with regards to the fafsa, what does efc stand for?

A college education can be a significant financial investment. Equally such, most parents and students look to financial help to make otherwise expensive schools affordable options for their families.

According to the National Middle of Educational activity Statistics, 85% of students receive some form of financial aid, but the amount of assistance depends on one very important number: the Expected Family Contribution.

To increment your own savings when planning for college, know these keys facts well-nigh your EFC:

one. What is an Expected Family Contribution?

Your Expected Family Contribution (EFC) is a figure that sets the parameters for your college search and weighs heavily on how much your family volition truly pay for higher. It is a dollar figure that represents the amount of money the federal government thinks a student and parents should exist able to contribute toward the coming year of a college didactics.

The Expected Family Contribution is recalculated for each year of a student's higher education. All colleges a pupil applies to (including the school a educatee enrolls in) use this number to decide the amount of demand-based aid to exist offered.

A student'southward financial need is adamant on a school-by-school basis by subtracting the student'due south EFC from the school's Cost of Attendance (COA):

Corporeality of Financial Need = (Cost of Attendance) – (Expected Family Contribution)

So, if a schoolhouse's COA is $42,000 and the student'south EFC is $28,000, the calculated fiscal need is $14,000.

While your Expected Family unit Contribution will not impact non-need-based awards (like merit scholarships), the demand-based aid y'all receive won't exceed your EFC. But there's no guarantee that the aid you lot do receive will hit that number. Most colleges do not meet 100% of students' financial demand, and so you'll likely need to encompass more than your EFC for those schools.

To judge how much you'll really pay at a given college, crunch your numbers in the schoolhouse'due south internet price calculator. (By law, colleges and universities are required to post these calculators to their websites.) Find your school's calculator on its admission page, or do a quick search with your school's proper name and "net price calculator."

2. How your EFC is calculated

The Expected Family Contribution formula is actually defined by constabulary and published each year. The federal government collects the information information technology needs when yous file the Costless Application for Federal Student Aid (FAFSA®).

Every year yous complete the FAFSA, you'll receive an updated EFC via a Student Aid Written report, or SAR. (Here's a sample SAR, where the EFC reported at the top of the first page is $0.) In addition, your EFC is sent to all the schools yous list on your FAFSA.

The federal regime uses iii main formulas to calculate your Expected Family Contribution, depending on your filing category:

• Dependent educatee
• Independent student with non-spouse dependents
• Contained educatee without non-spouse dependents

In some cases, a educatee may pass the simplified needs test —meaning their EFC is calculated with the simplified formula for their filing category. That formula does not consider avails when determining EFC.

3. Which assets are considered in your EFC

When you fill out your FAFSA, you're asked to share specific information that's used to compute your Expected Family unit Contribution. Depending on students' FAFSA filing status, they need to provide the following details for themselves, parents, and/or spouses:

• Taxable income (including interest, dividends, and capital gains) from two years ago
• Benefits received (unemployment, Social Security, etc.)
• Tax allowances
• Depository financial institution account balances, CDs, and cash
• Value of non-retirement accounts (including UGMA and UTMA accounts)
• Balance of 529 plans & Coverdell Teaching Savings Accounts (ESAs)
• Number of other children y'all'll have in college in the coming school year
• Retirement account contributions and distributions
• Contributions to Flexible Spending Accounts (FSAs) and Wellness Savings Accounts (HSAs)
• Equity in investment real estate
• Equity in some businesses
• Value of trust funds

4. Which assets are ignored by the EFC formula

While the FAFSA requires enough of detail to compute your EFC, the following assets are protected entirely during the calculation:

• Retirement savings — 401(k) & 403(b) plans, IRAs & Roth IRAs, pensions, profit-sharing plans, and more
• Equity in your primary residence
• Existing debt, including student loan debt
• Value of family businesses with fewer than 100 full-time employees
• Value of life insurance policies
• Personal possessions (vehicles, electronics, jewelry, fine art, furniture, wearable, etc.)
• Qualified withdrawals from a 529 plan or Coverdell ESA that'southward owned by the educatee or by a dependent student'south parents

v. How avails are weighted differently

Ownership of assets is key in determining the value of your Expected Family Contribution. Students are expected to contribute significantly more than of their assets and income to educational costs than are their parents.

Outset, you'll want to determine whether a student is categorized equally dependent or contained, equally independent students don't report their parents' financials on the FAFSA.

Then, check whether the student qualifies for the simplified EFC formula, which does non consider the value of financial assets.

For a dependent student non eligible for the simplified EFC formula, the Expected Family unit Contribution includes these weights:

• 64% to 5.64% of parents' unprotected avails
• 22% to 47% of parents' annual income (above certain allowances)
• l% of students' income
• 20% of students' unprotected assets

When you're thinking about saving for college, remember this: If a 529 plan is owned by a dependent student or his/her parent, the residuum held is considered a parental asset. Plans endemic by independent students are evaluated at a higher rate, as they're considered student avails.

A 529 plan owned past someone else — a grandparent, for instance — isn't listed at all on your FAFSA every bit an asset. Withal, distributions from those plans are considered untaxed income for the student. As a outcome, 50% of withdrawals taken from a grandparent-endemic 529 plan will be added to your EFC.

6. How to calculate your EFC

And then what's your magic number? You can gauge your Expected Family Contribution by using the U.Due south. Department of Education'southward FAFSA4caster tool. Or quickly generate your EFC with the CollegeBoard'due south Expected Family Contribution Figurer:

1. Gather your information.

Get together the documentation you'd need if you were filling out the FAFSA, including account balances and applicable tax returns. For the 2020 – 2021 FAFSA, you'll demand your 2018 tax records.

2. Choose a formula.

The CollegeBoard computer lets you summate your EFC with the Federal Methodology, the Institutional Methodology, or both. The Federal Methodology is what's used to determine your eligibility for federal aid. Some private schools and award programs, however, plant eligibility for their ain aid programs with the Institutional Methodology.

3. Determine your student's status.

Complete a quick questionnaire to ascertain whether your educatee is considered independent or dependent. The fields y'all see on the next screen will vary, based on this result.

4. Enter your financial details.

At this indicate, you'll be asked to complete a number of fields, which may include the following:

• • Family unit details: state of residence, parents' marital status, family size, names and ages of family members
  • Other students in the family: the number of family members who volition be in college when the educatee applies for aid
  • Financial information: adjusted gross income (AGI), earnings, benefits received, tax credits, allowances, and unprotected assets

5. Review your output.

Once you've filled in the requested figurer fields, view your results. You'll come across a screen that lists the expected parent contribution, the student's financial obligation, and the total EFC estimate.

If you want to dig in behind the scenes of your result, review the publicly available EFC formula worksheets. Or connect with a fiscal advisor who specializes in college planning. You'll get more data about what's contributing the most to your EFC and acquire what steps you can take to qualify for maximum college aid.

Learning the value of your Expected Family Contribution is just the kickoff of many steps to financing and saving coin on a college educational activity. With this disquisitional number in hand, you can weigh your college options wisely and customize a financial strategy that truly benefits your family.

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Source: https://www.finivi.com/what-is-efc/

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