Federal VS. Institutional Methodology EFC Formula

By: K.W. Abbott

There are two formulas by which the Expected Family Contribution (EFC) of a family can be computed: The Federal Methodology and the Institutional Methodology.

All colleges use the Federal Methodology (FM). It is used as the basis for distributing federal financial aid funds. The Institutional Methodology (IM) is used by some private colleges. It is used as the basis for distributing the individual college’s private funds. Federal financial aid funds are distributed on the basis of the FM, even though the college uses the IM to distribute its own private funds.

The Institutional EFC is usually higher than the EFC calculated using the FM formula. The IM takes into consideration items such as the personal residence and family farm assets. The financial aid office also has the discretion to add back certain income items such as depreciation or business losses. The financial aid office can also add back asset items that have been disposed of prior to the filing of the financial aid application, but were in the family’s possession during the year.

The IM formula gives several options to the financial aid office at the university. The family’s EFC should be calculated using both the FM and IM formulas. This is to prevent an unpleasant surprise for the family that calculates its EFC using the FM formula and has a student who attends a college that uses the IM formula to calculate a higher EFC.


                                                                           National Institute of Certified College Planners