What is Expected Family Contribution (EFC)? How Does it Affect Financial Aid?

Grace Lemire
Grace Lemire

Grace Lemire is a freelance writer and editor with over five years of experience in the personal finance industry. She has been featured on a variety of publications, including NPR, CNN, FinanceBuzz, Dollar Geek, Pangea, and True Finance. Her work focuses on the intersection of personal finance and technology. In 2023, Grace was nominated for the Best Personal Finance Advice award in Debt.com’s FinTok Awards.

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Emma Östlund
Emma Östlund

Emma Östlund works as a business operations analyst at Sparrow. Emma studied Psychology, Computer Science, and Markets & Management at Duke University. With a well-rounded background in business and analytics, Emma strives to deliver data-driven conclusions and insights.

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Camden Ford
Camden Ford

Camden leads Sparrow’s business operations – everything from product management to business analytics. After graduating Cum Laude from Duke University where he studied Civil Engineering, Camden worked as a Consultant for A.T. Kearney where he worked in their Strategic Operations practice. With a strong background in analytics, Camden strives to deliver data-driven conclusions and insights.

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June 21, 2023

While an important piece in determining your eligibility for financial aid, Expected Family Contribution, or EFC, is often misunderstood.

Here’s what you need to know about Expected Family Contribution for FAFSA purposes.

What is Expected Family Contribution?

Expected Family Contribution, or EFC, is a number used to determine how much financial aid you are eligible to receive, including grants and federal student loans.

EFC is calculated using a formula established by law. The formula uses information such as:

  1. Your/Your family’s income
  2. Your/Your family’s assets
  3. Your/Your family’s benefits
  4. The number of family members in college during the same year

This information is then used to estimate the amount of money you and your family would be able to contribute to one year of college costs. By doing so, financial aid programs are able to estimate what your financial need may be when it comes to paying for college.

Note that this number does not indicate how much you will receive in financial aid or how much you will have to contribute, but rather, how much you are eligible to receive and how much you could contribute. 

>> MORE: The four types of financial aid for students

Why Your Expected Family Contribution Matters

Your EFC is important because it contributes to how you are evaluated for financial aid overall, including federal student aid.

Expected Family Contribution and Federal Student Aid

When calculating your overall federal student aid eligibility, the federal government uses a formula that takes into account several factors such as:

  1. Your EFC
  2. Student enrollment status (full-time, part-time, etc)
  3. Your year in school
  4. The cost of attendance each respective school

Federal student aid has limits, and thus, your overall federal student aid eligibility helps determine how much of each type of aid you are eligible for. 

>> MORE: Student loan eligibility: Private & Federal Student loans

How Does My Expected Family Contribution Impact My Federal Aid?

Your EFC will help determine how much aid you will be eligible for. If your EFC is $0, you will be eligible to receive the maximum amount of federal aid. If your EFC is over a certain threshold, you will receive no aid at all. 

Note that these numbers may fluctuate annually to reflect changes in your/your family’s income.

Your Expected Family Contribution’s Impact on Financial Aid Overall 

Each piece of this overall aid eligibility equation helps paint a bigger picture regarding your finances, and therefore, helps schools understand where you may need financial aid.

How much of your financial need is covered by federal aid may impact how schools fill the remaining gap with aid such as university scholarships and grants.

Why Your Expected Family Contribution Changes 

Your EFC will likely change year-to-year as you or your parent’s/parents’ income changes. Therefore, the amount of aid you are eligible for each year will also change.

Be sure to resubmit your FAFSA each year to ensure that you maintain access to the maximum amount of aid you are able to receive.

>> MORE: FAFSA requirements: Everything you need to know

How Can I Calculate My Expected Family Contribution?

Let us say this before we give you the breakdown: While you can calculate your own EFC at home, be careful not to get overly attached to this number. At-home estimates are just that: estimates. 

Calculating the Parental Contribution to the EFC1

  1. Add up the total parent income (both taxed and untaxed income)
  2. Subtract allowances for federal and state taxes, as well as any Social Security paid
  3. Subtract an Income Protection Allowance (IPA)
    1. This number is intended to estimate how much a family would need for necessities such as housing and food based on its size. This number would be taken out of the overall income when calculating how much a parent would be able to contribute to a child’s education.
  4. Subtract an Employment Expense Allowance
    1. This will only apply for households where all parents are working, and will equal 35% of earned income or $4,000 — whichever is less. This amount is intended to cover the expenses that working parents have such as commuting.

After doing this calculation, you will reach what’s called your Available Income (AI). This represents how much of the parental income can be considered for college costs.

Calculating the Student Contribution to the EFC

  1. Add up the total student income
  2. Subtract allowances for federal and state taxes, as well as any Social Security paid
  3. Subtract an IPA
  4. Figure out the Student Contribution from Available Income (50% of the current total)

Finally, add the Parental Contribution to the Student Contribution to result in your family’s EFC.

Commonly Asked Questions About Expected Family Contribution

What is the Expected Family Contribution for an independent student?

When you are a dependent student, your EFC is calculated based on both your parent’s/parents’ income and your own.

However, as an independent student, your family’s income will not be used to calculate your EFC. Rather, your own income and assets will be factored into the calculation, minus some deductions.

If you are an independent without dependents, your EFC will be based on your income (and your spouse’s if you are married) minus taxes and basic living expenses.

If you are an independent with dependents, your EFC will be based on your income (and your spouse’s if you are married) minus taxes, basic living expenses, and an employment allowance. The employment allowance is available if you are a single working parent or a working student with a spouse.

>> MORE: How to fill out the FAFSA as an independent student

What is a good Expected Family Contribution?

There is no one specific number that makes your EFC “good.” Generally speaking, however, the lower your EFC, the more financial aid you may qualify for. 

Why is my Expected Family Contribution so high?

Your EFC can be high for a variety of reasons, however, it is often high due to having a high income or a lot of assets. Assets are resources that can produce positive economic value such as:

  1. Cash
  2. Real estate
  3. Stock holdings

When calculating your EFC, both liquid and illiquid assets are taken into account. Liquid assets are ones that can be sold quickly without losing a lot of their value, such as the money in your bank account or stocks. Illiquid assets, on the other hand, are ones that do lose value when sold quickly, such as cars and real estate.

If you/your family has a low income but a lot of assets, your EFC may be higher than you expected. If this does not seem to be the case, however, consider filing a financial aid appeal to have your EFC recalculated.

>> MORE: How to fill out a financial appeal letter

Final Thoughts from the Nest

Your EFC is one piece of how your financial aid eligibility is calculated. While it isn’t the whole bit, it is important. By estimating your family’s EFC, you can determine what financial gaps may arise after receiving financial aid.

If scholarships and federal student aid don’t cover your financial need completely, it may be time to explore a student loan to fill the gap. When you’re ready, Sparrow is here to help.

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