Does anyone know the details of how the EFC is calculated. Does a big 529 account balance significantly reduce the EFC?Thanks.
Would you mind if I move this to the financial aid forum?
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The amount in your 529 account is considered a parent asset, and is assessed at 5.6% of its value towards your family contribution. Any 529 accounts you parents hold, even if the beneficiaries are other siblings, must be listed (because you can easily change those beneficiaries).
@BelknapPoint am I correct?
Yes.
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You can manually calculate EFC here, using the fafsa worksheets.
https://studentaid.gov/sites/default/files/2023-24-fafsa-worksheet.pdf
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I did
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Please go ahead.Thanks.
Thanks. I am curious how the calculation is done, not the EFC result.
As thumper noted above, you can expect any need-based award to be decreased by 5.5 percent of the balance of all the 529s that are owned by the students parents, regardless of whether the beneficiary is the student or his/her sibling.
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So to make it simple…if you had $100,000 in a 529, it would add $5600 to your family contribution. If you have $200,000…$11,200.
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EFC is heavily dependent on income. The income assessed is that of two years prior to the school year (e.g., 2021 income for the 2023-2024 school year). Parent assets (all assets except primary home and retirement accounts) are assessed at about 5.5%. Child assets are assessed at about 20% per year. Note that 529s are considered a parent asset regardless of beneficiary. If you are taking about a CSS school, rather than FAFSA only, many will assess some level of equity in your primary home as well - some all the equity, others just up to a certain level (e.g., 2x annual income). If you have divorced parents, a CSS school will consider the income / assets of both households; if you are doing FAFSA only it is just the income/assets of the primary custodial household. In both cases it’s the total income / assets, including those of stepparents. I’m sure it’s more complicated than that, but roughly that’s my understanding.
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Are you asking about the FAFSA EFC only….or are you asking about your family contribution to all colleges?
@mwfan1921 provided you with the FAFSA formula. You can see the entries. Those are used to calculate your FAFSA EFC.
If you are asking how different colleges compute for awarding their institutional need based aid…well…there are probably as many different formulas for that as there are colleges.
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I meant FAFSA EFC.
Has your question been answered?
Kind of. As you mentioned, each college probably has a different formula…
Not for the FAFSA EFC. It’s the same for all colleges.
Now…what the colleges calculate they will award you in aid? That’s a different question. If you haven’t used the net price calculators on each college website you are considering…use those. They will give you a decent net cost estimate.
If you are divorced, own a business, are self employed, own real estate other than your primary residence, the NPCs won’t be particularly accurate.
The FAFSA EFC should be viewed as the minimum colleges will expect you to pay.
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@thumper1 is correct. EFC is not what a college expects you to pay, and it doesn’t vary from college to college. It’s a number calculated by the federal processor, based on the information reported on their FAFSA, that is used to calculate eligibility for federal aid. If it’s low enough, the student would be eligible for a Pell grant. A student who is eligible for Pell MIGHT receive an SEOG grant, but this is allocated by the school from a pool the federal government gives them. All students are eligible for federal loans if they successfully complete the FAFSA, but the portion that is subsidized (if any) depends on the college’s Cost of Attendance, all other aid, and the EFC … but a freshman is eligible to borrow $5,500 in federal loans, up to $3,500 of which MAY be subsidized (but the entire $5,500 might be unsubsidized, depending on COA, other aid & EFC). Some students might be awarded Federal Work Study, which allows them to work in an on campus job & earn money … but earning that money depends on the student being hired, and because the student is paid for hours worked, there is no guarantee that the award amount will be earned. FWS is awarded by the school from a pool of money the Federal government gives them. Any other money a school awards is from its own funds (institutional aid). Most colleges don’t award aid that equals the Cost of Attendance less the EFC. The shortfall is called a gap. Schools just don’t have the funds to award aid to fully meet need for the vast majority of students.
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