Why is My EFC So High?

If you finally received your Student Aid Report (SAR) after filing your Free Application for Federal Student Aid (FAFSA®), you should have a good idea of how much the government expects your family to contribute to your college education. And you’ll know this based on your Expected Family Contribution (EFC) figure (if you completed the FAFSA® before late 2023), or based on the new figure, the Student Aid Index (SAI), if you complete the form later. 

This article focuses on the older calculation: EFC. 

If your EFC number looks high, it’s usually because you’re from a higher-income household. But what if it looks suspiciously high? And are there ways to lower it? Here’s what you need to know. 

What is EFC?

Expected family contribution (EFC) represents the amount of money the federal government believes a family can put toward a student’s college education. Your EFC number is generated based on data from your FAFSA® and is then used to calculate your financial need.

When you submit your FAFSA®, you’ll receive your Student Aid Report, which includes your EFC. The Student Aid Report can tell you whether you qualify for certain types of financial aid like the Pell Grant, and the EFC figure on the document gives a hint on how much financial aid. However, a Student Aid Report isn’t a financial aid award and doesn’t guarantee you will receive the full amount of estimated financial aid. 

How is EFC calculated?

To calculate your expected family contribution, the government uses a multi-step formula that considers financial information, like a parent’s income, a student’s income, and bank account balances. The U.S. Department of Education expects students to use 20% of their assets and parents to use 5.64% of their assets to pay for college. The EFC formula also takes into account household size, whether or not other family members are pursuing higher education, and other special circumstances that might impact your family’s finances. 

To find a ballpark SAI or EFC number before completing your FAFSA®, try an online EFC calculator or an SAI calculator. If you’re an independent student, your EFC calculation will look different. Instead of weighing your parents’ income and household size, the formula will focus on your income, any spouse’s income, and deduct for basic living expenses.

How do I know if my EFC is too high?

Since EFC is dependent on each family’s unique financial situation, there’s no one-size-fits-all answer. As of 2023, the average EFC for a four-year undergraduate student was around $14,000 per academic year. However, there are some high EFCs skewing the average because more than half of college students have EFCs at or below $2,500. 

The EFC formula allows for between 22 to 47% of parental income to be dedicated to paying for a child’s college. If your family’s income is higher, your EFC will be on the higher end of this percentage. For dependent students whose family’s income is below $29,000 per year, your EFC number will automatically be zero. With an auto-zero EFC, you will qualify for more need-based federal financial aid, like the Pell Grant, for example. 

If your family’s income is high, you can expect your EFC to be high. There are some special circumstances (like if there’s a large amount of money in a savings account in the dependent student’s name) in which your EFC might be high even if your family’s income isn’t. But if your EFC looks unreasonably high –– say, for example, it’s higher than your parent’s income –– it’s probably the result of an error. You may have made a mistake somewhere on your FAFSA®, or there may have been an error in processing your FAFSA. 

If you can’t figure out why your EFC is high, call your school’s financial aid office and they’ll be able to help you, or at least refer you to someone who can. If you haven’t finished the college application process yet, visit the Federal Student Aid Help Center, where you can call, live chat, or email a representative from the FSAIC (Federal Student Aid Information Center) who can help you with all things FAFSA®-related.

How do I lower my EFC? 

Before you try to lower your EFC, it’s important to know what financial information from which years will be considered in the EFC calculation. The financial data used is from the “prior-prior year,” not from the most recent tax year. This is a common misconception. For most high school students applying to college, the prior-prior year is January 1st of sophomore year through December 31st of junior year. 

You do need to complete the FAFSA® each school year to maintain your financial aid package. So, if you follow a four-year degree schedule, the financial information used to calculate your EFC will be from January 1st of your sophomore year of high school through December 31st of your sophomore year of college. As in, EFC for… 

  • Freshman year of college will be based on finances from January 1st of your sophomore year through December 31st of your junior year of high school
  • Sophomore year of college will be based on finances from January 1st of your junior year through December 31st of your senior year of high school
  • Junior year of college will be based on finances from January 1st of your senior year of high school through December 31st of your freshman year of college
  • Senior year of college will be based on finances from January 1st of your freshman year through December 31st of your sophomore year of college

As you prepare to fill out your FAFSA® or start the college admissions process, you won’t be able to lower your current EFC because the data will be based on prior-prior year finances. But you can use these strategies to lower your future EFC number. 

