2012-2013 EFC Quick Reference Guide

Applying for College

The process of applying for need-based financial aid for college begins by students and parents completing one or two financial aid forms, the FAFSA (Free Application for Federal Student Aid) and/or the CSS Profile. Any college or university that awards federal student aid must require that students complete the FAFSA in order to determine eligibility for federal aid (it works for most state aid too). Most colleges and universities nationwide use the FAFSA as their sole application for need-based financial aid, so students applying for aid at those colleges only need to complete the FAFSA.

However, there are about 300 colleges which require that the CSS Profile also be completed in addition to the FAFSA. Those colleges use the CSS profile to assess the student’s eligibility for the college’s own institutional aid dollars. Typically, “Profile” colleges are very selective private colleges, including the Ivies, but the University of Michigan at Ann Arbor and the University of North Carolina at Chapel Hill are examples of flagship state universities that also require the Profile.

Calculating the Family’s Expected Contribution (EFC)

Regardless of the aid form(s) the student is required to complete and submit as part of the process of applying for financial aid, and after all of the time and information it takes to complete the form(s), it all boils down to three letters, EFC.

You provide your financial information on the aid forms (FAFSA and CSS Profile), submit the forms online to the processing centers for each respective form, and the information from the forms goes into the aid calculations (the Federal Methodology and the Institutional Methodology). The output of those need analysis calculations is the student’s expected family contribution (EFC) toward the cost of college. The student’s EFC is the minimum amount the student is expected to contribute toward the cost of college. Thus, EFC represents a dollar amount. It is the “output” of the aid forms and calculations.

Both of the EFC formulas focus primarily on the assets and income of the parents and student, family size and the number of dependent children enrolled in college in a given year to assess the family’s ability to pay for college using the income and assets that they have. And because the two formulas calculate EFC differently, it’s likely that the student’s EFC under each formula will be also be different.

Using a Student’s EFC to Determine the Need for Financial Aid

EFC is used to analyze a students’ need for financial aid using a simple formula that subtracts the student’s expected family contribution (EFC) from a college’s total cost of attendance (Cost of Attendance – EFC = Financial Need). If a student’s EFC is less than a college’s cost of attendance, then the student qualifies for need-based financial aid.

Cost of Attendance

Cost of attendance is obviously one of the two variables needed to determine need-based aid eligibility. Cost of attendance is the total cost of enrolling at a college, including tuition, fees, room & board, books, travel and personal expenses.

So if you know the cost of a specific college you can subtract your child’s EFC from that cost to determine if your child is eligible for need-based financial aid at that college. If you don’t know the cost of a specific college, you can use the 2011-2012 national average costs for a 2 year public college ($16,000), a 4 year public college ($20,000), a 4 year private college ($42,000) or 4 year elite college (the most selective and most expensive colleges nationwide, at $56,000 per year), to get a general idea of your child’s aid eligibility.

National Average College Costs
$16,000 The national average cost of a 2 year public college, commuting students not living at home
$12,000 The national average cost of a 4 year public college with in-state tuition
$42,000 The national average cost of a 4 year private college
Projected for the 2011-2012 academic year.

2012-2013 EFC Quick Reference Table

The EFC Quick Reference Table works like this. First, you need to know the parent’s adjusted gross income (AGI) which is typically the last line on the first page of your tax return. To keep things simple, if you don’t know your AGI simply use the amount that you earn from working each year.

  1. Step 1 – Locate your income in the AGI column.
  2. Step 2 – Find the column at the top of the table that corresponds to the number of dependent children that you have and follow that column down to the row that corresponds with your income (AGI). The number in the intersecting box is your estimated EFC based on parental income only.

The estimated EFCs in the table below do not take into account your assets, or if you itemize deductions on your tax return or make contributions to qualified retirement plans or receive any form of untaxed income. All of which can substantially increase your EFC.

For example, if your income is $70,000 and you have two dependent children, then your EFC is $7,385 and falls into the green area. If your income is $225,000 and you have one dependent child, then your EFC is $57,316 and is in the red area.

