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Different Ways Colleges Decide How Much Financial Aid To Give You

Did you know that the U.S. government – specifically, the Department of Education  – has its own particular way of calculating how much you can afford to pay for college?

And their rules are followed by almost every college in the country ?

Yup. Just fill out the FAFSA, hit the “submit” button and Presto! Out spits your Expected Family Contribution, otherwise known as EFC.

That number represents the amount of money that the government, in all of its wisdom, thinks you can afford to pay for one year of higher education.  NOT necessarily what you will pay, but what you appear to be able to afford under the formulas, known as the “Federal Methodology.”

Wondering what your EFC is?  I’ll tell you how to estimate it – in a minute.

WARNING – you will probably be very angry, shocked, confused or depressed by your EFC.

Why?  The average EFC for a family earning $120,000 in adjusted gross income is roughly $30,000.

Yes, you read that correctly – a family earning a low six-figure income – before paying income taxes, property taxes, the mortgage and all of the other expenses associated with modern families – is expected to be able to pay $25,000-30,000 per year toward college.

The biggest flaw in the EFC formula is that it doesn’t factor expenses.  So if you lived in an expensive area of the country, like a suburb in the Northeast, and you earned $120,000, your EFC would be identical to a family with the same financial profile living in Sheboygan, Wisconsin, where the cost of living might be 50% less.

The good news is that you can control your EFC, with planning.

I’m no psychic, but I predict that, after you calculate your EFC, you are going to be very interested in learning how to lower it.  This book is chock full of legal methods of lowering your EFC and, therefore, qualifying for more financial aid.


If you are a more visual or auditory person, you can watch a recorded version of an old workshop I used to give:

Another resource:  the Department of Education helps you estimate your EFC on a special page it set up:

The “Institutional Methodology”

Approximately 200 private colleges use the CSS Profile to calculate your EFC a different way. One of the key differences between the Federal Methodology and the so-called “Institutional Methodology” is that the CSS Profile factors in home equity, reasoning that if you have it, you’ll use it (compared to a high rate, high fee parent loan or private student loan).

 Of course there are exceptions.  Harvard’s website is very clear that it does NOT count home equity against you, for example (with an endowment valued at more than $30 Billion, Harvard probably won’t lose sleep over giving you a few extra bucks).

 My “back of the napkin” way  to calculate EFC for a private school is to use the FAFSA forecaster link above, then add $8,000 per $100,000 (8%) of home equity.

 So if your FAFSA forecaster EFC is $30,000 and you figure out you have $200,000 in home equity (Fair Market Value of your home less all outstanding mortgages and equity lines), your EFC could be around $46,000 – $30,000 plus $16,000.

RESOURCE:  Since October 2011, the Department of Education has required colleges to post a “Net Price Calculator” on their respective websites.  Although potentially confusing (there’s no standardized set of information they must ask), I think this is a great first step, because it helps families see that they may not have to pay “Sticker Price” for college.

Here’s the link to the College Board’s Net Price Calculator:

Help is easily available, if you know where to look online.  Use these resources to learn what it takes to get a great financial aid package!

Andrew Lockwood wrote How to Pay Wholesale for College, which he’s offering as a free download for a limited time.  Go to to get your copy.