What is EFC anyways?

Understanding your “EFC”

Your “EFC” is tossed around a lot while you are enrolling to college or already attending, but what does it mean and why is it so important?  EFC stands for Estimated Family Contribution and it is the Federal Governments best determination on your  “financial need”.  Your an/or your family’s “financial need” is determined through a formula based on what you report through the Free Application for Federal Student Aid (FAFSA). Since it is calculated by the Federal Government, EFC is based on the Federal Methodology.

Federal Methodology Components to your EFC

  • Taxable Income
  • Non-taxable Income
  • Family size
  • Number of family members attending college
  • Assets

The EFC is important for a couple of reasons. The first is that it determines your eligibility for the two most widely given grants for students, PELL (up to $5,550) and Federal Supplemental Educational Opportunity Grant (FSEOG), up to $4,000.  These are “need based” so the lower your EFC the more likely you are to receive these grants and thus lower the amount of loans you may need to borrow.  Secondly, it is reported on your Student Aid Report (SAR) and this determines the amount of Financial Aid you may be eligible for based on the Cost of Attendance (COA) at your chosen school.  EFC will also determine how the award amounts for Subsidized vs. Unsubsidized are disbursed.  This is very important as you look at the long-term effect of your loans post-graduation.  We have discussed this in detail on our Federal Loans page.

Let’s put EFC into practice in a side by side comparison so you can fully understand its importance. For all intensive purposes the two students below are exactly the same in every way other than their EFC.

EFC impact on financial aid

As seen above, Student 1’s financial need is $10,000 and Student 2 has $23,000 in financial need.  Next, lets break this down further to see how each students EFC will affect their eligibility for PELL and FSEOG.  We will be using the PELL Chart published by the Federal Government to determine this.

low EFC impact on financial aid

As shown, Student 2 had a lower EFC and thus, they are eligible for more PELL Grant that brings down their total out of pocket cost for their yearly tuition.

Adult learners often time experience hardships while in school (i.e. Job loss, reduction in wages, etc…) and many times you are able to lower your EFC by filing an appeal with your school.  These special circumstances should immediately be communicated to your Financial Aid Adviser.   

Curios what your EFC may be?  Check out the FAFSA4caster!  Once you have finished filling everything in you will see your estimated EFC on the bottom of the page.


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