Many families use the summer months to get a running start on the college application process. They make take college tours, or visit colleges online. They may also take time during the summer to work on college essays and to peruse applications.
One of the best ways to make the most of your time this summer is to consider your family's EFC, or Expected Family Contribution. Of all the figures that are going to be important to you this year, none will be more important than your Expected Family Contribution (EFC). It’s going to be more important to you than the size of your tax rebate, the interest on your mortgage and even the fluctuations in the price of gas.
Your EFC is the amount that you will likely have to pay that year for your child’s college education.
The financial aid administration calculates your EFC based on your income, but they may also factor in the value of your home and will definitely factor in any savings, investments and assets in your portfolio.
They want to make sure that if you can afford to pay for college yourself, you will.
Of course, just because the financial aid administration thinks you can afford to pay x amount of money for college doesn’t mean that you’ll agree with them. You might not consider your retirement fund or the value of your home as relevant to your child’s college education. That won’t help you. If your child is attending a private school, they can still be factored into your EFC and could give you a figure that’s much higher than you think you can afford to pay out of your income.
The only way to be certain that your EFC is even close to a realistically affordable amount is to prepare your finances carefully. There are a number of strategies that can reduce your EFC... one of them is to avoid saving money in your student's name, but there are other strategies as well.
No one sends off their tax returns without careful thought and consultation with an accountant. No one should enter their base financial year without talking to an experienced college funding advisor.
There’s no better time to do that than now, before you start filling in the forms and before the start of the new academic year.
If you can complete all your financial preparations this month, the next year will be much easier—and your child’s college years will be a great deal cheaper!