What Is the Formula for Expected Family Contribution

Start the financial support process early using our Expected Family Contributions (EFC) calculator. This tool will help you understand which college might expect your family to contribute to the cost of college, which will allow you to create a plan on how to pay for college. The results are only an approximation of the federal number of HGFs that is calculated when you file the FAFSA. So where exactly does the EFC number come from? It is calculated by the federal government and some schools in different ways, but everything is based on your reports on: your family assets (the value of your savings or investment accounts [excluding retirement accounts], if any) and sometimes your domestic or professional assets; Your family income; the size of your family; and the number of dependent children enrolled in university. Your CFE is calculated based on the information you have provided in your FAFSA information. It takes into account factors such as your household income and the number of family members (including current students!) that this income has to bear. It will not take into account consumer debts such as credit card balances and car loans. Therefore, the presence of credit card, mortgage or other debt does not increase the chances of getting a cheaper EFC number. If you don`t know how to answer some fafsa questions, check out our tips for answering tricky questions. If you are an independent student, the formula only takes into account the income and assets of yourself and, if you have one, your spouse. Roughly speaking, if you do not have non-marital dependents, you can use your AGI, pension contributions, family allowances, etc.

add; Deduct taxes; and deduct about $10,000 if you`re single or married and your spouse is also enrolled in university, or about $16,000 if you`re married and your spouse is not a student. The number you receive represents your “net income,” and you have to pay about 50% of that income for the university. If you are an independent student with parents other than your spouse, your CFE will be charged in a third way. The percentage of your income you`re supposed to contribute depends on how many dependents you have and your age, so the best way to use the FAFSA4caster tool on the Ministry of Education website is to use it. If you`re really curious about the details, you can also browse the spreadsheets in the EFC Formula Guide to see exactly how it works. First, parents are generally expected to contribute up to 47% of their net income to the cost of university each year. Before you panic, stop! That doesn`t mean you`ll earn 47% of every dollar. (And remember, it`s cumulative, so if you have multiple kids in college at the same time, it`s up to 47% for everyone together, not for everyone.) View your adjusted gross income from line 37 of your parents` tax return form 1040. If you`re reading this in the fall of 2018, you`ll actually want the AGI for the 2016 tax year.

Add contributions to the retirement and health savings account; family allowances; and any other income received, even if you have not paid tax on it. For a moment, pretend that your CFE is $19,000 and that your financial needs are calculated at $8,000. Your school offers you $4,000 in financial support based on need. That leaves $4,000 in unmet needs. As a result, the family must manage funds to cover $23,000 (CFE plus unmet needs). Source: ifap.ed.gov/efcformulaguide/attachments/1920EFCFormulaGuide.pdf Second, the formula will look at your parents` assets. FAFSA is not interested in their retirement accounts. It also does not take into account the equity of homes or assets of small businesses with fewer than 100 employees. But he wants to know what your parents have in savings, checking, and taxable investment accounts. However, keep in mind that there will be many other things when deciding which college to go to and how to get there.

The best way to determine what a college can really cost is to determine the net price of that college. This is often much less than the published price. Because each college does its calculation differently, it is much more difficult to calculate your own EFC for the CSS profile than for the FAFSA. But you can start with the idea that parents are still supposed to spend 47% of your net disposable income. However, it is likely that it will be calculated on the basis of a two-year average and not on the basis of one-year reports. Schools say this allows them to better account for variable incomes. (This may work in your favor if you have an unusually low income in any of these years, or it may work against you if your income is abnormally high.) The Ministry of Education uses three different formulas to calculate a CEF. Form A is intended for dependent students (any person who can be declared to be dependent on their parents` tax); Formula B is for independent students who have no parents other than a spouse (read: no children); and Form C is for independent students who have dependents other than a spouse. A student`s CFE can be zero.

This means that, given your family`s financial situation, they would not be able to contribute to your college education. For example, you might be able to use a 529 plan to cover a portion of your CFE, as you are expected to use about 6% of it each year. A cheaper college, such as a community college or public school, can also help; The total cost of attendance may be lower than that of your CFE, which would mean that you are not eligible for federal assistance to attend this school, but could still mean that you and your parents are required to pay much less than the CEF. However, it`s true that bridging the gap between the CEF and what you can really afford is how many people end up with unsubsidized private loans. However, there are actually two EFC formulas: the normal and the “simplified”. The EFC is the number that results from filling in your FAFSA. (Information about FAFSA can be found here.) According to the official FAFSA website, “the expected family contribution (EFC) is a measure of your family`s financial strength and is calculated according to a legally established formula” The EFC is expressed as a number equal to an amount in dollars. For example, 12,000 is $12,000.

This means that the federal government (and colleges) expect your family to be able to contribute $12,000 a year to your college expenses. Based on the information you have provided on your family`s income and wealth, the federal government and the college will create the CFE between them. This is the money you and your family will have to pay for your education in the next school year. The federal government then takes your answers and calculates your CFE according to a complex FORMULA of the CEF. To get started, search here for the PDF guide / link “The EFC Formula”. Third, the formula now wants to know what your income and wealth is. If you have income, subtract the taxes paid, then $6,600; Then multiply everything left by 0.2. .