To understand what your expected family contribution (EFC) is, it helps to first understand what it is not.
Your CFE is not how much your family has to pay out of pocket for your college education, and it is not how much financial assistance you will receive. Rather, it’s what the federal government – taking into account your family’s finances – thinks you can contribute towards tuition. This estimated number is then used by your school to determine how many federal financial aid you might receive.
Your expected family contribution plays a critical role in determining how much financial assistance you can get from the federal government, at least until July 1, 2023. This is when the CFE will be replaced by the SAI, or Student Aid Index.
Specifically, here are some things you should know about EFC:
The CFE is just that – the estimated amount the government calculates that you and your parents, in most cases, can afford to spend towards the cost of your education. This is one of the four factors your school uses to determine the amount of need-based assistance you can receive in the form of scholarships, soft or low-interest loans, and student financing.
The other three factors are:
- Registration status
- Year at school
- Cost of participation
When put on paper, your CFE is just a dollar figure. For some borrowers this could be as little as $ 0 (and an ISC, once it replaces the CFE, could actually be a negative number). For others, as much as the full attendance fees. A low EFC means you may be eligible for more financial aid, while a high EFC means you may have to rely on unsubsidized loans to cover costs your family cannot afford.
Behind the scenes, the EFC you receive is based on a complicated formula.
|Why is the expected family contribution replaced by the student aid index?|
|The FAFSA Simplification Act was consolidated into the Consolidated Appropriations Act of 2021 (also known as Congressional Second Coronavirus Relief Bill) sought to make it more clear to students and their families how their eligibility for a federal financial assistance would be determined.
● EFC has long been the number used by college financial aid offices to determine how much financial aid you should receive; it is not, as the name suggests, a direct reflection of how much you (or your parents) have to contribute out of pocket towards tuition.
● According to public opinion, the Student Aid Index more clearly describes a given student’s eligibility for financial aid, whether or not they are receiving parental aid.
Your CFE comes from the information you provide in your Free application for federal student aid (FAFSA). Completing the FAFSA is the first step you will take towards funding your education.
What you report on your family’s income has a direct effect on the CFE that ends up on your college award letter. But your independent or family income is just one thing that affects your CEF. The others are:
- Assets you own, like your home
- The benefits you receive, such as unemployment or social security
- The size of your family, including the number of parents attending school simultaneously
A student from a family that owns a home, for example, may end up with a higher CFE than a student with a single parent renting an apartment. But if that first student has three siblings also in college, their CEF will reflect that as well.
The above factors are used in the Ministry of Education formula to calculate CEFs. The federal agency publishes a detailed breakdown of this formula each year. Some important financial information, such as current credit card debt and student loans, is not included in the calculation.
To get a better idea of your own CEF, you first need to know what type of federal aid seeker you are.
|How will the calculations work for the Student Assistance Index?|
|When SAI replaces EFC for the 2023-2024 academic year, don’t worry about the drastic changes to the formula used to determine your eligibility for aid. The National Association of Student Financial Aid Administrators wrote in their guidelines, however, that some changes are underway. Notably:
● SAI would base Pell Grant amounts more on a student’s dependency status, among other household factors. Based on what we know today, it is reasonable to assume that more low-income students, independent or not, will have access to higher scholarship amounts once the Student Aid Index will be in place.
● SAI would not give the same break that EFC gave to familiesh several children enrolled in college at the same time. It’s fair to expect that if you have two kids in college by 2024, you’ll receive less federal financial aid than in 2023.
In the ministry’s 36-page explanation of how the CFE is calculated, there are worksheets for three types of federal aid applicants:
- Dependent students
- Independent students with spouse and no other dependents
- Independent students with dependents other than a spouse
There are standard and simplified formulas for each applicant. Applicants eligible for the simplified formula will not have to enter as much financial information to see their CEF.
For example, a dependent student whose family receives Supplementary Nutrition Assistance Program (SNAP) benefits and was not required to file an income tax return would be eligible for the simplified formula and therefore would not be required to file an income tax return. disclose family assets in its application.
To find your estimated expected family contribution, select and complete the worksheet in the Guide to EFC formulas that matches your family’s financial situation.
If you prefer to be guided through this process, try an EFC calculator like the one in The College Council. One of the benefits of using a calculator to find your CEF is that you can simultaneously fit your information into the federal formula and a separate methodology that private schools use to allocate grants. This will give you a more complete idea of the potential help available to you.
Regardless of how you estimate your expected family contribution, you will need to have the same information handy. Examples of necessary data may include:
- Income figures as precise as untaxed social security benefits
- Allowances like state taxes
- Assets, such as cash held in checking and savings accounts
- Other documents, such as your most recent tax return
To ensure consistency and accuracy, be sure to use the same financial information that you entered on your FAFSA in the calculator you are using.
Once you’ve completed the estimation process, the CFE assigned to you in your college award letters shouldn’t come as a surprise.
But it is possible that your life and financial situation will change dramatically after you file for your FAFSA. Your $ 10,000 EFC could drop to $ 5,000, for example, if your breadwinner suddenly loses their job or becomes ill.
For a student in a similar situation, an appeal process – called professional judgment – could give rise to an adjusted CFE which better reflects their ability to pay for their studies.
It is important to discuss any questions or concerns with your school’s financial aid office as soon as a problem arises. The representatives there can help you get the federal help you are now eligible for, regardless of your initial CEF.
There is a simple equation that can help you understand what your CEF actually means when funding your education. Just subtract it from your school’s cost of school attendance (COA):
COA – EFC = Financial need
And once the Student Aid Index arrives in July 2023, the equation will change slightly:
COA – SAI = Financial need
Your financial needs can be met from a variety of sources, including donations like scholarships and grants that do not have to be repaid. Ultimately, your CEF helps the federal government and your school decide how much need-based federal aid you may receive.
Your need-based assistance allowance cannot exceed your cost of participation. If your COA is $ 10,000, for example, and your CEF is $ 5,000, you cannot receive more than $ 5,000 in need-based assistance.
Common forms of federal need-based assistance include:
- Federal Pell Grant
- Federal Supplementary Education Opportunity Grant (FSEOG)
- Direct subsidized loan
- Federal Perkins Loan
- Federal work-study
Needs-based loans are generally preferable to other loans. A direct subsidized loan, for example, is a more profitable alternative to a non-subsidized direct loan because the government will pay interest on the subsidized loan while you are enrolled and during deferral periods.
The maximum allowance for each type of federal loan varies depending on your school year and whether you are an independent or dependent student. The maximum you can claim as an individual is shown on each college award letter you receive from schools where you have been accepted or are already enrolled.
But don’t be afraid to dispute what you received if it falls below the maximum mandated by the federal government. Your school may have room in its budget to meet your needs. For more information, see our guide on negotiate better financial aid.
In addition, any remaining balance could be filled by private student loans, one of the many solutions that can close a funding gap if you hit your federal loan limit.
Laura Gariepy contributed to this report.