Many of the rules surrounding FAFSA are there to ensure your EFC is a true reflection of what your family can afford. A $400K house with a $300K mortgage. Families with low EFC’s will want to look at schools that give generous need-based financial aid packages. Get married. However, you could also have a much lower EFC at a PROFILE school because of the other information they consider. The remaining amount is allocated toward your EFC at varying marginal rates that increase with income just like income tax brackets. david iaschi 21st October 2019 at 4:18 pm. Parent Income The EFC formula gives standard income tax, social security tax, and employment expense allowances but an unrealistically low parent income protection allowance. Your parents saved $2,400 per year by shifting their assets around with no changes to their net worth. Wait does this mean that since I wanted $9k ish and my mom earned 5k that I'd be expected to pay $1500 when I obviously used that money for the family????? My fafsa says my EFC is 000000, what does that mean? It is the maximum expected contribution, not necessarily what you actually must or will pay. Do your parents make an abnormal amount of money or have a large amount of assets? Posted by 4 days ago. If it was that easy, every student would do it and everyone would have a very low EFC. Dorothy Speaks About Coach-for-College Service “G iven my status at the time, I felt completely lost and was afraid to make the wrong move given the risks. If your parents' earned gross income is below $25k you get an automatic EFC of $0. Determine if you’re a need-based aid candidate at any of the schools you are serious about. We live pretty comfortably though. Half of your personal net income (you being the student, not your parents) above $6570 will be included in your EFC. Step 2 – Lower EFC Strategies. So if your parents have a $500k investment account and $100k of equity in their $600k home that would be $60k added to your EFC. You won't get any financial aid by colleges so if your parents are only contributing 10k/year, you need to find some merit scholarships and hopefully full rides because even with full tuition scholarships you would need more than 10k to cover room/board/other expenses every year. What can you do? That’s the automatic EFC of families making an adjusted gross income of less than $24,000. The results are only an approximation of the Federal EFC figure that is calculated when you file the FAFSA. It starts with adjusted gross income from their tax return. The Free Application for Federal Student Aid (FAFSA) considers someone a part of a household if they live at home and if the parent or parents provide more than 50 percent of the dependent's support. So while your total EFC would go up by about $1,500 with a second student in college, it effectively reduces your total cost per student. New comments cannot be posted and votes cannot be cast, More posts from the ApplyingToCollege community. You also will be eligible for whatever need based aid your school offers. “Assets belonging to the student are assessed at a 20% rate. It's possible to have a $70k salary and be below the top bracket here if you have a lot of deductions. So say your parents have $100k in assets. You can be emancipated (but even then there's a lot of red tape and restrictions/regulations), you can get married, you can join the military, and that's about it. Note that some or all of these concepts may not be appropriate for everybody, so please consult a qualified college financial planning expert before proceeding. But now you have to pay a crazy amount that your parents are never going to agree to. If you have a job that earns more than this, you are expected to use half of the overage on college expenses and will not receive need based aid for that amount. The cost of college includes your direct costs of tuition, fees, residence hall, food but also travel, books and estimated other costs. What your parents can pay is the only thing the EFC is supposed to measure. 12% of your parents total assets will be included in your EFC. Your income and household members are easily the factors that will have the biggest impact on the your EFC. Note that the deadline for filing an amended FAFSA is 6/30/18, so there is still time to try some of this. However, if your family receives a low EFC number that is still higher than what is affordable, it is not a good EFC number. A decrease in income may decrease your EFC and increase your financial aid package if you are interested in requesting more student loan money. EFC (click here to check out more acronyms) or Estimated Family Contribution is calculated using the information that you provide on your Free Application for Federal Student Aid (FAFSA and CSS) application.The calculation is done according to a formula established by the U. S. Department of Education’s Federal Methodology Calculation. For some people it would even be worth refinancing their home after you graduate or getting a HELOC to have access to those funds again. Cookies help us deliver our Services. So