EFC stands for "Expected Family Contribution," or the amount that a student and his family are expected to contribute toward a student's college costs. Considerable information is required to calculate the EFC. The EFC is computed on the Free Application for Federal Student Aid, the federal form that is requested by most colleges and universities to evaluate the financial capabilities of the student and his family. From the information on this form, a college or a university will build a student aid package.
Significance
More families than ever before must rely on financial aid to cover the cost of tuition at most U.S. colleges and universities, because tuition has gone up far faster than inflation. Were it not for financial aid, many young people would be unable to attend college. The EFC is the basis for most colleges' and universities' decisions.
Features
To arrive at an EFC, you must first divulge the gross income and the adjusted gross income of the parents and the child. In addition, you must provide the current balance of both your checking account and the student's, as well as the current value of any investments owned by both, including businesses. The value of a parent's home is not part of that calculation.
Effects
Generally, the first $3,500 earned by a student during the year will be excluded from the EFC calculation. When parents have a total adjusted gross income of $50,000, they will have to pay about $2,000 towards their child's education. If their income is $60,000, they will pay about six percent of that; and if they earn $70,000, they will be asked for about eight percent of their income. Of course, these figures will be altered by the number of children in the household and the age of the parents.
Considerations
Once the college to which the student has applied has accepted her, she will soon receive the college's financial aid package. It will include the applicable grants and loans from the federal government as well as those offered by the college itself. If the amount of the EFC is in excess of what the family can afford, the student can respond with that information to the college, or begin searching for additional grants to make up the difference.
Misconceptions
The tuition, room, board and fees at many colleges and universitys today exceed $50,000 per year. Many students and their families do not apply to them because of their costs. Most colleges understand this fact and they have made significant adjustments to what a student will actually pay to attend. If you wish to attend such a school, apply anyway, and see what you will have to pay to attend. You may be pleasantly surprised.
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