What Is the EFC and How Does the New SAI Affect You?

The financial landscape of higher education is constantly evolving, and understanding its key components is essential for families navigating the costs of college. For many years, the Expected Family Contribution (EFC) served as a central figure in determining a student’s eligibility for financial aid. However, beginning with the 2024-2025 award year, the EFC has been replaced by a new measure called the Student Aid Index (SAI). This shift, mandated by the FAFSA Simplification Act, aims to streamline the financial aid process and provide a clearer picture of a family’s ability to contribute to educational expenses.

What Expected Family Contribution (EFC) Means

Historically, the Expected Family Contribution (EFC) was an index number estimating a student’s, and for dependent students, their parents’ or guardians’, ability to pay for a year of post-secondary education. This figure indicated financial strength, not an actual payment amount. Colleges used EFC to determine eligibility for federal, state, and institutional financial aid.

Beginning with the 2024-2025 award year, the FAFSA Simplification Act replaced EFC with the Student Aid Index (SAI). The SAI functions similarly as an index number, representing a family’s financial capacity to contribute to college costs. This number appears on the FAFSA Submission Summary.

The Factors Determining Your Student Aid Index (SAI)

The Student Aid Index (SAI) is calculated using specific financial information from the FAFSA to determine a family’s financial strength. This calculation considers income, assets, and family size. It deducts a minimum amount for normal living expenses from financial resources to arrive at the index.

Income assessment for SAI includes taxable and untaxed income for parents and students. For parents, the calculation begins with adjusted gross income (AGI) and adds back deductible payments to Individual Retirement Accounts (IRAs). An Income Protection Allowance (IPA) is then subtracted from income, accounting for basic living costs and ensuring a portion of income is protected from the calculation. For the 2024-2025 award year, untaxed income like child support received is now reported as a parent asset rather than income, representing a notable change from previous methodologies.

Assets also play a role in determining the SAI for both parents and students. Included assets encompass cash, savings and checking accounts, and the net worth of investments. A significant change under the FAFSA Simplification Act is the inclusion of the net worth of all businesses and farms, removing previous distinctions based on size. However, certain assets are excluded from the SAI calculation, such as equity in a family’s primary residence and funds held in qualified retirement accounts like 401(k)s and IRAs. Student assets are weighted more heavily than parent assets, with no allowances applied.

Family size influences the SAI, determined by the number of dependents on the applicant’s or parents’ U.S. tax return. A notable change is that the number of family members enrolled in college simultaneously is no longer a direct factor in the SAI calculation. While colleges may still consider this information for institutional aid, the federal methodology no longer accounts for it, which could impact families with multiple college-bound children.

SAI’s Role in Financial Aid Awards

The Student Aid Index (SAI) directly impacts financial aid. College financial aid offices use a formula to determine a student’s financial need: Cost of Attendance (COA) minus SAI equals Financial Need. This formula calculates eligibility for federal, state, and institutional aid.

The Cost of Attendance (COA) estimates what it costs a student to attend college for one academic year. This includes direct costs like tuition and fees, and indirect costs like room and board, books, supplies, transportation, and personal expenses. Colleges must provide this estimated COA, which sets a limit on the total financial aid a student can receive.

Once financial need is calculated, colleges assemble a financial aid package that may include grants, scholarships, work-study opportunities, and federal student loans. A lower SAI indicates greater financial need, increasing the likelihood of qualifying for more need-based aid. Unlike EFC, the SAI can be a negative number, as low as -$1,500. A negative or zero SAI indicates the highest financial need and often qualifies a student for the maximum Federal Pell Grant award.

Addressing Unusual Financial Situations

The standard Student Aid Index (SAI) calculation may not always capture a family’s true financial circumstances, especially with unforeseen changes. Federal regulations allow financial aid administrators to use “professional judgment” to adjust a student’s SAI or Cost of Attendance (COA). This discretion ensures the financial aid system remains flexible and responsive to individual needs.

Professional judgment addresses two categories: “special circumstances” and “unusual circumstances.” Special circumstances relate to financial situations not accurately reflected by FAFSA data, such as job loss, significant unreimbursed medical expenses, or a parent’s death. For example, administrators can adjust income to zero if a student or parent provides documentation of unemployment benefits.

Unusual circumstances pertain to situations warranting an adjustment to a student’s dependency status, known as a dependency override. Examples include human trafficking, refugee or asylee status, parental abandonment, or incarceration. Families facing these situations should communicate directly with their chosen college’s financial aid office. The process involves submitting additional documentation, and institutions must now publicly disclose their process and requirements for professional judgment requests.