The EFC Myth

General Information

When you complete and submit a FAFSA, the Department of Education calculates an Expected Family Contribution (EFC) using formulas commonly referred to as Federal Methodology or FM.

Each year, hundreds of news stories, blog postings and financial aid presentations, erroneously define your EFC as the amount colleges will expect you to pay.

Unfortunately, nothing could be further from the truth.  In reality, your EFC is ALMOST NEVER the amount you will pay for college.

Instead, your EFC is used to calculate the amount of federal aid you are eligible to receive at each school you apply to.  The amount you will pay for college will vary widely from school to school and often differ from the EFC by thousands of dollars.

The confusion stems from the fact that EFC is still presented as an acronym for Expected Family Contribution, an artifact of days long gone, when the EFC was often a reasonable approximation of the amount that many families were expected to pay for college.

Actual Definition

The Department of Education has only recently acknowledged the current reality by changing the official definition of EFC. In the most recent EFC Formula Guide it states:

“The Expected Family Contribution (EFC) is a number that determines a students’ eligibility for federal student aid. The EFC formulas use the financial information students provide on their Free Application for Federal Student Aid (FAFSA) to calculate the EFC. Financial aid administrators (FAAs) subtract the EFC from the students’ cost of attendance (COA) to determine their need for the following federal student financial assistance offered by the U.S. Department of Education (the Department):

• Federal Pell Grants,
• Subsidized Stafford Loans through the William D. Ford Federal Direct Loan Program,
• Federal Supplemental Educational Opportunity Grants (FSEOG),
• Federal Perkins Loans, and
• Federal Work-Study (FWS).”

Some schools also use your EFC to determine your eligibility for need-based institutional grants.

Examples

Here is an example that helps translate EFC and other financial aid jargon into plain English.

In this example the calculated EFC is $17,000 and the Cost of Attendance (COA) at four target schools ranges from $21,000 to $52,000.  We have chosen four different types of target school.

1. At the in-state public university, there is $4,000 of calculated financial need. State schools typically have little or no grants or scholarships available to most students.  Therefore, no grants or scholarships are awarded at this school and the Net Price for your family is $21,000.
2. At the out-of-state public university there is $18,000 in calculated need. To attract quality out-of-state students who pay a higher tuition, this school awards $7,500 in need-based grants. The Net Price for your family is $27,500.
3. At the private college with large merit scholarships there is $28,000 of calculated need.  The school awards $18,000 of merit scholarship and the Net Price for your family is $27,000.
4. At the private college with generous need-based financial aid, the calculated need is $35,000.  The school meets 90% of your need with a grant of $31,500. The Net Price for your family is $20,500.