The information — and the calculations behind it — that a school uses to determine your eligibility for financial aid depends largely on you, your parents and what type of institution the school is. Most schools rely, completely or in some part, on a federal model known as “expected family contribution” (EFC). The EFC is the criteria used by schools, whose students rely on federal financial aid to help pay for their educations, to determine aid eligibility. Such schools include practically all public institutions and many (if not most) private colleges. Regardless of the school, Yuma Community College or Yale, if you are receiving financial aid under a federal government program, the award will be based on your EFC.
The information used to calculate EFC comes from the Free Application for Federal Student Aid (FAFSA; yes, we’re wading into the realm of FGAAS: federal government acronym alphabet soup) which you will fill out every year you attend college and hope to get federal aid to do so.
How Is Federal Financial Aid Calculated?
Using the information from your FAFSA, your school’s financial aid officials (and their handy computers) will apply a formula known as the federal methodology (no acronym) to your individual situation. They look at your income and assets, as well as those of your parents to arrive at your EFC. As a general rule, the closer your EFC is to the estimated cost of attending the school you’ve chosen, the less eligible you are for federal financial aid — because the federal government and your college expect you to contribute an amount equal to your EFC to your education (thus, “expected family contribution”).
Under federal methodology, your income and easiest will be weighted more heavily than those of your parents. If you are independent (i.e. over 24, married, etc.), of course your parents’ assets will no longer be considered in the EFC calculus. For purposes of this post, however, I’m going to work under a hypothetical that presumes a dependent student. In this way, we’ll cover the most ground with the EFC and federal methodology.
A student’s income is given more weight because it is assumed that she has fewer financial obligations and responsibilities than her parents. Plus, it is her education at issue, not that of her parents. Some types of assets, regardless of who owns them, can be “protected” — or all together excluded — from the calculation. Once income and assets are all thrown onto the pile, the number of people living in the household who are attending college at the same time is taken into account. Each additional student under the same roof will lower the EFC for everyone attending school. If you look at the amount of federal financial aid needed or received on a per-household basis (rather than based on the situation of individual students), more attendees under the same roof means more federal aid available to the household. The trick then becomes allocation.
Without delving too deeply into the math and actual calculations behind the EFC, the method used to reach the figure can be summarized like this: a percentage of your parents’ non-excluded income, plus a percentage of their non-excluded assets, is added to a (much higher) percentage of your unprotected income and a (much higher) percentage of your non-excluded assets.
So, if you think you will need federal aid to attend college, the name of the game is finding acceptable (legal!) ways to lower your EFC. This, in turn, will increase your eligibility for aid under the federal methodology. Your status can be one of the largest determining factors in the EFC calculation.
Financial Aid Status
As I suggested earlier, one sure way to reduce your EFC is to be considered an independent student. If your college and the feral government view you as such, your parents’ income and assets are no longer considered in the federal methodology. For this reason, as you may well imagine, being viewed as “independent” for purposes of EFC calculation is much more difficult than actually being independent. When a college looks at your FAFSA, only a few select criteria will trigger a determination of independence under the federal methodology. These include: your age (24 or older); having children of your own; marital status (not single); active duty military service; being a foster child beyond age 13; being an orphan; homelessness; being in a graduate degree-seeking program; being emancipated by court order; or having your own dependents who live with you.
If you fail to meet any of these criteria for independent student status, you will not be considered independent for financial aid purposes, and your parents’ income and assets will be used to increase your EFC. However, if you believe that you have a compelling reason (or reasons) for being declared independent, you can appeal to your college’s financial aid administrator. In the occasional, rare instance the administrator will override the FAFSA-based decision and declare you independent based on his or her professional judgment. Such a situation will require, at minimum, proof that you — and you alone — are financially responsible for yourself.
Keep an eye on FrugalDad.com over the next few days — I will post more information about financial need determination and suggestions for lowering EFC.