FAFSA won't recognize the significant wealth your family has there. Note that this is an annual amount, which is kind of crazy. My mom and stepfather refused to show me their numbers. For example, the 2021-2022 EFC formula sets the income protection allowance for a family of four with one child attending college at a mere $29,890. All else equal, families from high-tax states like California, Maryland, New Jersey, and New York will have lower EFCs; families from low-tax states like Alaska, Nevada, Tennessee, and Washington will have higher EFCs. The EFC stands for Expected Family Contribution and it is the magic number for what kind of financial aid you are eligible and how much you can get. Many of the rules surrounding FAFSA are there to ensure your EFC is a true reflection of what your family can afford. Because the EFC formula for a dependent student uses parental data and the two formulas for independent students do not, the first step in calculating a student’s EFC is to determine his or her dependency status. But no matter where you are in the FAFSA filing process, I’ll give you a few ideas to lower your EFC and to increase your needs-based aid for college. Press question mark to learn the rest of the keyboard shortcuts. EFC is Expected Family Contribution and, while the income protection allowance decreases by $3,160 for each additional student, the EFC is effectively divided by the number of college students in the household. Your EFC will not be affected by money you have saved in 401K or IRA retirement accounts. Parental income is a bit tricky. The EFC is how much money you’re supposed to be able to pay toward college expenses. You can use the FAFSA 4caster to estimate your EFC; just remember to add back any retirement plan contributions to your income or you’ll be way off. In any case, you’ll also probably have to ask for the EFC since schools that use the PROFILE don’t have an equivalent of the SAR. Dear OScar, I cannot calibrate ESC: they enter calibration mode (musical tone) but when I lower to minimum the slider they do not exit calibration mode: they just beep 1, then 2, then 3 times and repeat…leaving ESC not calibrated. Double-check all of your numbers. LasMa 10768 replies 138 threads Senior Member. It translates into higher, needs-based federal and state grants, and subsidized Stafford student loans. So, the college you attend will use that EFC figure to determine how much aid you get. $300K in an investment account. These go from 22% of the first $16,400 they earn up to 47% of any amount over $33,100. FAFSA counts $12k of that toward your EFC. But since they earned less than $25k you get the automatic $0 EFC. Minimize Parents’ Income in Base Year . Note: my mom and stepfather did not allow me to see how much they make so I don't know if it's right I was just wondering if the number was even possible and roughly what it meant. Combining all three of these approaches could have a significant effect on your final EFC. What Now? Strategy: Parents should max out 401k, 403b, and IRA contributions for a couple years before filling out the FAFSA and the whole time you're in college. If your parents have $20k in credit card debt, they could pay that off with other assets reducing their FAFSA assets to $80k. However presumably if your family income or assets were actually that high you'd probably not be doing a FAFSA anyway. A bunch of things are netted out (taxes, personal allowances, etc). Your EFC might be high enough to disqualify you from need-based aid, like grants, but you might still be able to get federal work-study or get federal student and parent loans. Press J to jump to the feed. What is reported on federal tax forms as AGI with some adjustments is the primary number for EFC. I don't understand why My EFC (Expected Family Contribution) is still over 1700. Was not fun to go back and do it correclty :l. What your parents are planning to pay doesn't matter in the slightest in the EFC measurement. First, there’s the cost of schooling – that includes tuition, room, board, textbooks, and other supplies. However presumably if your family income or assets were actually that high you'd probably not be doing a FAFSA anyway. Keep in mind that student aid is generally not considered income, although you’ll still need to report it when filing taxes. If you're looking for an increase in financial aid, the solution is to lower your EFC by following several strategies as you fill out and submit your FAFSA form. Next step is to contact the financial aid departments at all your schools--this is assuming that you do require financial aid, and your FAFSA profile doesn't fully represent your situation--and explain your family's financial status and any extenuating circumstances. Unless your parents have an annual income of a million dollars a year, an EFC of $525k+ doesn't make sense. It will also not be affected by your outstanding debt, from your mortgage to car loans to credit cards. In order to access federal student loans and other types of financial aid, you still need to fill out the FAFSA. (Your