Colleges needed a fair way to assess a students’ financial need and to determine what scholarships or loans they’re eligible for. Expected family contribution or EFC is the number used by colleges to figure this all out.
Below, we’ll explain what EFC is, what it’s used for, how to calculate your estimated expected family contribution, and how to appeal it.
What is the Expected Family Contribution?
What is the Expected Family Contribution Used For?
Colleges use your estimated expected family contribution to determine your family’s financial need. They subtract your EFC from the cost of attendance or COA, which includes tuition, room and board, supplies, and books. The difference is the amount of need-based aid you need in the form of scholarships, grants, work-study, and subsidized federal loans.
Cost of Attendance – Expected Family Contribution = Financial Need
A low EFC means that you’ll qualify for more federal-based aid. A high EFC means that you’ll need to resort to other options like unsubsidized federal loans, Parent Plus Loans, private loans, or savings.
The Two Types of EFC
Depending on where you attend college, your EFC is calculated using one or two methods—institutional and/or federal. All students have their EFC calculated using the federal methodology (FM). This determines your eligibility for federal financial aid as well as institutional-based aid (in most cases).
Students attending certain private colleges or public colleges also have their EFC calculated using an institutional methodology (IM). It’s a slightly different calculation that tends to place more responsibility on the student. The University of Michigan, UNC-Chapel Hill, and the University of Virginia all use IM to determine eligibility for institutional grant money.
Calculating the Estimated Expected Family Contribution
Figuring out how to pay for college is stressful. Determining your estimated expected family contribution can give you some answers as you await official financial aid documents from your chosen college(s). The federal government and colleges use a specific formula to calculate a family’s EFC, but there are a few ways that you can do it yourself.
Use an online EFC calculator to calculate your estimated expected family contribution. Bear in mind that you will need to input a lot of personal financial data, so choose the site carefully. College Board, the organization that oversees the SATs and AP tests, offers a free EFC Calculator. It’s thorough and has you input the same type of information that goes on your FAFSA. You’ll need access to your and your parent’s tax returns from two years prior to fill it out properly.
Just to give you an idea about what to expect, here’s a sample of what the calculator determined given the following information:
Mariah is 18, has no siblings, lives with her married parents, and is planning to attend the University of Virginia. Her parents had a combined adjusted gross income of $50,000 in 2017 and have $6,000 in savings. Mariah had an adjusted gross income of $1,000 in 2017 and has $1,000 in savings. Her family rents, so they don’t have any equity in a house. Based on this information, Mariah’s EFC is as follows:
$3,761 for Parents + $200 for Mariah = $3,961 Total EFC
$2,021 for Parents + $1,261 for Mariah = $3,282 Total EFC
For Mariah’s circumstances, her EFC for federal aid is higher than her EFC for institutional aid. Her college also places more weight on her income and savings and less weight on her parents’ income compared to the FM calculation.
Why Should I Calculate My Expected Family Contribution?
Calculating your EFC can help you better prepare for college. Since it considers your tax return from two years prior, you could theoretically calculate your EFC two years in advance. This would only give you a rough estimate since the calculation method can change, but it’s better than nothing. Estimating your EFC will give you idea of your family’s financial responsibility when it comes time to pay for college. The knowledge can bring some peace of mind or motivate you to start saving.
Your family should use the estimated expected financial contribution to guide their financial decisions for the next two years. For example, based on the results, your parents could decide to open a 529 College Savings Plan. With this investment account, they can save money tax-free to put toward your future educational expenses. The money is considered the parents’ asset, so it doesn’t affect the EFC as much. Plus, it will accrue some interest, so you’re getting more than you put in.
Appealing Your Estimated Expected Family Contribution
The FAFSA has you submit income data using tax documents from two years prior. This is an advantage if your parents were promoted within the last year and your current income is higher. It’s also a disadvantage for some families because a lot can happen in two years.
Say both of your parents worked two years ago and brought in two full-time incomes. If your dad no longer works for whatever reason, your family’s current income looks a lot different now than it did on the documents you submitted for your FAFSA. To account for this, colleges allow you to submit an expected family contribution appeal. It’s a form where you can submit a request for a reevaluation of your family’s financial situation based on more recent financial information.
Valid reasons for an Expected Family Contribution appeal include:
- Reduced income or loss of wages
- Divorce or separation
- Death of parent or spouse
- Out-of-pocket medical and dental expenses
You can only fill out an appeal after you have submitted your FAFSA. Start the process by contacting your college’s financial aid office directly. They can walk you through the process and send you the appropriate paperwork. View Ohio State University’s Expected Family Contribution Appeal to get an idea of the type of materials you’ll need to provide with your appeal. Collecting these materials and writing an explanation of events will take some time, but it’s worth it. It could end up saving your family a lot of money and reduce your student loan borrowing.
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College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.