What is Need-Based Financial Aid (EFC) and How Does it Work?

Sharing is caring!

Last Updated on August 31, 2023 by Lori Pace

Need-based financial aid or Expected Family Contribution (EFC) is a powerful tool for single moms or low-income families to help pay for their kids’ college tuition. Knowledge is power, and what you don’t know can cause you anxiety, so use your EFC number to bring you some peace of mind. 

Paying for university or college is one of the most significant lifetime expenses. Thankfully, governments and colleges have created an index (the EFC) that calculates what a parent or student can afford to pay without breaking the bank.

Things To Know About Need-Based Finacial Aid

1. What is Expected Family Contribution?

EFC is a rough estimate of a student, parent, or guardian’s ability to pay the costs of a year of post-secondary education. They use the EFC in the United States student financial aid process to calculate an applicant’s eligibility for need-based federal or college student financial aid. They measure the numbers 0 to 999 999, the highest number meaning a family has the means to pay for college tuition independently.

2. EFC and FAFSA

The EFC is part of the Institutional Student Information Record. They add this to the record after filing a Free Application for Federal Student Aid (FAFSA) form. The FAFSA is a vital part of the financial aid process (more on that later).

3. How Do They Calculate EFC?

The EFC number is subtracted from the college or university cost of attendance (COA) to further value students’ financial needs. If COA > EFC, then a student is considered to have a financial need. Because the cost of textbooks, accommodation, supplies, and food is more than a family can feasibly afford, you should naturally qualify for financial aid.

They calculate this with the EFC formulas, which use the information that students provide on the Free Application for Federal Student Aid (see, the FAFSA is essential).

Net price = (total cost of attendance – the grants and scholarships you receive). It’s a good idea to look into a specific college’s net prices because a college’s net price calculator uses its own financial aid policies to calculate its estimate.

4. Know If You’re an Independent Student or Not

Independent Students Are Either:

  • Married
  • Earning a graduate degree
  • A veteran or serving in active duty in the military
  • In foster care or lost both parents or guardians
  • Homeless or deemed at risk for homelessness by a deemed official
  • Responsible for a child or dependent who receives more than half of their financial support by the student
  • Turning 24 or older before the 1st of January of the school year, they apply for

How Do I Calculate My EFC?

There are many FREE CALCULATORS ON THE WEB to help applicants estimate the EFC, COA, and net price. I’d recommend checking these out before filing the FAFSA.

Here are some you could use:



What Does This Mean?

It’s not a secret that college is unbelievably expensive. As of 2021, the US student loan debt is $1.7 trillion. This means that student debt is ten times wealthier than Jeff Bezos, who is worth (only!) $193 billion.

If you don’t want to contribute the trillions of student debt charitably, use your EFC estimate to budget and save money!


This isn’t a guarantee that you will receive any scholarships or financial aid, as every college has only so much money available. But the lower the EFC number, the better your chances are for more funding, which means the less you or your family will need to contribute.

How Need-Based Financial Aid Works:

1. Calculate your EFC using an online calculator.
2. Submit a FAFSA by
  • Using FAFSA on the Web  
  • Using the myStudentAid mobile application
  • Applying electronically through a school
  • Mailing a FAFSA to the Central Processing System (CPS)
3. Get an automatic Zero and Simplified Needs EFC.

A student’s EFC is set to zero if the family’s income is below $26,000 for the year or if they:

  • Received funding from any of the Federal Benefits programs – such as SSI, SNAP (formerly known as the Food Stamp Program), WIC, or Free/Reduced Price Lunch
  • Were eligible to file a 1040A, 1040EZ, or were not did not need to fill out a tax return
  • The parent is a dislocated worker, meaning – they have been laid off or received a layoff notice from a job.
  • Were self-employed but are now without work due to economic conditions or a natural disaster.
  •  Are the spouse of an active duty member of the Armed Forces and have lost employment or are underemployed due to relocating due to a permanent duty station change.
  •  They are a displaced homemaker, someone taking care of a family without pay, do not get support from their spouse, and are unemployed or underemployed.

*Families meeting the above requirements except for having income between $26,000 and $50,000 are eligible for the Simplified Needs Test. They do not use assets in the calculation.

*Independent students without dependents other than a spouse are not eligible for the Automatic Zero or Simplified Needs

4. Considerations that reduce the EFC:
  • Additional family members supported by the head of the household (e.g., siblings or grandparents who are living at home)
  • Additional family members in college. (They split the EFC among the students in college because there is collectively less disposable income)
  • Lower-income (especially student income)
  • Fewer assets (especially student assets)
5. Colleges or universities can lower the EFC.

They do this if there are unusual circumstances brought to the financial aid office’s attention. These circumstances include:

  • Loss of employment
  • Loss of child support, alimony, etc.
  • Separation or divorce
  • Death of parent or spouse
  • Significant medical or dental expenses not covered by insurance
  • Income that was abnormally high because of a one-time lump sum that will most likely not occur again
6. Financial issues they do not consider in the EFC:
  • The equity (value of the home minus mortgage repayment) in the family’s main house
  • Parental retirement funds, such as 401ks
  • Consumer debt, such as car and credit card loans
7. The EFC is not always an accurate cost for what the family will pay.

Many families spend more, sometimes much more, than the EFC suggests. The college’s fees – the EFC = the student’s financial need. While many need the help, most four-year colleges do not have enough need-based financial aid to meet students’ needs. As a result, the parents must pay for the rest.

8. Exceptional Circumstances:

Should parent(s) have the means to pay, but an unwillingness to support a student will not increase financial aid. The United States Congress determined this.

In other exceptional cases, such as parental child abuse and parental communication with the child being prohibited by a court, the college financial aid office has the authority to change a student’s status from Dependent to Independent. Meaning they could be eligible for student aid on an independent’s EFC criteria.

In Conclusion

Long story short, EFC is vital in the college application and tuition process. Ultimately it can relieve anxiety for the unknown expense education can cause. That’s why we recommend you calculate the EFC number to bring you some peace of mind.



Lori Pace
Lori Pace

Lori Pace is a single mother of three daughters ages 7 and under. As a working mom from home, she balances kids, work and two crazy dogs with humor and love. Follow Lori as she honestly gives tips and advice based on her own experiences as a single mom!