Expected family contribution

The formula for computing the EFC changes each year. It is different for each of three categories of student (dependent students, independent students without dependents other than a spouse, and independent students with dependents other than a spouse) and is published in the Federal Register. An Department of Education document explaining how the EFC is determined was 36 pages long in 2017.[3] It considers income, family size, living expenses, and family and student savings. If the student is a dependent, the student's savings and income, if any, are considered highly available to pay for college. A student with a college savings fund in his or her name will have a higher EFC (if not qualifying for an automatic zero), and will thus receive less need-based aid.

• Automatic Zero: A student's EFC is set to zero if the family's income is below $26,000 for the 2017–2018 year and
  • they either received funding from any of the Federal Benefits programs (SSI, SNAP (formerly known as the Food Stamp program), WIC, or Free/Reduced Price Lunch), OR
  • they filed or were eligible to file a 1040A, 1040EZ, or were not required to fill out a tax return, OR
  • the parent is a dislocated worker.[4]
• Simplified Needs Test: Families meeting the above requirements except for having income between $26,000 and $50,000 are eligible for the Simplified Needs Test, in which assets are not used in the calculation.
• Independent students without dependents other than a spouse are not eligible for the Automatic Zero or Simplified Needs.[5]

There are several considerations that can potentially reduce the Expected Family Contribution (EFC) when calculating financial aid eligibility.[6] Here are some factors that can impact the EFC:

1. Number of Family Members in College: If there are multiple family members attending college at the same time, the EFC for each student may be reduced. This is because the cost of education is divided among the family members, recognizing that there are multiple students with financial needs.
2. Family Size: The size of the household affects the EFC. Generally, as the number of family members supported by the parents' income increases, the EFC decreases. The more dependents a family has, the more financial resources are typically allocated to meet their needs.
3. Income Protection Allowance: The federal government provides an income protection allowance based on the size of the household and the number of family members attending college. This allowance ensures that a portion of the income is not included in the EFC calculation, providing some relief for families.
4. Asset Protection Allowance: Similar to the income protection allowance, there is an asset protection allowance that exempts a certain amount of assets from consideration. The specific amount depends on the age of the older parent and whether they are married or unmarried.
5. Need-Based Aid Formulas: Different financial aid formulas used by colleges and universities can also impact the EFC. Some institutions use their own methodologies or consider additional factors beyond what is required by the federal government. These formulas may result in a lower EFC for certain families.
6. Financial Hardship: In some cases, families may experience significant financial hardship that is not adequately captured by the standard EFC calculation. In such instances, families can appeal to the financial aid office and provide documentation to demonstrate their extenuating circumstances. The financial aid office may exercise professional judgment to adjust the EFC based on the individual situation.

It's important to note that while these considerations can potentially reduce the EFC, the actual impact on the final EFC calculation will depend on the specific circumstances of the family and the policies of the institution providing the financial aid.

Items that lower a student's EFC:

• Additional family members supported by the head of the household (e.g., siblings or grandparents who are living at home)
• Additional family members in college. (The EFC is split among the students in college.)
• Lower income (especially student income)
• Fewer assets (especially student assets)

Colleges or universities have the legal authority to lower the EFC if there are unusual circumstances, usually brought to the financial aid office's attention as the result of an appeal of a financial aid award. These circumstances include:

• Loss of employment
• Loss of child support, alimony, etc.
• Separation or divorce
• Death of parent or spouse
• Large medical or dental expenses not covered by insurance
• Income that was abnormally high because of a one-time lump sum that will most likely not occur again

Aspects that are not considered in the calculation of the EFC are:

• The equity in the family's principal home. (Additional homes and other real estate holdings are counted.)
• Parental retirement funds, such as 401ks
• Consumer debt, such as car and credit card loans