EFC not really an "expected" amount

Parents Forum
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<p>I was reading a discussion on the Financial Aid forum about EFC. I think people assume that the figure is some magic number the government has determined that represents and amount you could actually pay if only you were to cut back on ______ (fill in the blank).</p>

<p>A long time ago I worked at social services for welfare eligibility. Clients would always ask, “How am I supposed to live on that amount?” What people didn’t understand is that the process is the reverse of what they think. First the government appropriates some amount of money for a program. Then it goes back and divies it out, setting the limits where ever they may fall - but the limits fit the appropriation.</p>

<p>I suspect FAFSA works the same way. It has no real bearing on realty. Your EFC simply reflects the amount of money the government chooses to appropriate to the entire program, divided by the expected demand. I know this doesn’t change the pain involved, but I think it is probably the realistic view of the FAFSA process. </p>

<p>So, if you EFC is $40,000 there may or may not be a way to pay that. The government doesn’t really give a hoot. All they know is that with the levels set the way they are it fits the overall budget for the program. I just hope it helps kids understand that the government is not saying that your particular family should be able to, somehow, actually pay that amount. </p>

<p>Does this make any sense?</p>

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<p>"
I suspect FAFSA works the same way. It has no real bearing on realty. Your EFC simply reflects the amount of money the government chooses to appropriate to the entire program, divided by the expected demand. I know this doesn’t change the pain involved, but I think it is probably the realistic view of the FAFSA process."</p>

<p>Actually, no.</p>

<p>The funds available reflect what you say. The award calculations do not. Congress, through the DOE, has determined how need is calculated, at least under the federal methodology. It uses many sweeping assumptions, such as ignoring cost of living differences, current standard of living etc. The formula unfairly, in my mind, discriminates between defined benefit retirement programs and employee funded defined contribution retirement programs. </p>

<p>The issue you raise, shortage of fin aid funds, is usually handled by gapping, or by upping the loan component of the equation.</p>

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<p>Your post makes a lot of sense. I don’t know whether the various components of the EFC (salary, child’s assets, parent’s assets, etc.) are randomly manipulated to achieve a desired numerical end, but I fully agree with your sense that the EFC number has little bearing on reality when it comes to family finances. And while it is important for those applying to college to fully comprehend in order to avoid family miscommunication over the resources available for their college education, it would be nice if the colleges and the universities would recognize that the EFC doesn’t represent reality for many families.</p>

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<p>I recall someone getting severely flamed for a similar comment (to what I am going to say) so I hesitate, but…
There is an ideal (or maybe naive) hope that you can tell the government what you make and they will come back with something that reflects the reality of what you spend, and then the difference will be made up by the college.</p>

<p>This reminds me of the error people make about two other things: life expectancy and prison sentences.</p>

<p>People like to say that life expectancy used to be (say) 47 years, so people got old and died at that age. No, life expectancy is something COMPLETELY different. It is a numerical measure that is an AVERAGE - so if one year there are a ton of deaths of 30-year-olds from AIDS, the number goes down. Some places have many infant deaths, etc. But healthy people still live to 70 or 80 (read a little history!) Life expectancy is sort of a fictitious number that means something entirely different than what it sounds like.</p>

<p>Same with prison sentences: they do not reflect time as we know it, but a base number from which is added or subtracted various other variables.</p>

<p>And so with the EFC. It does NOT “really represent” what you can “afford.” It is a basic number that the government feels is a fair one to work from, given certain very basic survival needs. A few students seem to think reflects that the balance between that number and their tuition is “owed” to them by other taxpayers or the school. This is wrong. Instead, it is a reflection of where they need to start. It may be that a community college or local state school or living at home and commuting is where they need to start, unless they can get other scholarships.</p>

<p>As for the “we could never afford this in one year” - it is not expected. It is expected that you can cobble that amount together through various means, from savings, extra earnings, loans OVER TIME, etc.</p>

