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Understanding the EFC


By Kim Clark posted at US News Education at:


Your EFC represents what a college will expect you to pay at a minimum for one year of a child's college. The EFC, which is expressed as a dollar figure, is calculated based on such factors as family income, certain investment assets, number of people in the household and, in some cases, home equity.


Plenty of families are shocked when they obtain their EFC. Parents with a lot of debt can be particularly upset. The EFC formulas don't consider household debt, so the EFC can be a fairly harsh assessment of a family's ability to pay for college.


Some low-income families can have an EFC as low as $0. An EFC of $0 means that the family has no ability to pay for college. Families with low EFC's will want to look at schools that give generous need-based financial aid packages. By contrast, there is no EFC ceiling for wealthy students. 


Why do you need to know what your EFC is? You will get some idea of the costs that your family will face for one year of college and what kind of financial aid you might expect. But that figure alone won't tell you anything until you look at the price tag of a particular school. Here are two examples:


School No. 1: Private College

Family EFC: $24,000

Cost of attendance: $52,000

Potential financial aid award: $28,000


School No. 2: State University

Family EFC: $24,000

Cost of attendance: $14,000

Potential financial aid award: $0


What factors should parents & students consider in evaluating a finanical award:

As a practical matter, the vast majority of schools will not meet 100 percent of a family's need. The students who capture the best financial aid packages are typically the ones whom a college or university covets. Teenagers will often get a better deal if they are in the top 25 percent to 33 percent of the latest crop of applicants.


Students and parents looking to choose a college likely to award them sufficient grants can ask the college's financial aid office about 10 major factors that help determine just how big their financial aid offer will probably be:


1. The college's policy on student loans: Several schools, including Amherst College in Massachusetts and Pomona College in Claremont, Calif., provide enough grants and work-study jobs to meet a student's need. Others, such as Oberlin College in Ohio and Wesleyan University in Middletown, Conn., say they will provide enough grants so that low-income students don't have to borrow, while others will be expected to take out modest loans. Still others offer aid packages that include federal student loans of up to $7,500 a year.


2. The way the college calculates a family's "need": Harvard University, for example, promises to provide enough grants to make sure families earning less than $180,000 pay no more than 10 percent of their income. Other schools on this list promise enough aid so that the family generally only has to come up with an expected family contribution that the school calculates based on the family's income and assets.


3. What the college considers as its "cost": Legally, a college's total cost of attendance is supposed to include tuition, fees, room, board, books, travel, and reasonable miscellaneous expenses for laundry and other necessities. Some schools keep their "cost" low by providing comparatively small allowances for books or miscellaneous expenses. The College Board surveys colleges every year and estimates that books and supplies cost about $1,100 last year. The typical "miscellaneous" expense budget ranged from $1,400 to $2,000.


4. The college's expectation for a student contribution: Many of the schools on this list reduce the student's need, and thus the aid package, by at least $1,000 (and some by much more), saying that the student is expected to contribute that much each year from summer earnings. A few schools, such as SUNY's College of Environmental Science and Forestry in Syracuse, N.Y., provide enough aid so that students aren't required to pitch in summer earnings.


5. How the college counts home equity: Some colleges, such as Yale University and Occidental College in Los Angeles, do sometimes consider the equity parents have in their homes as a resource that should be tapped to help pay for college. Others, such as Brown University and Harvard, don't consider home equity at all.


6. How the college considers divorced parents: Some schools, such as Yale, analyze the incomes of both stepparents and original parents and make their own judgments about which set of parents should be responsible for each student's college costs. Others, such as Boston College, consider the incomes of only the original parents. Colleges that only use the Free Application for Federal Student Aid consider only the custodial parents' income, even if a stepparent has a prenuptial agreement relieving the stepparent of financial responsibility for the child.


7. The cutoff date for the meet-full-needs promise: Reed College in Portland, Ore., and SUNY ESF try to meet the needs of only those students who complete their aid applications on time. Other schools, such as Adrian College in Michigan, commit to meet the need of only those students admitted during the early or regular admission seasons and may run out of aid by the time they start admitting students off of the wait list. Still others, such as Princeton University, Northwestern University in Evanston, Ill., and St. Olaf College in Northfield, Minn., say the timing of the application doesn't affect the aid award.


8. The aid policy for international students: A few schools on this list, such as Princeton and Grinnell College in Iowa, commit to meet the financial needs of noncitizens. Many others, such as Northwestern and Adrian, don't guarantee full aid for international students.


9. Whether the school also offers merit scholarships: Some schools on this list, such as Rice University in Houston and Washington University in St. Louis, offer top students scholarships no matter how rich their parents or what their EFC is. Others, such as Columbia University, do not offer merit scholarships.


10. The effect of an aid application on chances for admission: At least 28 colleges have committed to ignore a student's aid application when deciding about admission. But some others on the list do reserve at least some seats for students who can pay full price. Reed says it meets the full need of all admitted students and doesn't consider ability to pay for more than 90 percent of its admission decisions. But the last dozen or so fat envelops go to students who don't need financial aid.