How the FAFSA Simplification Act is Changing Expected Family Contributions (EFC)

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. For some students, though, the complex FAFSA form makes asking for help difficult, or nearly impossible.

The FAFSA Simplification Act, which President Trump signed as part of the Consolidated Appropriations Act of 2021, included a few major changes to the student aid form. Most 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 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 will 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

In 2023, we can expect “Student Aid Index” (SAI) to replace “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 -$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 and number of children in college

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 which 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” by 2023.

Not All Families Can or Will Contribute to College Expenses

The EFC is not a true quote of what a student will receive for school. Instead, it’s a rough estimate based on parents’ tax information, income and a few assets.

Unfortunately, not all families are able or willing to contribute to their students’ educational expenses. In some cases, a high EFC may be misleading.

For example, if a child doesn’t have a good relationship with his or her parents, then they may have a high EFC, but may still be expected to pay their own way through school. By looking at the EFC alone, however, universities may choose to withhold need-based financial aid.

It Assumes Parental Responsibility

Another problem with the term “Expected Family Contribution” is in its implication. While many parents would love to contribute to their children’s education, not all can.

Assuming that parents should take care of their children’s educational expenses places an unfair burden on families with lower incomes. By that logic, the inability to do so could leave a parent feeling guilty or a child feeling resentful.

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.

The Bottom Line

Currently, the process for estimating financial aid is imperfect. While the Expected Family Contribution was originally designed to help determine how much money students would need for college, often, it only bars students from need-based financial aid.

Changing the verbiage around student aid, however, could create a major mental and emotional shift for many families. Not only does it alleviate the “expected” financial burden for parents, but also addresses that not all students receive the same amount of help, even if their parents’ incomes look the same on paper.