How Do You Know Your Efc

Paying for College

Here's How Colleges Calculate Your EFC

Nosotros interruption down the EFC formula, including how to determine your Bachelor Income, Contribution from Assets, and Student Contribution.

If you lot take a high schoolhouse student applying to college soon, it won't be long before you learn nearly the Expected Family Contribution (EFC). Probably the most prevalent acronym in the globe of college financial aid, the EFC is a number personalized to your family and used by colleges to decide your eligibility for fiscal aid. The EFC is calculated by inputting your family'due south finances into a standard formula set by Congress. And the result of this mutual calculation can get out a lot of families, well, frustrated.

Your EFC is intended to indicate the amount that your family can pay for ane yr of college costs. Colleges employ it when determining how much fiscal assist to offering to your student. But many families, when learning of their EFC, tin can't believe the enormity of the number. Surely, they think, at that place has been some mistake? The EFC can seem escalated because of some assumptions in the formula used to calculate it. And though the details of the adding are unlikely to change significantly in the almost time to come, understanding how the formula works can ease some of the stupor when you learn your ain EFC.

The EFC calculation determines both a parent contribution and a pupil contribution toward college costs, and and then combines them. The formula intends to decide your full fiscal resources, and then subtract the minimum amount of coin your family needs for living expenses each year. It assumes the remaining amount can, in part, be used for college. Here how it works:

EFC Parent Contribution

1. Add up total annual parent income. Use both taxable and nontaxable income, including any corporeality put toward retirement that yr
2. Subtract allowances for federal taxes, land taxes, and Social Security paid
3. Subtract an Income Protection Allowance (IPA). Here'south the real surprise in the formula. The IPA is intended to correspond the amount a family needs from its income for necessities (remember housing and food). Information technology's based on the size of your family and how many children you currently have going to college. Just for a family of four with 1 kid going to college, it's only $28,580 for the current twelvemonth. You likely spend more than that on living, right?
4. Subtract an Employment Expense Assart. This is only for households where all parents are working, and equals 35% of earned income or $4,000, whichever is less. It'south intended to cover those expenses that all working parents take, such every bit buying lunch and commuting.

The number you've reached based on the calculations to a higher place is called your

Available Income (AI)

and is intended to represent how much of your income tin be considered for higher costs. Gear up that number aside for a moment.

1. Add up total parent assets. Include all cash, banking concern accounts, net investments, and net existent manor, simply don't include your primary home or your retirement accounts.
2. Decrease an Asset Protection and Education Savings Allowance. This number is based on the age of the older parent and is intended to protect an amount of your assets that you have saved for emergencies or college costs. Equally an instance, the assart for a parent historic period 48 is $xi,900 (if there are two parents).
3. Multiply your current total by 12%. This calculation ends up protecting well-nigh of your remaining assets for other needs, which is proficient news.

The number you've reached here is your

Contribution from Avails.

1. Add Bachelor Income to the Contribution from Assets to determine the Parent Adapted Available Income (AAI).
2. Determine Parent Contribution from AAI. There's a complicated table that provides you this number. As an example, if your AAI is $100,000, your Parent Contribution from AAI is $40,305. You'll divide that number in half if you have ii children in higher at once.

The resulting number is your Parent Contribution. Set that number aside.

EFC Educatee Contribution

1. Add up total almanac student income. Apply any income received in the twelvemonth, regardless of whether or not the student paid taxes on it.
2. Subtract allowances for federal taxes, state taxes, and Social Security paid
3. Subtract an Income Protection Assart (IPA). This number increases a fleck each year. Correct now information technology's $six,660, which is a pretty generous figure. Many students don't accept income that exceeds this corporeality.
4. Make up one's mind Student Contribution from Available Income. Take 50% of your current total to decide this effigy.

Gear up that number aside for a moment.

1. Add together upwards total educatee avails. Include all cash, depository financial institution accounts, and net investments
2. Determine Student Contribution from Assets. Take xx% of your electric current asset total
3. Make up one's mind Total Student Contribution. Add Student Contribution from Available Income to Student Contribution from Available Income. The resulting sum is your Student Contribution.

Ready to adding your EFC? Add your Parent Contribution to your Educatee Contribution. The resulting sum is your family's EFC. Though information technology doesn't represent the exact corporeality that you'll pay for college costs, colleges will assume you lot can contribute this amount when they make up one's mind how much financial assist of part to your family.

Though you can calculate your EFC by hand using these formula worksheets, you can much more easily employ our EFC Reckoner to reach the same outcome. If you lot'd like to talk with us once y'all have your estimated EFC, give us a call. We're happy to walk through the numbers and respond any questions. You can reach united states of america at (800) 449-MEFA (6332).

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Source: https://www.mefa.org/blog/heres-how-colleges-calculate-your-efc