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What Your EFC Tells You - And What it Doesn't

I wanted to title this post "Why the EFC is Junk". Don't get me wrong, it's an important number. But it's a number created by a government calculation and may not have anything to do with the reality of what you can afford to pay for collge, nor what you will receive in financial aid.

And these days, the best time to start thinking about your EFC is when you are saving for college, not when you have to start paying for it. That way you avoid the sticker shock that comes when your child is a senior in high school!

The official definition of the EFC from the FAFSA website is this:

  • The Expected Family Contribution (EFC) is a measure of your family’s financial strength and is calculated according to a formula established by law. Your family’s taxed and untaxed income, assets, and benefits (such as unemployment or Social Security) are all considered in the formula. Also considered are your family size and the number of family members who will attend college during the year.

That's all fine and well in that it tells you what it IS (kind of). It doesn't tell you what it means.

It used to be that your family's EFC actually told you something useful. Back in the day when college was much less expensive, your EFC told you what you were expected to pay towards your child's education. The gap between what it cost to attend the school and your EFC was the amount of need-based financial aid you could expect to receive. Financial aid was available through federal grants, state grants, college awards, work-study and subsidized student loans, and covered the whole gap. 

Unfortunately as the cost of attending college has risen, the amount of grant money available has declined. So now we're in a situation where only a small percentage of schools meet 100% of the need (i.e. gap) calculated using the EFC. 

So today, the EFC tells you what the government THINKS you should be able to contribute to your child's education. That's it. It doesn't tell you how much you can actually afford to pay (check this post for that), nor help you determine for sure how much financial aid you will receive. 

What is does tell you is whether or not you will be ELIGIBLE to receive need-based financial aid, depending on the cost of attendance (COA) at each school. For example, if your family EFC is $15,000 and the school COA is $25,000, you are eligible for $10,000 in need-based financial aid ($25,000-$15,000). If the school COA is $12,000, you are not. It's that simple.

As for what % of need you can expect will be met, check out http://www.thecollegesolution.com/list-of-colleges-that-meet-100-of-financial-need/ and http://www.coalitionforcollegeaccess.org/ for school ideas. If you are interested in specific schools, you can look them up on CollegeMatch or search only for schools who meet a certain percentage of need.