Many parents wonder what effect saving for college will have on their student's chances of qualifying for financial aid in the future. Here's the good news: not as big of an effect as one might think. Saving for college helps, because the more you have saved, the less you will need to fund out of current income.
Schools base financial need on a formula:
EFC, or Expected Family Contribution, is an annual figure the financial aid office of a particular school uses to determine if there is a financial need.
As shown in the chart below, to calculate a family's EFC:
Source: U.S. Department of Education and Federal Student Aid, "The EFC Formula 2014-2015".
Use the Quick EFC Calculator
The Expected Family Contribution (EFC) is the amount the family is expected to contribute before needs-based funds become available.
Information about your family, the student's income and assets, and the parents' income and assets.
The estimated EFC, which includes the amount the parents are expected to contribute, and the amount the student will be expected to contribute, if applicable, based on the information you provide.
Note: According to the U.S. Department of Education letter, Gen 06-05, any account in a 529 plan will not be treated as a student asset, even when held in the student's name either directly or through a fiduciary account (Trust or UGMA/UTMA account).
1 Available income is the amount of parental adjusted gross income after allowances for federal, state, local and FICA taxes, as well as an income protection allowance based on the number of people in the household.
2 $6,260 is the income protection allowance for the 2014–2015 academic year; $6,130 is the amount for the 2013–2014 academic year.
3 Assets held in qualified retirement plans, such as IRAs, are not considered in determining eligibility for federal student aid. The percentage of other assets considered in determining EFC will vary based on the amount of assets, the age of the eldest parent and whether there are one or two parents.
4 529 plans that are owned by a student or parent are treated as parental assets in the federal financial aid calculation. Source: U.S. Department of Education and Federal Student Aid, "The EFC Formula 2014-2015".
Please consider the investment objectives, risks, charges and expenses associated with 529 plan investments before investing. Contact your financial advisor or visit futurescholar.com for a program brochure, which contains this and other important information about the plan. Read it carefully before investing. You should also consider, before investing, whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program.
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© 2017 South Carolina Office of State Treasurer
Please consider the investment objectives, risks, charges and expenses carefully before investing. Contact your financial advisor or visit futurescholar.com for a Program Description, which contains this and other important information about the Future Scholar 529 College Savings Plan. Read it carefully before investing. You should also consider, before investing, whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. The Office of State Treasurer of South Carolina (the State Treasurer) administers the Program and has selected Columbia Management Investment Advisers, LLC and Columbia Management Investment Distributors, Inc. (Columbia Management) as Program Manager. Columbia Management and its affiliates are responsible for providing certain administrative, recordkeeping and investment services, and for the marketing of the Program. Columbia Management is not affiliated with the State Treasurer.
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