family can afford to pay more than the college costs.) The rental income will count as income too. Now that you're basically a FAFSA CPA, how can you take advantage of this information? But in general I know that owning your house outright is far better than having a mortgage and say, an investment account. Married students will often have a lower EFC than those who are unmarried, even though incomes and deductions are the same. My mom made the opposite mistake and was delighted when my first choice school's net price calculator spit out like 5k per year. If you got a number that seems implausible for your situation, you first want to look over the FAFSA and make sure there isn't an error. EFC Calculations and Eligibility. Having an estimate of your EFC doesn’t mean you’ve finished all your financial aid paperwork, like the FAFSA or CSS Profile. But it does give you a guide for researching college costs. You will be eligible for need based scholarships as well. I am an independent student with the only source of annual income ($9000) from my parents. If your EFC is higher than the COA, you just get no aid. The first step in lowering your EFC is to determine whether or not it’s worth doing. Owning your expensive house with no mortgage is great for you because there's no difference between that and having a $600k mortgage on a house worth $400k as far as FAFSA goes. You can also shelter your wealth and income from FAFSA by maxing out retirement account contributions. Step 5 – Identify Generous Schools. Share #3. If your parents had high income, then yes. Here are some little known tips on how your EFC (Expected Family Contribution) is calculated (Source). An EFC of $0 means that the family has no ability to pay for college, but that rarely means they won’t have to pay something. Here is the formula: Cost of College – the EFC = Financial Need. How to do that? However, it’s all relative, since these numbers are in relation to each other. This subreddit is for anyone looking for advice about undergraduate college admissions, including college essays, scholarships, SAT/ACT test prep, and anything related to college applications. It's not like they're going to create a negative financial aid package where you have to pay the rest of the 500,000. Others have said it but make sure you double and triple-check your FAFSA to make sure you didn't add an extra digit or something -- IE, make sure that you put 100,000 instead of 1,000,000 or something. I wanted guidance and wasn’t completely sure who to turn to. I thought I would get EFC of 0 because I don't work! I don't work at all. 5. There is a specific formula used to determine your eligibility. Kantrowitz says the EFC is based on the two years prior to the academic year for which a family is applying, and there are changes families can make during that year that will lower their EFC. Remember that this is net available income with all the deductions and exclusions taken out. Online "net price calculators" can help you estimate your EFC, but it's just that -- an estimate ... could potentially lower the amount of other financial aid you receive. This subreddit is for anyone looking for advice about undergraduate college admissions, including college essays, scholarships, SAT/ACT test prep, and anything related to college applications. It's really hard to be treated as an independent by FAFSA. Just a little typo like that will completely throw off your results by a huge amount. That answer lies in knowing what the definitions and formulas are for all of these factors (assets, income, deductions, etc). New comments cannot be posted and votes cannot be cast, More posts from the ApplyingToCollege community. If your parents have a lot of credit card debt, consider paying it off, then filing an amended FAFSA. Honestly FAFSA is pretty complicated, so it's hard to say what your EFC and actual aid offers will look like until you fill it out and apply. The higher the dollar amount of your EFC, the less financial aid is available to you for your quest to further your child's education. The lower your income, the less your EFC will be. Paying more in federal income tax usually lowers a family’s EFC. We use cookies on our websites for a number of purposes, including analytics and performance, functionality and advertising. $400K net worth, but roughly $36K EFC. If you’re applying for financial aid with the FAFSA, there are two basic numbers that go into the equation. Since your EFC is greater than your COA, your calculated financial need is $0, and you would not receive any financial aid. But 525330 is like seven times more than the COA for the most expensive schools out there. Number of dependents isn't going to do much with that other than increase the asset protection allowance. EFC is calculated by taking the Cost of Attendance (COA) and subtracting the EFC. Shitpost Wednesdays. Continue this thread View Entire Discussion (11 Comments) More posts from the ApplyingToCollege community. The EFC is determined by a formula designed by Congress, and is an estimate of how much you