<p>It is necessary that the number be low due to human nature. It is easier (and working at various universities, i saw it a thousand times) to try for the maximum you can get out of other people. On one website, a girl bragged that she named her sailboat “Student Loans” because she was eligible for extremely low interest (that is, the interest was paid by taxpayers) loans and she didn’t need them, so she bought a boat. Another student went back and got a $9,000 grant, then paid for his wedding with it. On the student CC board, students routinely ask how they can hide their money in cash, etc. because “I worked for it and I deserve it.” Others rail against the school/government/taxpayers because their parents do not want to pay.</p>

<p>By using low numbers, the government makes an attempt to assure that peope will see that education is a sacrifice and something that is THEIR repsonsibility, even if it means choosing a school or timetable to graduate within one’s means.</p>

<p>Please don’t shoot the messenger…I agree with others that the formula is unfair in that it doesn’t take into account geopgrapic location, etc., but I cringe when I see people not understanding that the EFC number is a useful measure of understanding something, and like life expectancy, is NOT meant to be a reflection of reality.</p>

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<p>Nedad,</p>

<p>Well said. There are many iniquities in the whole college process, from admissions to paying for it. I think even worse than the federal fin aid formula, for instance, is the practice of setting sticker price higher than average price (excuse me, setting tution high so they can offer fin aid [=discounts] to select students.) But this is a separate topic.</p>

<p>We are consumers of a product offered by various colleges. If we don’t like the approach, we can always look at other alternatives. But the numbers speak for themselves. I can only add “buyer beware” as there are a lot of financial aid games going on. Just read the Atlantic Monthly’s September college issue the past two years.</p>

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<p>Interesting points…</p>

<p>My father(student here, like to read the parents forum for insight into my parents twisted minds… j/k) was abhorred by our EFC number and was rambling for days about how screwed up the government is. I guess that by the books we are quite wealthy but my parents grew up in modest homes and have continued to live modestly while their paychecks have grown. The extra cash has gone into deferred payment plans and into investments(rental properties and such) which are not easily accessed… It is just bothersome that those who save their money and plan ahead get penalized by the system. I have too many friends whose parents make much less but spend much more. Because of this they have no savings and have VERY low EFCs and their children(my friends) will get financial aid. </p>

<p>… I should stop here as I really don’t know about the inner workings of the whole fin.aid process.</p>

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<p>I’ll join you here nedad. I am horrified at how often I read on this site what people feel they are owed. Asking for strategies on hiding funds so that the rest of us can pick up the tab. Private colleges, especially the better ones, bend over backwards to be inclusive. IMO, it’s quite simple, if your family is not willing to make financial sacrifices for education, you’ll need to make educational sacrifices.</p>

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<p>See the attached link for a description of the ‘economics’ of a college education and the ‘rationale’ concerning the efc (starts on page 49).</p>

<p><a href=“College Board - SAT, AP, College Search and Admission Tools”>College Board - SAT, AP, College Search and Admission Tools;

<p>Newmassdad: you are spot on, for those living in high costs areas, the efc takes a larger bite out of what we might consider disposable income than it does for someone living in a low cost area on similar incomes. Moreover, it is clearly advantageous to those with defined benefit pension plans since the 401(k) contributions and deductible IRAs are add-backs to the formula (heck, a deductible IRA gets hit twice, since it also reduces taxes due). But, that is life.</p>

<p>Nedad: a small nit – the term life expectancy as normally used in the popular press is defined as the expected life of babies born today and is should be quoted for the US, individual countries or the world separately. However, since life expectancy is highly influenced by childhood diseases and deaths, it needs to be adjusted for every age group. For example, the last time I looked at the expectancy tables, a person aged 50 had a life expectancy of ~25-30 years ( yeah, I know, unisex table), making his/her expectancy nearly 80.</p>

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<p>get penalized by the system."</p>

<p>Um, no. How can your father imagine he has been somehow “penalized”? How can anyone say he is punished for being asked to pay for something he can afford - and tying up money in accounts not easily accessible does NOT mean one can’t afford something!</p>

<p>Has he suffered any wrong by living in a country that allows investments, private property, etc.? This is just so weird to me — it’s pushing the idea of “entitlement” way, way over the top…</p>

<p>Bluebayou, thanks - though the life expectancy of a baby born today IS figured by the math done with the number of deaths at the same time, as you say, so we actually agree…</p>

