With the cost of education increasing in incremental amounts every year, financing education has never been a more important issue. One of the main sources for this educational financing is government financial aid. Government financial aid is distributed based on financial need. This need is discovered using the EFC table, or Expected Family Contribution.
Your EFC number is the amount of money that the government feels you and your family should be able to put towards your educational costs. This number is achieved through imputing a variety of factors having to do with yours and your family's financial statistics. Once you EFC has been calculated, your college of choice will take the EFC number and using an EFC table will determine how much of the school's available financial aid you will receive.
Regardless of what college you choose to attend, or the cost of that college, your EFC will be determined the same exact way. Two students with the same financial information, but attending a private university and a community college, would still have the same EFC regardless of the cost for school. However, there are varying factors depending on whether you are a dependent or independent student. An independent student's EFC no longer takes into account his parents financial income when determining the EFC. This can benefit many students whose parents income makes them ineligible for aid. An student is considered independent if over the age of 23; enrolled in a program granting a degree higher than a Bachelor's degree; married or separated but not divorced; has parents who are no longer alive; serving active duty in the armed services; or has dependents. For further information on who is considered a dependent, view the Resources section below.
After dependency status is determined, the EFC calculation takes in the available income of the applicant, or in the case of a dependent student the applicant and his parents. To determine available income, the offsets are subtracted from the total income. Income sources are salaries or other sources of income from investments. Offsets include any taxes paid, such as federal and state taxes. An additional offset may be included for those that have dependents at home, or have additional dependents that are in college. This offset can vary depending on family size, but usually range from $15,000 to $32,000. This number is also subtracted from the income to determine the final available income number.
If your final income number is below $50,000, available assets are not used in calculating your EFC. However, if your final income lies above this mark, available assets will also be included in the EFC. Just like income, assets also have offsets for protection called and asset protection allowance that lower the total asset number. Depending on marital status and age, the typical family may see an asset protection allowance of at least $45,000. Twelve percent of the available assets is considered available for the family to contribute to education expenses (7 percent for independent students with children) and is added to the EFC table calculation.
Once all of these number have been calculated they are put into a mathematical equation. The available income is added to the 12 percent of available assets to get the adjusted available income (AAI). The AAI is multiplied by 22 to 47 percent depending on the student's status, and then added to a predetermined additional assessment to get the EFC. If the student, or parents of the student, have children, the EFC is divided by the amount of children to get the final EFC.
Once the final EFC has been determined, the number is put into an EFC table. The EFC table tells the school how much financial aid a student should be awarded. This does not mean that the college is obligated to give you that exact amount. The school financial aid officers might choose to give more or less financial aid. This amount is dependent on how much aid is available for the school to use, as well as other factors as scholastic record and talent.