Adjusted Gross Income Expected Family Contribution
based on number of dependent children
Adjusted Gross Income Expected Family Contribution
based on number of dependent children
(AGI) One Two Three Four (AGI) One Two Three Four
$30,000 $556 $0 $0 $0 $125,000 $25,929 $24,623 $22,986 $21,512
$32,500 $987 $231 $0 $0 $130,000 $27,563 $25,736 $24,506 $23,029
$35,000 $1,418 $662 $0 $0 $135,000 $29,198 $27,371 $26,023 $24,548
$37,500 $1,849 $1,093 $397 $0 $140,000 $30,832 $29,005 $27,540 $26,065
$40,000 $2,269 $1,524 $828 $17 $145,000 $32,466 $30,639 $29,057 $27,582
$42,500 $2,673 $1,955 $1,259 $448 $150,000 $34,101 $32,274 $30,573 $29,099
$45,000 $3,076 $2,360 $1,689 $879 $155,000 $35,688 $33,861 $32,161 $30,569
$47,500 $3,318 $2,764 $2,108 $1,310 $160,000 $37,267 $35,449 $33,748 $32,039
$50,000 $3,776 $3,167 $2,511 $1,740 $165,000 $38,784 $37,008 $35,336 $33,449
$52,500 $4,228 $3,421 $2,915 $2,144 $170,000 $40,301 $38,525 $36,877 $34,742
$55,000 $4,760 $3,880 $3,134 $2,547 $175,000 $41,818 $40,042 $38,394 $36,154
$57,500 $5,286 $4,348 $3,593 $2,951 $180,000 $43,335 $41,559 $39,910 $37,565
$60,000 $5,910 $4,880 $4,015 $3,176 $185,000 $44,852 $43,076 $41,349 $38,976
$62,500 $6,486 $5,427 $4,547 $3,634 $190,000 $46,369 $44,593 $42,761 $40,387
$65,000 $7,220 $6,050 $5,037 $4,063 $195,000 $47,933 $46,157 $44,219 $41,845
$67,500 $7,935 $6,652 $5,660 $4,595 $200,000 $49,497 $47,721 $45,677 $43,303
$70,000 $8,797 $7,385 $6,193 $5,093 $205,000 $51,061 $49,264 $47,135 $44,762
$72,500 $9,659 $8,130 $6,926 $5,716 $210,000 $52,624 $50,722 $48,593 $46,220
$75,000 $10,521 $8,992 $7,590 $6,258 $215,000 $54,188 $52,181 $50,051 $47,678
$80,000 $12,244 $10,715 $9,314 $7,668 $220,000 $55,752 $53,639 $51,510 $49,136
$85,000 $13,968 $12,439 $11,038 $9,391 $225,000 $57,316 $55,097 $52,968 $50,594
$90,000 $15,692 $14,163 $12,761 $11,115 $230,000 $58,773 $56,517 $54,388 $52,014
$95,000 $17,191 $15,834 $14,485 $12,839 $235,000 $60,172 $57,916 $55,787 $53,414
$100,000 $18,680 $17,323 $16,092 $14,562 $240,000 $61,572 $59,316 $57,187 $54,813
$105,000 $20,168 $18,811 $17,581 $16,107 $245,000 $62,971 $60,715 $58,586 $56,213
$110,000 $21,023 $19,666 $18,435 $16,961 $250,000 $64,371 $62,115 $59,986 $57,612
$115,000 $22,657 $21,183 $19,952 $18,478 $425,000 $99,999 $99,999 $99,999 $99,999
$120,000 $24,291 $22,700 $21,469 $19,995

All of the EFCs are color coded to give you an idea of whether the student will qualify for need-based financial aid at four types of colleges. The color coded EFCs are based on national average costs, and your income only. Your actual EFC may be higher or lower, and the average cost of college in your home state may be higher or lower than the national average costs, thus aid eligibility varies by state.

The student would qualify for need-based financial aid at:
Blue and Bold ELIGIBLE at 2 year public, 4 year public, 4 year private colleges, and for Federal PELL Grants*
Green ELIGIBLE at 2 year public, 4 year public, and 4 year private colleges
Yellow ELIGIBLE at 4 year public and 4 year private colleges
Orange ELIGIBLE at 4 year private college
* Note on the PELL Grant: The 2012-2013 figures will be available in early 2012.
We will update this post, as soon as we have the figures.

The student would NOT qualify for need-based financial aid at:
Red NOT ELIGIBLE at 2 year public, 4 year public, or 4 year private colleges

Let’s Put All of This Into Perspective

You Qualify

Using the example from above, if your income is $70,000 and you have two dependent children, your EFC is $7,385 and is green, which means that based on this estimated EFC using your income alone (your actual EFC may be higher), your child should qualify for need-based financial aid at all three types of colleges. As a result, your child is eligible to receive grants, scholarships, work-study and student loans as part of the child’s financial aid package. Eligibility does not mean certainty however. You will have to wait to see what form of aid the child gets and how much it is worth.