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<p>the people who have savings but dont want to spend them, reminds me of my grandma who always paid cash for everything and who died with a closet full of expensive bags and perfume that she was saving for “good”.</p>

<p>We have savings, albeit not much as they have been hit over the years during periods of un/underemployment and catastophic illness /major house repairs/trying to keep the car going with out buying a new one:(, and it is allocated for education first.</p>

<p>Yes the EFC isn’t “fair”- but neither is life, and you either do what you need to do to make things work or you complain about it ( which I suppose is what these boards are for). there aren’t a lot of legal ways to “work” the system as far as I can tell, the best you can do is plan ahead, and be informed about choices- we all have them- we may not like them- but we have choices</p>

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<p>The thought process many seem to employee here is truly over the top. First, many posters are just shockingly unabashed in seeming to assume that everyone cheats and hides money. It is as though the money magically appears from some Government source that has nothing to do with tax payers. </p>

<p>Anovice, what you need to understand is that many of us will sell off investments to pay for college. We took money we didn’t need for survival at the time and invested to have funds when we need them. Such as to put our kids through college and ourselves through retirement.</p>

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<p>Anovice;</p>

<p>look at it this way, if your parents saved absolutely nothing up until this time, your efc wouldn’t be considerably different bcos the main basis for efc is income. Only ~5% of parental assets are counted. (Full government support begins to diminish at incomes >$40k depending on household size. Anyone with AGI >$150k is in the top 5% of income earners in a country of 300 million.) Thus, if they saved/invested in nothing up to this point, they/you would be significantly worse off. You should thank them for planning well.</p>

<p>Properties can be easily sold – this market is hot, hot hot. Or, properties can be used for collateral for a tax deductible loans. Ditto for stock investments, they can be sold to pay tuition or, margined, to raise cash.</p>

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<p>There are some intrinsic unfairnesses in the EFC. First of all, it assumes that your family has been earning money at this level or at a “building” level for a while. It also does not take into account cost of living (NYC vs upstate NY= big difference in cost of living). It severely penalizes those who save in the student’s name to a degree where anyone who knows about this avoids it. Small business owners are hit very hard. Those who do not put retirement savings into qualifed pension or 401 type plans are hit hard. Those who put their money into an expensive house can “hide” that money since primary residences are not included for FAFSA (though Profile asks for that info) and you can also “hide” money in collectibles and personal items. One of the ironies about the process is that family who uses their income to buy into good school districts for their kids, private schools, things that you just can’t easily move out of especially if you have other younger kids, is in worse shape than someone who just blew the money each year. The first example still has those bills to pay wheras the other can start an austerity program. Though, yes, savings is hit up, it is at a 5.6% which is worth it considering the flexibility and other benefits you get from having that money sitting there. Someone who has the full 4 year tuition amount sitting in cash at a bank is hit up for less than a year’s amount over the 4 year period. Frankly, your children’s education is something you should feel proud saving for.</p>

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<p>There is often a BIG difference between what you CAN pay and what you WANT to pay. Our EFC is $41000. Needless to say, we don’t WANT to pay that amount…but the reality is that if our child’s expenses for college were that amount, we would be expected to pay it. And we do…Did it mean cutting back on _____? Sure it did. And it made us realize just how much discretionary money we were literally blowing away for many years. No we don’t go out to eat much, won’t be getting new cars until the kids are out of college, limit our clothing and “stuff” expenses, reduce Christmas and birthday spending, watch sales more carefully on things like food and other necessities, do more work ourselves (e.g. painting the house…we did it ourselves), etc. Let me say it again…we do not LOVE writing those monthly college checks. BUT the reality is that we can. I do not feel entitled to a nickel of need based aid because I know that there are MANY MANY families who truly have the need.</p>

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<p>nedad-(and others)</p>

<p>maybe penalized was the wrong choice… A particular friend comes into mind when I think about this and it just bugs me. They have a hummer AND an escalade yet have an EFC under 5K… what gives? I, who lives in the same neighborhood, goes to the same school, and drives much more modest cars, has an EFC… well, higher then any I’ve seen posted recently.</p>