and your family are able to contribute toward your education expenses, based on information from the FAFSA. The rental property will count toward your parent's assets. If it was that easy, every student would do it and everyone would have a very low EFC. It's not like they're going to create a negative financial aid package where you have to pay the rest of the 500,000. A family with a $2M net worth could have an EFC of $0 with income deductions, a large retirement account, no credit card debt, and a ton of home equity. Strategy: Parents should pay off credit card debt before filing FAFSA. A higher allowance results in a lower EFC, because it is deducted from your income in the formula. The most direct way to lower EFC is by lowering income. You can't just declare yourself independent. A low EFC is good news. You have fewer children attending college. Retirement savings aren't included in assets either. Step 4 – Determine College Affordability. For example, an EFC number of 500 means that your family is expected to pay at least $500 to cover tuition and fees, and you may be eligible to receive aid to cover tuition up to that amount. You can also appeal to FAFSA directly, but it could be a more difficult road. You got in! Your Estimated Family Contribution affects your eligibility for financial aid - the lower your EFC, the more grants and scholarships you can qualify for. If your EFC is higher than the COA, you just get no aid. They didn't and won't let me see how much they make. $0 in other investments. 3.9k. Most colleges cannot meet 100% of need. Since saving for retirement is deducted from income when calculating adjusted gross income, your parents should be maxing out their contributions to reduce their income AND assets for purposes of EFC calculation. Another family with a $0 net worth could have a large EFC with few income deductions, no retirement savings, no home equity, and massive credit card debt. For our purposes, however, estimating this is enough to get us in the range of a reasonable EFC. $400K net worth, but $0 EFC. I had to let them pick the password and everything so I have no idea what they make. Low-income families can have an EFC as low as $0. Then you find the loopholes and strategic moves you want to make. Have children. They can reduce contributions later to rebalance retirement vs non-retirement assets. It means that the government feels that you can’t afford to pay college tuition. If your parents sold the investments and paid off their house, they would reduce that portion of the EFC to $0 without influencing their true net worth at all. My EFC is nearly $5,500 and I barely make 24k a year. Step 3 – Evaluate Aid Eligibility By School. You will qualify for the maximum Pell Grant of $5,920 per year. FAFSA and Adjusted Gross Income. For example, you could have the same net worth with both: A $400K house with no mortgage. I got an EFC number of 525330.... Is that even possible? Strategy: Parents should move as much of their assets into their primary residence as possible. Getting a zero EFC is hard enough, but getting a full ride is much harder to get. The EFC is used to determine your eligibility for federal student aid. By using our Services or clicking I agree, you agree to our use of cookies. May 2011. On the idea of making changes to your assets in an attempt to lower your EFC, McKenna said you should be very leery of anyone trying to “sell” you an investment or insurance product that purports to lower your EFC. The larger your household size is, the lower your EFC will be (in most cases). Congratulations! My parents aren't planning on paying anything over 10k a year so this seems really high. I think the Collegeboard screwed up. This is one of the few things in the process that's okay/preferred to be done by a parent. How to Lower your EFC on the FAFSA and Get More Financial Aid. What if I don’t go off of my parents income and go off of my own. Go back through the numbers you put in, I guarantee there's a decimal missing or an added zero somewhere. They’ll be listed as an exclusion on your FAFSA form. If you get a zero EFC, you might think that you are getting a full ride to college, but that is not necessarily the case. I'm assuming middle upper class. Home equity in a primary residence is not included in assets. Press question mark to learn the rest of the keyboard shortcuts. Subsidized is good because it means that the government pays the interest while the child is in school. Your parents must make a lot of money($1 million+/year) for it to be that high. Work as few hours as possible, or find more deductions to lower your adjusted gross income and taxes paid. Credit card debt is not counted against assets. If my source of income from parents is lower, would my EFC be also lower as well? If you are eligible, the EFC will determine exactly how much financial aid you can get. Now only $9,600 is added to your EFC. Press J to jump to the feed. As you can tell, given the same COA, a lower EFC generally means more financial aid.
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