Preparing for College Financially

One of my State Data Center colleagues, Dale Miller, pointed this out to me. He thinks this is important to share, and I quite concur. Moreover, this being the graduation season, it’s timely!

He has discovered that many parents are quite surprised about how much they are expected to contribute to their kids’ college costs. Dale writes, "This is referred to as their Expected Family Contribution (EFC). What typically happens is that parents bumble along (I know we did) until their child is a junior in HS and then they go through the process of applying to colleges and for financial aid at the FAFSA.gov website when WHAM >>>> - they get a reality check upside the head when it comes to how much the federal government thinks THEY can contribute toward attending school." I can imasgine there are MANY parents sitting in financial aid office with tears in their eyes over this.

What can the schools or government could do to reduce this sticker shock when it comes to EFCs? Dale notes, "Figuring out financial aid has always been a bit of a 'black box'. You put a bunch of numbers in and out comes your EFC with no understanding of what it is or how it comes about.

"Lo and behold, there is now a way to determine your EFC at the FAFSA website. It is called fafsa4caster. Basically you can punch in info for the current year as though your child were applying to a college right now, and get an EFC figured out for you. It takes maybe 15 minutes to do and requires you to answer a TON of questions, including tax and investment questions. (I estimated some just playing around with the website to see how it works, you could do the same if you wanted to get a ballpark EFC for your family.)

"Regardless, it is exactly what I have always maintained people should be able to do. Even better, it allows people to see their EFC right now, even if their kids are young and not even in kindergarten, let alone high school or college. So my challenge to everyone is to try it, and be prepared to hear the collective gasps of parents or perspective parents around the web as they see what their EFC actually is !

"OK, go to http://www.fafsa4caster.ed.gov/F4CApp/index/index.jsf and pick option "B" to get started. Remember, you’ll need some basics like your adjusted gross income and how much you paid in taxes last year. Having other info, like any 529 Education account balances, or 401K contributions is also good to have. But even in the worst case, you can just punch in some estimates to see what ballpark your EFC will fall in."

Dale believes that putting this information on this site "could help people reassess what they are doing to prepare for their kids' futures!"