Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Expected Family Contribution (EFC)

What it is:

The expected family contribution (EFC) is the amount of money that a family is expected to contribute toward a student's college tuition or expenses in a given year.

How it works (Example):

Upon completion and submission of the FAFSA, the student's financial information will be reviewed by the federal and state government education departments. Based on the financial information given, the student's financial need will then be assessed, and a student aid report (SAR) will be sent to the student's family as well as the potential colleges they may attend. 

The expected family contribution (EFC) is presented in the SAR. The formula used to calculate the EFC considers family income, student income, investments and assets, the number of family members enrolled in college, and the family size of the student's household.

The lower the EFC that is found on the student aid report, the higher the financial need, and the less a family is expected to contribute towards the student's college expenses. Also, the lower a student's EFC, the greater a student's eligibility to receive Pell Grants, Stafford and Perkins Loans. Another form of aid that may be offered is through the school's Federal Work Study Program (FWSP).

Why it Matters:

The expected family contribution is used by a college's financial aid office to determine the amount of financial aid that should reasonably be awarded to a student based on their financial need. Upon receipt of the student's SAR, the financial aid office will send the student a financial aid package which shows how much grant, loan or other financial assistance the school can offer the student.

It is possible for students to affect financial aid eligibility by reducing or increasing their EFC through the transfer of assets. Because holding assets in certain accounts may adversely affect a student's financial aid eligibility, a tax or financial professional may be consulted to ensure the student gets adequate financial consideration by the school's financial aid office.

[Related articles: 5 Simple Ways to Save on the Rising Costs of Higher Education7 Simple Ways to Pay Off Any Size Student Loan

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