Efc how is it calculated

Four staff members, standing against a brick wall, laugh as one staff juggles. Three Female Students, wearing different college T shirts, smiling. Male student with backpack walking across college campus. Sign up for Text Messaging Sign up. Subtract an Employment Expense Allowance. It's intended to cover those expenses that all working parents have, such as buying lunch and commuting. The number you've reached based on the calculations above is called your Available Income AI and is intended to represent how much of your income can be considered for college costs.

Add up total parent assets. Include all cash, bank accounts, net investments, and net real estate, but don't include your primary home or your retirement accounts. This number is based on the age of the older parent and is intended to protect an amount of your assets that you have saved for emergencies or college costs.

This calculation ends up protecting most of your remaining assets for other needs, which is good news. The number you've reached here is your Contribution from Assets. There's a complicated table that provides you this number. You'll divide that number in half if you have two children in college at once. The resulting number is your Parent Contribution. Set that number aside. Use any income received in the year, regardless of whether or not the student paid taxes on it. Small farms, small family businesses, and your home equity are also excluded as a counted assets.

There is an allowance amount based on the tax-filing status and the age of the oldest FAFSA-filing parent. The asset amount that exceeds the allowance amount will be multiplied by 5. For dependent student income, the rules are straightforward. Amounts over the allowances are weighted at 50 percent. For the student asset section, there are no allowances, and assets are weighted at 20 percent.

This asset moving strategy is a common error. You need to be careful when liquidating student assets. The first issue is the tax consequence of liquidating assets.

Do your research as this limit changes periodically based on the tax code. The next issue is ownership of the account or asset. A parent would need to have documentation to properly liquidate a Uniform Gift to Minor Account UGMA account , which is the type of account issued for most children under the age of eighteen. It is expected to start in the school year It is unclear how the colleges will handle this major change.

Back to all posts. Shalon B. Categories: Financial Aid. Jump to:. What is the EFC? Start thinking about college affordability now. Author Recent Posts. Shalon is a content writer for Going Merry. Our team personally vets every college scholarship listed on our website as your one-stop shop for scholarships. Latest posts by Shalon B see all. Ready to find scholarships that are a match for you? Sign Up for Free.