Pay down your mortgage

The value of your house will not be reported on your FAFSA®, but your bank account balances will. If your family has excess cash sitting in a checking, savings, or brokerage account, consider using some portion of it to pay off some or all of your mortgage. 

Reduce other debt

Further reduce the savings reported on your FAFSA® by paying off other debt. The amount you or your family owes in loans or credit card debt isn’t factored into EFC calculation. So, if you have outstanding debt and the means to pay it down, do so when your finances are analyzed on the FAFSA®. 

Contribute to a 529 plan

If a 529 savings account is in the name of a dependent student or a parent, it is considered a parental asset on the FAFSA® and factored into the EFC calculation at the lower parental rate. If you’re an independent student, the 529 plan is considered a student asset and factored in at the 20% student rate. 

Starting with the 2024-2025 FAFSA®, which will be filled out by families in 2023, distributions made from a 529 plan owned by a grandparent will no longer be considered income on the FAFSA®. This means that you can transfer 529 accounts to a grandparent or other family member’s name to avoid having them factored into your EFC calculation.

Avoid FAFSA® mistakes

Sometimes a high EFC is the result of mistakes made while filling out the FAFSA®. One common error is including financial information for both parents if your parents are divorced. Another is reporting gross income instead of adjusted gross income (which includes deductions for things like health insurance premiums). 

Completing the FAFSA® accurately is crucial to getting the most precise EFC number. Try to complete it as close to the launch date as possible – this year, that was Dec 30, 2023. Students who file on the early side get almost double the federal financial aid compared to students who file later. 

Open a Roth IRA

Retirement accounts, like a 401(k) or an IRA, are not counted as assets on the FAFSA®. But only a Roth IRA will be completely omitted from your EFC calculation because Roth contributions are made post-tax. Pre-tax contributions made to traditional 401(k)s or IRAs should be reported as untaxed income on the FAFSA®. If you don’t have one, consider opening a Roth IRA. You can contribute up to $6,500 (or $7,500 depending upon your age) per year and prevent these funds from factoring into your EFC calculation. 

Reduce family income

Parental income is the largest contributing factor in EFC calculation. If possible, defer any workplace bonuses or avoid exercising stock options. If you have an investment that’s losing money, consider selling it. The capital loss will factor into your adjusted gross income and could lower your EFC. 

Reduce money held in the student’s name

Assets held in a dependent student’s name are factored into the EFC calculation at a much higher rate than assets held in a parent’s name. Keep student savings from driving up your EFC by opening a Roth IRA on behalf of the student and transferring money into that account. Or, you could use money in a student’s savings account to pay off debt and reimburse them at a later date. If family members want to give financial gifts to you or your child, ask them to contribute to a parental account or a 529 savings account. 

Still too high? Consider appealing. 

If your EFC is high and your college did not offer a sizable enough financial aid package, you can always appeal for more aid. As part of this, you can highlight any financial difficulties (e.g. medical bills, legal fees, pending divorce) and your college financial aid officer might, through a process known as “Professional Judgement,” override the inputs to your FAFSA® to get to a lower EFC, and therefore be able to offer you a higher aid package. 

Get matched to scholarships with Going Merry

College financial aid can make higher education a possibility for all types of students. If it feels like your family’s ability to pay for college and your EFC are mismatched, take a second look at your FAFSA®. All need-based aid – and eligibility for federal student loans – is determined by the FAFSA®. Double-check your work to make sure you haven’t made any errors, and if you still have questions, contact your school’s financial aid office or the Federal Student Aid Information Center.

Another effective way to reduce the cost of college is to apply for scholarships. On Going Merry, we source high-quality awards of all types — from merit scholarships to weird scholarships, and even awards for average students. Browse our extensive database or create a profile and let us do the searching for you. Sign up for Going Merry and we’ll match you with scholarships you’re already eligible for.

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

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