Jenni, a member of our Paying For College 101 Facebook group, studied her family's Expected Family Contribution (EFC) early in the college application process. That's because she knew she had an unusually complex situation. She didn't have just one student readying on her freshman year. She'd two – twin daughters both taking off for school simultaneously.
She used this very thorough spreadsheet put together by another member of the group to calculate finances, including the families' savings and debt, also to see exactly what the EFC outcome could be if perhaps one daughter visited college and also the other didn't.
“We also played with numbers to determine whether it was worth a little of our savings and paying down some bills – just like a auto loan – in our case moving $15,000 from savings to pay off a car loan,” she said.
“That did not have that much effect on the bottom line EFC – so in our case it had been better to keep the $15,000 in savings where it's in a high yield checking account earning about 3% interest than paying off an auto loan which has a 0.75% rate of interest.”
What Does My EFC Number Mean?
The EFC is a number in line with the finances that you simply set of the disposable Application for Federal Student Aid (FAFSA).
What does EFC mean around the FAFSA? Colleges go ahead and take information in the FAFSA to calculate your EFC with a formula established by Congress. Cost of Attendance (COA) minus Expected Family Contribution (EFC) equals the quantity of Financial Need.
All of the taxed and untaxed income, including your student's income, assets like savings and benefits, including unemployment or Social Security, are utilized in the EFC formula.
Your family's size and the quantity of family members attending college during the year also is figured into the equation. Consumer debt – charge card balances, mortgages and auto loans, for instance – are not calculated.
The higher the EFC score, the greater you're expected to pay. Families should keep in your mind the EFC is often the minimum a college expects a family to pay for. Often, families pays a lot more.
For example, let's imagine your family's EFC number is 3500. Your will be expected to pay a minimum of $3,500 toward your student's tuition.
Some colleges also employ a tweaked version of this federal formula to create their very own “institutional methodology.” Many private universites and colleges use the CSS profile, a form along with FAFSA, to find out eligibility for non-government needs-based financial aid, such as the institution’s own grants, loans and scholarships.
Your EFC score will begin at zero and continue in to the thousands. The higher the EFC, the greater money the federal government thinks you can pay for college from your financial strength. A high EFC score means your student will receive less need-based federal financial aid to go to college.
The closer you will get to zero, the greater federal dollars you’ll have access to for paying for college.
Some schools offer needs based educational funding, which supports cover the gap between your EFC and the cost of college. But if you can’t even afford your EFC or if there’s still a tuition gap despite receiving educational funding, then loans will likely need to cover that difference.
That means more debt for you and your student after college graduation.
A Net Price Calculator Is Your Friend. Here’s Using It.
Many parents make use of the Net Price Calculator on college websites. These prices vary widely.
For example, one parent testing out different college calculators found costs ranged from $13,000-$63,000. Still, using net price calculators is a good idea.
For some families using the net price calculated helped them eliminate schools that cost too much and in turn they avoided visiting those schools and accumulating unnecessary travel costs to some college that ultimately wouldn’t be a family’s financial fit.
For now, net price calculators are the most useful tool open to work out how much a university will in fact cost. You can estimate just how much you'll be likely to pay out of your own pocket for that year and figure how much educational funding might be open to fill the gap.
The calculators, whether on the college or around the College Board site, are made to show college costs for any first-year student. You can create different scenarios, too, during these calculators.
For example, some permit you to model for those who have two students attending college.
Before you utilize one of these simple calculators, you will need to have the forms handy to input the information:
- Tax Returns (Three years is usually recommended)
- Bank Statements
- Investment Statements (non-retirement accounts)
- Business Statements (if either parent or even the student owns a business)
If you do make use of the EFC calculator around the College Board site, don't forget to create a College Board account so all of your EFC calculations will not be lost. You are able to complete multiple net price calculators and save the outcomes on the College Board account.
All colleges have to possess a net price calculator although not all of them are the same. Some only calculate the need-based aid.
Others want information to help calculate merit aid like more scholarship opportunities.
None of them go ahead and take cost of living like food and gas price – all which add to the price of attending college.
Prevent EFC Sticker Shock
Families often are stunned by their EFC score, since the number doesn't reflect what they can realistically afford.
Just because two parents could make $100,000 annually and have $50,000 in savings does not necessarily mean that they can manage to contribute nearly $18,000 a year or even more to some child's college expenses.
They still have to eat, perhaps enjoy a vacation and set more savings away for their retirement.
Holly Ingebo, a military parent with two students in college, was stunned when she saw her high EFC score on the FAFSA.
“I wouldn't say I cringed, however it was a lot more like shock or disbelief,” Ingebo said. “Then I would say a feeling of hopelessness that my children would not be able to get any help paying for college and that we were stuck.
As an effect, my children have often had to drop classes or reduce their course load so they perform more.”
While paying tuition has run out of the question for Ingebo to help her children, she helps them in different ways with books, mobile phone bills and auto insurance.
Ingebo never calculated the EFC number just before filling out the FAFSA and first saw it on the Student Aid Report. Many parents, though, suggest understanding the score way in advance
“The EFC is not difficult to figure out provided you have all the information ready to go,” Jenni said. “If you financials are straightforward, i.e. you have a somewhat set yearly salary also it doesn't fluctuate much from year-to-year then you should be fine getting a ballpark figure.”
But she warns that families with yearly fluctuating finances – such as a contract worker or perhaps a individual who receive performance-based bonuses – could find the EFC harder to calculate.
Although sometimes the EFC may give you an anxiety attack, it's vital that you should know your number as soon your child starts the school application.
Your EFC score will certainly affect your money, some way.
Understanding your EFC score can also help guide you to test for a lower EFC score, and there are a few ways to help make your EFC lower and correct.
It's worth the investment of time to calculate the EFC to prevent major sticker shock when trying to get a specific school. Even with educational funding and scholarships, a college could be from your budget range.