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EFC doesn't matter, here's why.

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For years, high school counselors and college financial aid offices have been suggesting that families try to figure out their Expected Family Contribution (EFC) in order to estimate the expected contribution of a student's family for the academic year and help gain insight into the student's financial aid eligibility.  The trouble is most colleges' costs have risen so high that they may not be able to award enough financial aid to cover the difference between the costs and the EFC. This means that the EFC is less about a student and/or parent’s calculated financial strength to pay for college and more about a method to help distribute limited federal need-based aid dollars.

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How Does EFC Get Calculated

The federal government over the years has changed their tune about EFCs.  They used to tout in the 1998-99 Student Financial Aid Handbook that EFC “is the amount that a family can reasonably be expected to contribute toward college costs. The EFC is based on an analysis of the family's financial strength, including the income and assets of the student and the student's spouse or--if the student is dependent--the student and his or her parents.”  Currently, the Federal Student Aid website “Expected Family Contribution (EFC) is an index number used to determine your eligibility for federal student financial aid.”  There have been some adjustments in the manner the EFC has been calculated since 1998-1999.  Throughout this time, the calculation has focused its analysis of the family's financial strength based on income and assets as well as family size and the number of family members who will attend college during the academic year.

The EFC is calculated according to a formula established by federal law.  Both taxed and untaxed income, assets (other than the primary household equity, 401(k) plans, pension funds, and annuities), and benefits (such as unemployment or Social Security). If you want to get into the nitty gritty of how the federal EFC is calculated, check out the  The EFC Formula guide.

How Is EFC Used?

The calculated federal EFC is subtracted from the cost of attendance (tuition, fees, room and board, books and personal expenses) to determine the federal financial need. For instance, if your COA is $22,000 and your EFC is $18,000, your financial need is $4,000; so you aren’t eligible for more than $4,000 in federal need-based aid.

College financial aid offices use this formula to determine if students are eligible for the following federal student aid programs:

  • Federal Pell Grant
  • Federal Supplemental Educational Opportunity Grant (FSEOG)
  • Federal Work-Study
  • Federal Direct Student Subsidized Loan


Colleges may also use a state aid formula to use the federal EFC to award state grants, scholarships, and work-study programs.

Why EFCs Don’t Tell You Much

Most people think that if the federal government calculated their family’s contribution to $18,000, then colleges will be required to award them 100% of their financial need.  (Even more think this will all be met by gift aid - that is scholarships and grants).  The reality is that less than 80 colleges and universities award 100% of financial need in the US (see “Here's Every College That Offers 100% Financial Aid”).  In fact, most of these 80 colleges use their own institutional EFC formula that includes assets that the federal government excludes like the primary home’s equity and retirement accounts - not the federally calculated EFC.  Since there are about 4,000 accredited, Title IV eligible 4-year postsecondary institutions in the US, this means that knowing your EFC doesn’t help you to understand how much financial aid you will receive at the vast majority of colleges and universities. 

Some colleges may be able to award 100% of federal financial need for some of their students.  For example, some low-income families may qualify for enough federal and state aid that the college can “fill-in” the rest of the financial need with institutional aid.  Conversely, some families with just majorinal financial need (let’s say $4,000) because they have higher EFCs, colleges may be able to meet 100% of their financial need easily with institutional aid even if they don’t qualify for any federal or state need-based financial aid. 

The reality is that most colleges will gap you.  A funding gap or financial aid gap is when a college’s financial aid offer doesn’t meet the entire calculated financial need as defined by the federal and/or institutional formulas with need-based aid.  Some colleges disguise this funding gap by filling the gap in with unsubsidized Federal Direct Student Loans, Federal Parent PLUS Loans, and other forms of financing. 

Pro Tip:  Concentrate more on your net price - that is the cost of attendance minus merit and need-based scholarships and grants. Our College Financial Planner lets you quickly see the Average and income-based net prices for colleges.  Then you can continue on to see how far your savings and cash will stretch to pay the remaining costs and compare your eligible financing options.   

Another approach to finding out your net price is to use the college’s net price calculator (NPC).  Some NPCs are excellent at letting you get an estimate of your merit and need-based aid, while others are so simplified they really give you as much information as the EFC does about your need-based financial aid eligibility.

Will the  New Student Aid Index (SAI) Tell You More?

Starting in the 2024-2025 academic year, the federal government will move from EFC to the Student Aid Index (SAI).  The primary motive for this move is to stop the confusion of what the EFC name suggests - that it is the amount a family is expected to pay towards college costs. By including the concept of “index,” the SAI will help families to understand it’s more of an eligibility analysis or look-up.  In our opinion, the SAI will still not tell you much about how much financial aid you will receive.

The new SAI goes into effect when the new simplified FAFSA goes into effect for the 2024-2025 academic year.  The FAFSA will be reduced to a maximum of 36 questions vs. the 108 on the current application.  One of the benefits to this move will be that FAFSA filers will be informed of their Federal Pell Grant eligibility before they complete the form online.

Much like the EFC Formula, the SAI will take into account taxed and untaxed income, assets, and benefits.  However, there are differences.  For instance, the SAI will not consider workman’s compensation and veterans’ education benefits which will no longer be reported on the FAFSA, creating more federal financial need. Also, SAI will eliminate the math that helps families with multiple members who attend college during the same academic year. This will yield a higher SAI when there are two or more children in college at the same time, creating much less federal financial need. 

Similar to the EFC Formula, the SAI will continue to have income protection allowances for students and parents.  The SAI parent  income protection allowance will protect a bit more income.  In contrast, the student income protection allowance will protect less unless the student is a single parent.