What Does Expected Family Contribution Mean Now?

Financial aid for higher education in the United States helps millions of students pursue their academic goals. Historically, the process of determining a family’s ability to contribute to college costs revolved around a figure known as the Expected Family Contribution (EFC). This amount aimed to standardize how much a student and their family could reasonably afford to pay for one year of college. The methodology for assessing financial need has evolved, bringing about significant changes to how federal student aid is calculated and awarded.

Defining Expected Family Contribution and Student Aid Index

The Expected Family Contribution (EFC) served as a foundational metric in the federal student aid system for many years. It represented what a family was expected to contribute toward a student’s education expenses for an academic year. Financial aid offices used this figure to determine a student’s eligibility for various forms of need-based aid. This calculation was often misunderstood, with many families mistakenly believing it was the actual bill they would receive or the total amount they would pay for college.

Beginning with the 2024-25 award year, the Student Aid Index (SAI) replaced the EFC as part of the FAFSA Simplification Act, enacted in December 2020. This change aims to simplify the financial aid application process and provide a more accurate assessment of a family’s financial strength. The renaming to “Student Aid Index” clarifies that the number is an eligibility index for student aid, rather than a direct expectation of payment.

A key conceptual difference between the EFC and SAI is that the SAI can be a negative number, going as low as -$1,500. This allows financial aid administrators to identify students with the highest levels of financial need more precisely, which was not possible when the EFC’s minimum was $0. Additionally, the new SAI formula no longer considers the number of family members attending college concurrently, which can impact aid eligibility for families with multiple children pursuing higher education at the same time.

Key Components of the Student Aid Index Calculation

The Student Aid Index (SAI) is calculated using specific financial information from both the student and, if applicable, their parents. This comprehensive assessment relies on four primary financial inputs: parent income, parent assets, student income, and student assets. Each of these components has distinct rules governing what is included and excluded, along with specific allowances that reduce the amount considered in the calculation.

Parent income is often the most substantial factor in the SAI calculation. The Free Application for Federal Student Aid (FAFSA) uses “prior-prior year” income, meaning the application for the 2025-26 academic year uses income information from the 2023 tax year. Income for FAFSA purposes includes Adjusted Gross Income (AGI) from federal tax returns, along with certain untaxed income sources. These untaxed sources can include:
Pre-tax contributions to Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs)
Distributions from Roth IRAs
Tax-free interest

Several allowances reduce the impact of income on the SAI. These include federal tax liability, which accounts for income and payroll taxes paid. An Income Protection Allowance, varying based on family size, is also subtracted to cover basic living expenses. Additionally, an employment expense allowance may be applied for working parents to cover job-related costs.

Regarding assets, the SAI calculation considers cash, savings, checking accounts, and the net worth of investments. Investments include:
Real estate (excluding the family’s primary residence)
Vacation homes
Income-producing properties
Trusts
Stocks, bonds, and mutual funds

Qualified education benefits, such as 529 plans, are generally counted as parent assets if owned by the parent. Child support received is also included as a parent asset.

Certain assets are excluded from the SAI calculation to reflect a family’s true capacity to pay. These include:
Equity in a family’s primary residence
Funds held in retirement accounts like 401(k)s, IRAs, SIMPLE, KEOGH, or pension plans
The cash value of whole life insurance policies and annuities

For the 2024-25 and 2025-26 FAFSA cycles, the net worth of small businesses and farms is generally included. However, legislation effective for the 2026-27 FAFSA will exclude equity in family-owned businesses with 100 or fewer full-time employees and farms where the family resides.

Student assets are assessed at a higher rate than parent assets; specifically, 20% of their value is considered available for college costs, compared to approximately 5.64% for unprotected parent assets. Student income also has an Income Protection Allowance, meaning that if a student’s income is below a certain threshold (e.g., $11,400 for the 2025-26 FAFSA), it will not contribute to their SAI. Federal Work-Study earnings and any taxable college grants or scholarships are generally excluded from student income in the SAI calculation.

Utilizing Your Student Aid Index for Financial Aid

Once the Student Aid Index (SAI) is calculated from the FAFSA, it becomes a central figure in determining a student’s financial need. The fundamental formula for this determination is: Cost of Attendance (COA) minus Student Aid Index (SAI) equals Financial Need. This financial need then dictates eligibility for various forms of need-based financial assistance.

The Cost of Attendance (COA) represents the estimated total cost of attending a particular college or career school for one academic year. This comprehensive figure includes both direct costs, such as tuition and fees, and indirect costs. Indirect costs encompass expenses like:
Room and board
Books and supplies
Transportation
Personal and miscellaneous expenses
Loan fees (if applicable)

A student’s calculated financial need directly impacts their eligibility for specific types of aid. A lower SAI generally indicates a higher financial need, potentially leading to more need-based aid. This can include federal programs such as:
The Pell Grant, which is awarded to students demonstrating exceptional financial need
Subsidized federal student loans, where the government pays the interest while the student is in school

State-specific grants and scholarships, along with institutional aid from colleges themselves, also often use the SAI as a key determinant for awarding funds.

Important Considerations for Your Student Aid Index

A Student Aid Index (SAI) can range from a negative value of -$1,500 to a positive number, with a lower SAI indicating a greater financial need. If a student’s SAI is zero or negative, they are generally eligible for the maximum Federal Pell Grant, provided they meet other eligibility requirements and have not exceeded their lifetime Pell Grant limits. While a negative SAI signifies the highest level of financial need, it does not mean that a student will receive financial aid exceeding the college’s Cost of Attendance.

Families facing unusual financial circumstances not accurately reflected by the FAFSA data can request a re-evaluation through a process known as “special circumstances” or “professional judgment.” Federal regulations allow a financial aid administrator at a college to adjust the data used in the SAI calculation on a case-by-case basis. Common situations that may warrant such a request include:
Significant loss of income due to job loss
Unusually high unreimbursed medical or dental expenses
Changes in family structure such as divorce or the death of a parent

To initiate a special circumstance review, families typically need to contact the financial aid office at their chosen institution and provide documentation supporting their claim. While schools are not obligated to grant these adjustments, they have the discretion to do so if the circumstances are adequately documented and deemed to significantly impact the family’s ability to pay. Furthermore, various online tools are available for families to estimate their potential SAI before completing the official FAFSA, providing an early indication of their financial aid eligibility.