You Don’t Qualify

On the other hand, if your income is $225,000 and you have one dependent child, then your EFC is $57,316 and is red, which means that your child won’t likely qualify for need-based aid at any of the three types of schools used. But, that doesn’t mean that you have to pay $57,316 because the “sticker prices” at the three types of schools is less than that. You will never pay more than the cost of attendance.

Keep in mind too that the costs used to create the table are national average costs for these three types of schools and that the cost of attendance of a specific college will be different than the national average. Several Ivy League colleges are more than $50,000 annually, but the projected 2011-2012 national average cost for 4 year private colleges is $40,000. So the national average costs give you a broad sense of aid eligibility, and if your child doesn’t qualify for need-based aid, he might still receive some merit-based aid.

Financial aid (grants, scholarships, loans and work-study) is awarded on the basis of need and/or merit. Need-based aid is based on a family’s demonstrated need for aid through the needs analysis formula: COA – EFC = Need. Merit-based aid is awarded regardless of the student’s ability to pay and is based on the student’s talent (academically, athletically, etc). I need simple ways to keep all of this straight, so I just remember that need-based aid is based on your ability to PAY and merit-based aid is based on your ability to PLAY.

EFC With Two Kids in College at the Same Time

Note that under both formulas, if parents have two children in college, the parent’s portion of the expected family contribution is not twice what it would be for one child. In fact, in the federal formula, the parent's portion of the family contribution gets split equally among the number of students in college. So if the parent’s have one child in college and have an earned income of $140,000, their EFC will be about $30,000 per year for that child. With two children in college, the parent’s EFC will get split 50/50 and applied to each child’s overall EFC, or $15,000 each.

The CSS Profile applies a little more than half the parents' contribution to each of two students. Bottom line: If you have more than one child attending a pricey private college, you may qualify for need-based aid even at a fairly high income level.

Eligible For Aid at One College, But Not at Another

A student’s eligibility for need-based aid is relative to the cost of attendance of each college the student is considering. The student may qualify for need-based aid at one college and not at another. Using the example above, based solely on the parent’s income alone, and forgetting all assets for the moment, parents earning 

$140,000 per year in income would have an EFC of approximately $30,000 per year under the federal formula with one child in college. At the private college costing $54,000 per year, the student would qualify for $24,000 per year in need-based student aid because the student’s EFC is $24,000 less than the college’s cost of attendance. Conversely, at the state university costing $20,000 per year, the student wouldn’t qualify for any need-based student aid because the student’s EFC is higher than the cost of attendance.

The Financial Aid Award

For the most part however, even if a student qualifies for need-based aid it doesn’t mean that the college or university will meet 100% of the student’s need. And in most cases you won’t know what the student’s “aid package” will consist of until the student receives his/her financial aid award letter. Don’t get too caught up in trying to predict the exact makeup of a student’s aid package based on a bunch of statistics pertaining to the college’s historical aid awards. Rather, try to get an idea of what amount of aid the student is eligible for and focus on the most useful statistic, percentage of need met. Percentage of need met is a statistic that the majority of colleges release annually, and represents the average percentage of need that the college met for students that had need-based aid eligibility in the previous year’s incoming freshman class. For example, on average one college might only meet 70% of student’s need, and another college (like many of the elite private colleges) might meet 100% of need. That’s a very big difference in aid, especially over four years. The percentage of need met reflects all of the aid packaged by the college’s aid office on behalf of the students, including federal aid, state aid, and private scholarships and so on. Thus, it reflects a all forms of aid, including merit aid, in one statistic.

How College Selection Impacts Financial Aid

The next thing you can do with the percentage of need met is to apply the rule of thumb that if the student, from and admissions perspective, is a good candidate for admission, or the college wants the student for a particular reason (whatever that may be), the student is more likely to get an aid package that meets a higher percentage of need met than the published average, and might expect that aid package to contain more grants and scholarships than student loans and work-study, especially at private colleges where they have greater flexibility to discount their tuition (i.e. knock something off the sticker price). If the student is a possible, reach or far reach candidate for admissions (i.e. the college isn’t all that interested in the student), the student might get admitted, but getting an optimal aid package might also be a far reach. This is a clear example of how college selection and affordability are integrated, and the reason why knowing what EFC formula and aid forms a college requires is also critical.

