Your income will typically have the largest impact on your Expected Family Contribution (EFC).
Income can come from:
- Taxed and untaxed income (visit the IRS Earned Income page for the official list)
- Benefits (such as unemployment or social security)
- Income or rental property
- Dividends and capital gains from securities sold for profit
- Alimony or child support
- Retirement income
The financial aid formula uses the adjusted gross income (AGI) reported on your tax return.
Automatic zero EFC
If you and your spouse's combined AGI is $23,000 or less and you, your spouse, and your dependent child are all eligible to file an IRS 1040A or 1040EZ, your EFC is automatically zero. There is no need to do further calculations.
An EFC of zero means that your child may receive a financial aid package that covers up to 100% of college costs.
Your AGI is more than your salary
In addition to your salary, here are some other items factored into your AGI:
- Money from Social Security not included in AGI
- Veteran non-education benefits
- Child support
- Earned income credit
- Child tax credit
- Payments to tax-deferred pension or savings plans
- Deductions and payments to SEP, SIMPLE, and Keogh retirement plans
- Untaxed IRA and pension distributions
- Foreign income exclusion
- Worker's compensation
- Housing and food allowances paid to members of the military and clergy
- Credit for federal tax on special fuels
What's deducted from your AGI
Once all these benefits and income are added up, the government does a little subtraction. It deducts from your AGI:
The result of these calculations is your total income for purposes of the EFC.
Student and parent assets
Learn how what your family owns can affect your EFC.