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Home Fafsa Estimating Potential Financial Aid Expected Family Contribution (EFC)

Expected Family Contribution (EFC)

2019-2020 Filing the FAFSA Guide Cover
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Your Expected Family Contribution (EFC)

The information you input in your FAFSA will be used to calculate your EFC. The EFC is calculated by the U.S. Department of Education using a formula which is established by law.

How is my Expected Family Contribution (EFC) Calculated?

There are two financial aid applications that can be filed to determine your Expected Family Contribution (EFC): the Free Application for Federal Student Aid (FAFSA®) and the CSS Profile®. The FAFSA is the most widely used, whereas the CSS Profile is required at more than 200 colleges/universities.

Before we get into the nitty-gritty details of how these two different forms calculate your EFC, it’s important to note that if your college requires the CSS Profile, you still need to complete the FAFSA (i.e., you need to fill out BOTH forms).

Both forms are available every year starting on October 1.

The FAFSA Federal EFC

The FAFSA utilizes a financial aid formula known as Federal Methodology (FM). Most colleges in the United States use the FAFSA to determine EFC.

This is the number calculated by the U.S. Department of Education. Overtime the EFC and what it means has shifted quite a bit. Your federal EFC is more of an index used by your college to determine how much financial aid you would receive if you were to attend their school.

Many think this is the amount of money your family will need to pay out of pocket, but it’s not. (And yes, we can hear the sound of relief from some of you!) It is a great goal number for your family to contribute, but it is not required that your family pay this amount.

Factors that Affect the Expected Family Contribution (EFC)

Understanding how your income, assets, and college savings plans impact the Expected Family Contribution (EFC) can be tricky. This information is intended to give you a better understanding of how these items should be treated, and what effect they will have on the calculation of the EFC.

Impact of Income and Assets on Federal Student Aid for Dependent Students

impact of assets on federal aid for dependent students
Item Protected Portion Reduction in Aid Eligibility
Parent Income Income Protection Allowance (IPA)3 starts at $19,080 for the 2020-2021 FAFSA 22% to 47% of available income after IPA
Dependent Student Income Income Protection Allowance (IPA) $6,840 for the 2020-2021 FAFSA 50% of available income after IPA
Parent Assets
  • Family Home5
  • Retirement Plans
  • Small Family Businesses6
  • Asset Protection Allowance (APA)7
  • Simplified Needs Test
12% of asset net worth for reportable assets above the asset protection allowance
Student Assets
  • Family Home5
  • Retirement Plans
  • Small Family Businesses
  • Simplified Needs Test
20% of asset net worth for reportable assets
Number in College The parent contribution portion of the EFC is divided by the number of children enrolled in college, increasing eligibility for need-based financial aid.

Table footnotes

  1. The assessment of ability to pay depends on the income and assets of the student and parents, family size, the number of children in college, and the age of the older parent.
  2. Income is based on a prior tax year and includes Adjusted Gross Income (AGI) plus untaxed income.
  3. The parent income protection allowance (IPA) is $29,340 in 2020-21 for a family of four with one in college. Essentially the IPA changes with the household size and number in college as reported on the FAFSA.
  4. Assets are based on the net worth (market value minus debt secured by the asset) as of the date the form is filed.
  5. Family home is the principal place of residence; vacation homes are reported as an asset.
  6. Small businesses have less than 100 FTE employees and are owned and controlled by the family.
  7. The parent APA is based on the age of the older custodial parent. There is no APA for student assets. The Simplified Needs Test ignores all assets when parent AGI < $50,000 and parents who did not file an IRS Form 1040 Schedule 1.

Special Treatment of 529 College Savings Plans on the FAFSA

treatment of 529 college savings plan on FAFSA
Account Owner Treatment of Assets Treatment of
Qualified Distributions
Treatment of
Non-Qualified Distributions
Dependent Student Parent asset Ignored Taxable income to the beneficiary
Parent of Dependent Student Parent asset Ignored Taxable income to the beneficiary
Independent Student Student asset Ignored Taxable income to the beneficiary
Grandparents and others Ignored Untaxed income to the beneficiary Taxable income to the beneficiary
  • Only 529 plans owned by the student or the custodial parent of a dependent student are reported as assets on the FAFSA.
  • Distributions from 529 plans that are reported as assets on the FAFSA are ignored on the FAFSA, reducing need-based aid eligibility by up to 5.64% of the asset value.
  • Distributions from other 529 plans are reported as untaxed income to the beneficiary on the next year’s FAFSA, reducing aid eligibility by up to 50% of the distribution amount.
  • Grandparent-owned 529 plans hurt need-based aid eligibility more than parent-owned 529 plans.
  • Workarounds for grandparent-owned 529 plans include changing the account owner to the parent or student, or waiting until the senior year in college to take a distribution, when there is no subsequent year’s FAFSA to be affected.
  • The CSS Profile® considers all 529 plans that list the student as a beneficiary, regardless of account owner.
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