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College Planning Part 2 - What is EFC?

October 06, 2021
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The Free Application for Federal Student Aid (FAFSA) is now open for the 2022-2023 school year. If you missed our last college planning message - the bottom line is to apply early!
Last post, we explained how the FAFSA determines a student's Expected Family Contribution (EFC). The Expected Family Contribution assesses a family's taxed and untaxed income, assets, and other benefits to determine what a family's "contribution" or obligation could be.
EFC is an important part of the financial aid equation. The image below simplifies the EFC calculation that helps determine financial aid eligibility. Financial Aid includes grants scholarships and direct federal student loans.
The formula shows how the income and assets of both parents and students are factored into the calculation. Parental assets (not including retirement accounts) are factored in at 5.64% of the EFC, compared to students' assets at 20% of EFC. In other words, it's important to know who owns what and more so, parents are not expected to spend their entire nest egg on college funding!
What you need to fill out the FAFSA:
  • A Federal Student Aid (FSA) Username and Password for the student and one parent/guardian.
  • Social Security Number
  • Drivers License Number (if applicable)
  • Tax Records from 2019 for the 2021-22 FAFSA
  • Untaxed Income Records (including payments to tax-deferred retirement plans)
  • Current Value of Your Assets (checking, savings, non-retirement investment accounts and real estate, excluding your primary residence)
  • List of Schools to share FAFSA Results
Gathering this information in advance and having it at your fingertips will help you navigate the FAFSA questions. Do not let the FAFSA itself be a barrier to accessing funding options for college.
Up next - Changes to the FAFSA are coming - New Simplified FAFSA in 2022-23. What does that mean?