For example, a state university will most likely require only the FAFSA to be completed, and as noted above, the FAFSA information goes into the Federal Methodology formula for calculating the student’s EFC. An elite private college will require the FAFSA to be completed to determine the student’s eligibility for federal student aid, likely state aid too, but will require the student to also complete the CSS Profile to determine the student’s need (eligibility) for its own institutional aid dollars. And since the two formulas calculate EFC differently, have different provisions for some circumstances and in the case of the CSS Profile, may also require financial information from non-custodial parents as well as the parent with whom the child resides (if divorced or separated), the student’s aid eligibility could be much lower at one college versus another on the basis of what aid form and formula a college uses.

Moreover, as you will read about below, merit aid is another form of financial aid, but merit aid awards are not based on the student’s EFC (family finances), it is based on the merits of the student. Some colleges offer academic merit aid and others do not. Got a smart kid who has the grades, he might be able to get the aid, but not at all colleges.

Merit Aid

Merit aid is another form of student aid that is based on the student’s academic, athletic, music and other merits, not family finances. Therefore, any student can receive merit aid.

The best things about merit aid are 1) merit awards are typically grants, scholarships or tuition discounts that don’t need to be repaid, unlike student loans and 2) students can be awarded merit aid regardless of the family’s overall income or how much the family has saved for college.

Academic merit aid is typically based on the student’s grade point average (GPA) and standardized test scores (SAT and ACT), and occasionally on class rank. It is pretty black and white; if you have the grades – you get the aid.

Student Gets Merit Aid But No Need-Based Aid

If your child doesn’t qualify for need based financial aid, but is awarded merit aid, then your out-of-pocket cost will be the sticker price minus the merit aid award. For example, if the college costs $35,000 per year and your EFC is $40,000 per year, you will be expected to pay the “sticker price” of $35,000 per year minus your child’s $10,000 merit aid award, for an out-of-pocket cost of $25,000 per year.

IMPORTANT - Why Merit Aid Reduces Need-Based Aid Eligibility

However, if your child, for example, qualifies for need-based financial aid in the amount of $15,000 ($35,000 - $20,000 EFC = $15,000 of need), and receives a merit aid award of $10,000, in most cases the financial aid office of the college will use the merit aid award to help “meet the student’s demonstrated need,” thus reducing the student’s need from $15,000 to $5,000.

It is important for you to understand that merit aid, state aid, local and private scholarships, etc, will all be used to first reduce or “meet” the student’s need, NOT to reduce your out-of-pocket cost.

Put another way, if the college costs $35,000 per year and the student’s EFC is $20,000 per year, the student has demonstrated need of $15,000. But the student’s merit aid award of $10,000 will be used to meet the student’s demonstrated need of $15,000 instead of helping you cover the amount you are expected to contribute toward the cost (your EFC). So the merit aid award will reduce the student’s need, not your EFC, or out-of-pocket cost. The college may offer the student a $5,000 Stafford loan along with the merit aid award of $10,000 to meet the student’s $15,000 need, and you will still be expected to pay $20,000 per year.

This is also true if your child receives any other form of outside aid, such as private scholarships, state grants, and so on; this aid will also be used to meet the student’s need first before it will reduce your out-of-pocket cost.

The Out-of-Pocket Cost of College

Continuing with our example above, the family might be able to send the student to the expensive private college costing $54,000 per year, for only $30,000 out of their pocket, the amount of the student’s expected contribution (EFC). If the college offers an aid package that covers 100% of the student’s need ($24,000), and it consists primarily of grants, then the family’s out-of-pocket cost for the elite private college truly becomes $30,000 per year instead of the $54,000 annual “sticker price.”

Since the student doesn’t qualify for need-based aid or merit aid at the $20,000 per year state university, the family will have to write a check for the annual $20,000 sticker price. The student in this case, although not eligible for need-based aid, would still be eligible for an unsubsidized Stafford loan of $5,500 as a freshmen (up to $7,500 annually in later years), which would help cover part of the $20,000 out-of-pocket cost, but the student will have to repay the principal and interest after college.

At the end of the college admissions and aid application process, you will arrive at a list of colleges to which the student has been accepted for admission, and have been given an official financial aid award letter by each of those institutions that explains the student’s eligibility for all of the aid that he/she is eligible for and/or has been awarded, including outside scholarships, state grants, student loans, work-study, etc. The aid office at each college “packages” all of this aid and sends the student an award letter explaining the aid package for each student. The award letter also includes the total cost of attendance to enroll for the upcoming academic year, including tuition, fees, room, board, books, travel and personal expenses. Thus, the out-of-pocket cost for each respective college will be the cost of attendance of each college minus the amount of the aid package at each college.