Contribution is an estimate of a family’s financial strength– how they can absorb the cost of paying for college, based on financial resources available. This is key: it looks at financial resources available, NOT how those financial aid resources are being used (i.e. debt, high living expenses, etc.)

$ Income plays the biggest role in the formulas used to calculate the EFC.

$ The Expected Family Contribution is based on ability to pay– not WILLINGNESS to pay.

$ EFC is not an estimate of your “left-over” resources from family finances once otiStock_000003060162Small.jpgher responsibilities are met.

$ The Government and the Schools expect families in similar circumstances to pay similar amounts.

$ Parents AND Students share responsibility for paying for college

$ The EFC is always based on the previous year’s income.

Knowing the premises behind how the EFC is calculated and used allows families to set proper expectations when it comes to financial aid.

Your Get NOTICED, Get IN, Get MONEY Assignment: Learn your EFC — It’s critical to your college plans. Once you know your current situation, you can better plan ahead when it comes to college! You need to make sure that you’re including financial aid considerations in your comprehensive college plan!

Even if your student is already applying to colleges.. it’s not too late.

Don’t be like the countless of families who right now aren’t even thinking about the mo.ney part of the process.

They won’t start thinking about it until February or March when most families file the financial aid paperwork. And then it is way too late! They (and you if you don’t do things differently) will have missed out on CRITICAL opportunties that are available right now to maximize their chances for mo.ney to help pay the college bill.

Fail to plan this properly and you WILL leave money on the table.