Why Is My Expected Family Contribution So High?

The Expected Family Contribution (EFC) was a metric used to determine a student’s eligibility for federal financial aid, estimating a family’s reasonable contribution toward educational costs. Calculated through the Free Application for Federal Student Aid (FAFSA), this figure served as a baseline for colleges to assess financial need. While the EFC has been replaced by the Student Aid Index (SAI) for the 2024-2025 award year and beyond, the financial principles influencing a family’s calculated contribution remain largely consistent. Understanding the components that contributed to a higher EFC helps families anticipate their financial aid eligibility and plan for college expenses.

Key Financial Inputs Driving EFC

Income is the primary factor influencing a family’s Expected Family Contribution. Both parental and student income levels are assessed, starting with Adjusted Gross Income (AGI) from federal tax returns two years prior to the academic year. The calculation also incorporates untaxed income sources, such as child support received, untaxed portions of pensions, and distributions from Individual Retirement Accounts (IRAs). Tax-deferred contributions to retirement plans, like 401(k)s and 403(b)s, are added back into the total income considered for the EFC.

Allowances are subtracted from total income to determine “available income.” These allowances include federal, state, and Social Security taxes paid, plus an income protection allowance for basic living expenses. An employment expense allowance is also deducted for working parents. Higher overall income, even after these allowances, directly translates to a higher EFC because more is considered available for educational costs.

Assets also play a role, though generally less impactful than income for parental contributions. Assessable assets include savings and checking account balances, and investments like stocks, bonds, and mutual funds. Real estate equity, excluding the family’s primary residence, is also considered. Certain assets are excluded, such as funds in retirement accounts (401(k)s, IRAs), equity in a family’s primary residence, and the value of small businesses with fewer than 100 employees.

College savings plans, such as 529 plans and Coverdell Education Savings Accounts (ESAs), are counted as parental assets if owned by a parent or dependent student. These parental assets are assessed at a maximum rate of 5.64% of their value. In contrast, assets held directly in a student’s name, including Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) accounts, are assessed at a higher rate of 20%. Even modest amounts in these categories can elevate the EFC, particularly student-owned assets due to their higher assessment rate.

Household and Demographic Factors

Family size influences the Expected Family Contribution. Larger households generally receive a higher income protection allowance, which reduces the income considered available for college expenses. This allowance acknowledges that more income is needed to support basic living expenses for a greater number of dependents. Consequently, a larger family size typically results in a lower EFC.

Historically, the number of children enrolled in college simultaneously impacted the EFC. Under the previous EFC methodology, if multiple children from the same family attended college, the calculated parental contribution portion of the EFC was divided among them. This division could reduce the individual EFC for each student, potentially increasing their eligibility for need-based aid. However, with the transition to the Student Aid Index (SAI) for recent FAFSA applications, the number of children in college no longer directly affects the overall index.

The age of the older parent also influenced the EFC through the asset protection allowance. This allowance, designed to shield a portion of parental assets for retirement, increased with the older parent’s age. However, for federal financial aid calculations, this asset protection allowance has phased out and is now set at $0. This means parental assets are no longer shielded based on age.

The EFC Calculation Methodology

The Expected Family Contribution (EFC) calculation converted reported financial and demographic data into a numerical index, determining a family’s capacity to contribute to college costs. It began by calculating “available income” by subtracting various allowances from total reported income. These allowances included deductions for federal, state, and Social Security taxes, an income protection allowance based on family size, and an employment expense allowance for working parents.

Similarly, “available assets” were determined by subtracting any applicable asset protection allowance from the family’s assessable assets. The federal asset protection allowance is currently $0, meaning all assessable assets are considered. The resulting “available” amounts from both income and assets were then subjected to specific assessment rates.

Parental available income was assessed on a progressive scale, with rates ranging from 22% to 47%, meaning higher available income resulted in a larger contribution. Student available income, after their own allowances, was assessed at a flat rate of 50%. These assessed amounts from parental income, parental assets, student income, and student assets were combined to yield the final EFC, providing a comprehensive measure of the family’s expected financial contribution.

Addressing Discrepancies or Special Circumstances

If a family receives an Expected Family Contribution (EFC) that appears unexpectedly high, the first step involves reviewing the Free Application for Federal Student Aid (FAFSA) form. Errors or omissions in reported income, assets, household size, or Social Security numbers can inflate the EFC. Checking each entry against financial documents can identify mistakes that might lead to an inaccurate calculation.

Once errors are identified, corrections can be made by logging into the FAFSA website. If dependent student information changes, parents may need to re-sign the form electronically. Alternatively, a paper FAFSA Submission Summary can be corrected and mailed in.

Beyond simple errors, certain life events qualify as “special circumstances” that may warrant an EFC adjustment. These include changes in financial situations, such as job loss, a decrease in income, or unexpected medical expenses not covered by insurance. Other events like the death of a parent, divorce or separation after FAFSA submission, or non-recurring income that inflates the EFC may also be considered.

Families experiencing such circumstances should contact the financial aid office at the college or university they plan to attend to request a “professional judgment” review. This process allows financial aid administrators to adjust the EFC based on documented evidence of a family’s reduced ability to pay. Providing documentation, such as termination letters, medical bills, or legal separation agreements, supports the request and demonstrates the EFC does not accurately reflect the family’s current financial reality.