The Expected Family Contribution is calculated from four categories of information provided on the Free Application for Federal Student Aid (FAFSA). Available parental income is added to parental assets to compute the total parental contribution. To this figure is added the student contribution from income and assets.
This calculation considers both taxed and untaxed parental income for the calendar year prior to the academic year for which aid is requested. From this total income figure are subtracted federal, state, and social security taxes paid; an income protection allowance that provides for the basic living expenses for a household of that size; and an employment allowance for households where either both parents work or a single parent works. Also subtracted are exclusions such as child support paid for a child who does not reside with the parents. The result is called available income and a portion is included in the Expected Family Contribution.
The value of parental assets include cash, savings and checking accounts, farm and business net worth and real estate and investment equity (not including family home). From this amount is subtracted an asset protection allowance that protects family retirement and emergency needs. The asset protection allowance is determined by the age of the elder parent. Not all parental assets are expected to be used to pay for college so approximately 12% of the value of the parental assets are added to the Expected Family Contribution calculation.
The available parental income is added to the available parental assets to determine the adjusted available income. This result is multiplied by an assessment rate that increases as adjusted available income increases. This figure is considered to be the amount parents can contribute toward college expenses for the family. If more than one member of the family is studying for a degree or certificate then this contribution is divided equally among the students of the family.
This calculation considers both taxed and untaxed student incomes for the calendar year prior to the academic year for which the financial aid is requested. From this total income figure are subtracted federal, state, local and social security taxes paid and exclusions such as Work Study earnings. Fifty percent of any amount over $2200 is added to the Expected Family Contribution unless the available parental income is negative, then student earnings can offset the negative figure. Also, 35% of the student's assets are added to the Expected Family Contribution. Independent students are treated similarly to the formula for parents without parental contributions. Independent students with no dependent other than a spouse contribute 50% of their available income and 35% of their assets. Independent students with dependents other than a spouse contribute a percentage of available income that increases as the income increases and only contribute 12% of their assets.
You can get a booklet called the "Expected Family Contribution (EFC) Formulas", which describes how the Expected Family Contribution formulas are calculated, by writing to:
Federal Student Information Center
P.O. Box 84
Washington, DC 20044