How much will you have to pay for college? The answer will depend heavily on your Expected Family Contribution. If you missed it, our last post explained what an EFC is and why it’s important to know what yours is. Are You Too Wealthy to Qualify For Financial Aid? The good news is that you can obtain your preliminary EFC quite easily. You just have to head to the College Board’s website to use its EFC Calculator. When you pull up the calculator this is what you’ll see:

## Picking an EFC Formula

At the start, you must decide which EFC formula you want to use. Your choices are the federal or institutional methodology or both.

You should select both formulas since at this point you don’t want to limit your school choices. The vast majority of colleges in this country only use the federal methodology. You will learn what your official federal EFC is when you submit your FAFSA or Free Application for Federal Student Aid during your child’s senior year in college. About 250 schools, nearly all private, require families to complete an additional financial aid form called the CSS/Financial Aid PROFILE, which uses the institutional formula. This formula drills deeper into a family’s finances.

## What You Need to Use the EFC Calculator

If you have the necessary documents, the EFC calculator should only take a few minutes to complete. Here are the types of questions the calculator will ask:

• Number of people in household
• Marital status of parents
• Age of parents
• Age of children
• Number of children in college
• Adjusted gross income from most recent calendar year
• Income taxes paid for most recent calendar year
• Any claimed education expenses
• Cash, savings, checking
• Non-retirement investments

Once you plug in these numbers, the calculator will produce an estimated EFC for the federal and institutional methodology.  These figures may or may not be similar.

## An EFC Example

To illustrate how an EFC calculator works, I am using a hypothetical 55-year-old couple with one college-bound student and a younger child. Here is their background:

• Parents’ adjusted gross income: \$150,000
• Teenager’s adjusted gross income: \$2,000
• Family’s home equity: \$175,000
• 529 college account: \$50,000
• Parents’ taxable assets: \$100,000
• Parents’ checking account: \$5,000
• Federal taxes paid: \$18,000

## EFC Results

Here are the EFC results for this family:

Under the federal methodology, the family would be expected to pay, at a minimum, \$31,819, for one year of school. Under the institutional formula the figure is greater -  \$34,081. With this high EFC, a family would not qualify for need-based financial aid from state schools.  Instead this teenager would be seeking merit scholarships from public universities, which are given regardless of a family’s ability to pay. This same affluent teenager, however, could qualify for need-based aid at an expensive private university. Using the institutional methodology, if the cost of attendance at a private college is \$60,000, then this family could qualify for up to \$25,919 in need-based aid.

## A Second EFC Example

While income is the biggest driver of a family’s EFC, the number of students in college simultaneously can also have a significant impact. I ran the EFC calculator for the hypothetical family above, but this time both of the couple’s children are in college. Here are the results:

The above example illustrates that a household’s EFC drops significantly when two (or more) children are in college at the same time. The federal EFC drops by roughly 50% and the institutional EFC typically shrinks by approximately 33%.

## Bottom Line:

Using an EFC calculator as early as your child’s middle-school years is important. The calculator can give you an idea of how much financial aid, if any, your child may qualify for. Knowing what your EFC is can help you decide what types of schools should be on a potential college list. It may also encourage you to save more.