How the FAFSA Simplification Act is Changing Expected Family Contributions (EFC)
January 7, 2021Updated July 20, 2022
If you’ve filled out the FAFSA, you know how complicated some of its terms can be. You’re also likely familiar with the cost of college, and you know that financial aid can go a long way to cover some other costs. For some students, though, the complex FAFSA form makes asking for help difficult.
The FAFSA Simplification Act was part of the Consolidated Appropriations Act of 2021 and included a few major changes to the student aid form. Most of the changes center around streamlining the form and offering equal educational opportunities to low-income families. One of the changes included a terminology shift from “Expected Family Contribution” to “Student Aid Index,” as well as adjustments to how students’ financial needs can be calculated more accurately.
Here’s why the change is important and what it means for you:
What is Expected Family Contribution (EFC)?
Expected Family Contribution is part of a formula used to calculate the amount of financial aid a student may receive from his or her parents. The simple formula is:
Cost of Attendance (COA) – Expected Family Contribution (EFC) = Student’s Financial Need
Cost of Attendance is an estimated amount that a student will pay in tuition and living costs during college. Expected Financial Contribution is the amount universities use to estimate how much help a student may receive from his or her family to cover the costs.
For example, if a student’s estimated COA for one year is $15,000 and their EFC is $5,000, then they may be eligible for up to $10,000 in financial aid. These numbers may be deceiving in some cases, however, as families are not always willing or able to contribute to their children’s educations.
Expected Family Contribution vs. Student Aid Index
For the 2023-2024 academic year, we can expect the “Student Aid Index” (SAI) to replace the “Expected Family Contribution” in the financial aid formula. While the basic formula will remain the same, it’s important to note that SAI can be as low as a negative -$1,500, whereas the minimum EFC is $0. The adjustment will enable colleges to calculate students’ financial needs more accurately.
How is Expected Family Contribution Calculated?
Colleges use the EFC to decide whether students should be eligible for need-based financial aid. Most EFCs are calculated based on the parents’:
- Taxed and Untaxed Income
- Assets
- Government Benefits
- Family size
Per the FAFSA Simplification Act, we can expect to see several changes to how these numbers are calculated by 2023. The changes are designed to even the playing field for lower-income families, as well as to account for a few common exceptions that the current form does not consider.
Words Matter: Expected Family Contribution vs. Student Aid Index
For years, the FAFSA has used the term “Expected Family Contribution” to calculate students’ expected financial need for college. Colleges and universities nationwide have used this figure to determine the amount of financial aid to offer to students.
The term “Expected Family Contribution” can be misleading for many reasons, however. As part of the FAFSA Simplification Act, the EFC will be replaced with the term “Student Aid Index” for the 2023-2024 academic year.
It Assumes Parental Responsibility
Another problem with the term “Expected Family Contribution” is its implication. While many parents would love to contribute to their children’s education, not all can.
Assuming that parents can contribute to their children’s educational expenses places an unfair burden on families with lower incomes.
Shifting the terminology to “Student Aid Index” generalizes the financial responsibility so that it’s no longer the parent’s sole obligation. The new name relieves some pressure on parents and opens the door to alternative sources of aid.