<p>I understand that I SHOULD NOT be a candidate for any aid as I am very fortunate but I see some kids who get aid who do not seem very deserving. </p>

<p>… make more sense? </p>

<p>I don’t mean to sound like I feel as though I am being wronged but I do believe that the current system is not all that it could be.</p>

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<p>I understand what anovice means. We have family friends who have two new cars, have remodeled their house a number of times the past few years and have had relatives pay prep school tuition. Now I learn their D got “generous” fin aid to go to Dartmouth next year.</p>

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<p>I have never personally seen anyone with a hummer and an esalade with an EFC under 5k. I have seen inequities, however. A friend of mine has a stepson who lives with them and the boy drove a jeep, went on expensive trips and got all kinds of benefits beyond the family means because of his grandparents on the father’s side who indulged their only grandson. And they do “beat the system” since the money is slipped into the equation without being reported. </p>

<p>I would not waste my time counting other people’s money. There are kids who have a tru****nd paying every dime and more, there are kids who can’t go to college because their parents don’t want to bother with this whole business. It is not a fair process. I do know that if you lease expensive cars, you can do so pretty cheaply, and if grandma bought your house, that could be your mortgage payment. Since FAFSA does not ask about home equity in a primary residence, there you go. Scenario #1. I can give you 50 more, but what is the point? Who is to say which kid is deserving of what parents? There are abusive and negligent parents out there, that we need to target before we start talking about college support. How much more time and money should the government be spending to rustle up all available funds? That is that much money less to distribute. There just comes a point where you cannot split the hairs any further. The system is inherently flawed in that the parents are the ones who dictate where kids go to college, not the kids, since the parents are the ones responsible for paying. If they won’t pay, and won’t fill out the forms, the kid is out of luck.</p>

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<p>Life isn’t always fair - if you look for it to be you’ll drive yourself crazy.</p>

<p>You cannot assess anyone’s finances with what you see on the surface. People who have been able to save for college and can work with a higher EFC are more fortunate that those who can’t…that’s it. I don’t care if you see the Escalade…relatives pay for tuition…whatever. Overall, those who have solid financial pictures are more fortunate and should feel proud of that. People who live beyond their means evertually fall prey to their own stupidity. You may not see it…but they do. </p>

<p>I don’t think it’s in any way productive to look around and compare your EFC to anyone else’s…or to peer into anyone else’s pockets in hopes of figuring out how they do it, etc. </p>

<p>This should be one case where you feel good about coming up off of $40k yr…or whatever your EFC is. There has to be some level of personal satisfaction from paying college tuition. I lay awake at night figuring out how to pay prep school tuition. Yes, I always feel really good when I hand them a check…even when it drains my account. I can’t think of any better place for it to go…and it’s going to go somewhere! </p>

<p>Sometimes I see people with expensive new luxury cars, lavish homes, etc…and if I know their kids aren’t being educated well I’m completely unimpressed. It’s kind of like the people who live in apartments, but drive $50k cars. They look pretty silly, don’t they? The only people impressed are those who don’t know any better. Same holds true for education…</p>

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<p>The need blind policy of colleges means that people who pay the whole thing are charged, what, double or more for college? This doesnt happen when I go to the movies. Now, a college education is a little more important than the movies, of course, and so I dont complain TOO much.</p>

<p>But 45,000 a year for lecture halls filled with 300 kids is pretty d*** expensive for anyone except the super rich, and I am not one of them.</p>

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<p>Jamimom’s advice is good. Don’t waste your time counting other people’s money. In fact, don’t waste your time fretting over what seem to be inequities in finaid awards. You don’t know a family’s full financial situation. Some folks do a very good job of living way beyond their means and “looking” like they have a fortune. In fact, sadly they may not have the money to pay their bills every month. For all you know they have had a catastrophic illness in the family (and NO you might not know), or are paying one credit card bill with another credit card (and YES folks do this). Some things, especially finances, aren’t what they seem. The converse is true too…just because a family lives in a small house, drives old cars, never goes on vacations, etc. does’t mean they are living in the poverty pocket. Families have very different financial perspectives.</p>