Navigating the financial aid process for college can be tedious. With all the terminology, acronyms and number crunching involved, it can even feel like school has started early.
But while it may seem like a lot of information to take in, understanding a few key concepts can help simplify the process: Expected Family Contribution (EFC), Cost of Attendance (COA) and Student Aid Index (SAI). We’ll break down each term and explain how they factor into the financial aid you ultimately receive.
What is the Expected Family Contribution?
There are two numbers used to determine how much you pay for college. The first is the Cost of Attendance, which is the total annual cost of college, including tuition, room and board, books, supplies, transportation and other related educational expenses.
The second number is the Expected Family Contribution, a number calculated by the federal government that shows how much your family can afford to pay toward college expenses every year. The EFC can be as low as 0, which means your family cannot contribute at all, and it can also range as high as 99,999.
If the EFC is higher than the COA, then you will not qualify for need-based aid. If the EFC is lower than the COA, then you may qualify for some need-based aid. This can help you pay less money out-of-pocket for college.
The EFC is calculated with a formula set by the federal government and not the individual college, so each college you apply to receives the same number.
The EFC is determined with data from the Free Application for Federal Student Aid (FAFSA), a form that asks for your parent’s income, assets and other financial details. The FAFSA also includes other factors like how many total dependents your parents have and if any of them are also attending college.
In some cases, your parents’ finances will not be included in your EFC. This may happen if you meet one or more of the following criteria:
- Current servicemember or veteran
- 24 or older
- Living at home and commuting to college
- Returning to school after dropping out
- Orphan or a ward of the state
- Already in the workforce
The EFC is recalculated every year, and may change drastically depending on your family’s financial circumstances. For example, if one of your parents receives a huge raise, then your EFC will likely increase. This may disqualify you from need-based aid. On the other hand, if one of your parent’s loses their job, then your EFC will decrease and possibly allow you to qualify for need-based aid.
How Does the EFC Impact the Cost of College?
The EFC determines whether or not you receive need-based aid, which can reduce the remaining cost of college.
Need-based aid includes the following:
A Pell Grant can be used for tuition, room and board and other educational expenses. Just like scholarships, Pell Grants do not need to be paid back.
The annual Pell Grant amount ranges from $650 to $6,495. The exact amount you receive depends on your EFC. For example, if you have a very low EFC, you may receive the full amount. If your EFC is slightly higher, you may receive a prorated amount.
Each college has an unlimited number of Pell Grants to distribute.
Federal Supplemental Educational Opportunity Grant (FSEOG)
The Federal Supplemental Educational Opportunity Grant is a need-based grant given to students with a low Expected Family Contribution. The annual amount ranges from $100 to $4,000. Like the Pell Grant, the exact amount you receive depends on your specific EFC.
Unlike Pell Grants, FSEOGs are only available on a first-come, first-serve basis. This is because each college only receives a certain number of grants. The sooner you apply and fill out the FAFSA, the greater the chance that you’ll receive an FSEOG.
Subsidized student loans
There are two types of federal student loans: subsidized and unsubsidized. Subsidized loans are only available to students with a low EFC. Subsidized loans do not accrue interest while you’re in college, during the six-month grace period or during any deferment periods. This can result in huge cost savings compared to unsubsidized loans, which always accrue interest.
Subsidized loans have an annual limit between $3,500 and $5,500 for all students. There is a total aggregate limit of $23,000 for undergraduate students and $65,600 for graduate students.
Work-study is another type of need-based aid, and it requires that you work at least 10 hours a week for a university department or affiliated institution. Like FSEOGs, there are a limited number of work-study spots available at each university. Students interested in work-study should submit the FAFSA as soon as possible.
Common examples of work-study jobs include working at the library, student recreation center or campus dorm.
Some scholarships are only given to students who qualify based on need. While private scholarships may not look at your EFC, the university may use your EFC to determine which internal need-based scholarships you qualify for.
What is the Student Aid Index?
As of July 1, 2023, the government will no longer use Expected Family Contribution to determine how much families can afford to pay for college. Instead, they will use the Student Aid Index (SAI). One of the main benefits of the SAI is that parents can exclude 20% more of their income than with the EFC. In short, this means more families will qualify for need-based aid.
Another main difference between the EFC and SAI is that students can have a negative SAI number, which will also open up more aid opportunities.
“Personally, I think one of the main places where I think we’re going to see a difference is in some of those supplemental grants and work-study,” said student loan lawyer Jay S. Fleischman.
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