Expected Family Contribution

The formula used to calculate the expected family contribution takes into account family income and assets, family size, and the number of other college students in the family. Institutions must use the Federal Methodology legislated by Congress to assess eligibility for federal aid, but states and institutions may use different formulas to distribute their own aid. In this analysis, references to the expected family contribution mean the federal amount. If the expected family contribution exceeds the price of attending, the student will not be eligible for any need-based aid. The expected family contribution is independent of where the student enrolls and depends entirely on the family’s financial circumstances.

The formula is designed to compare ability to pay across families to promote the equitable distribution of available aid. In practice, families may contribute more or less than the amount established by the formula depending on their own perceptions of what they can afford and are willing to pay.

The formulas for determining the expected family contribution have been changed many times in an effort to create rules that are both fair and easy to understand (Baum 1999). Among the issues frequently debated are at what age should a student be considered independent, how the financial resources of a noncustodial parent should be treated, and what parental assets should be included in the calculation.

• After adjusting for inflation, the average federal expected family contribution has declined over the past decade for low- and middle-income students.

The 1992 amendments to the Higher Education Act introduced several important changes in how the expected family contribution is computed: home equity is no longer included in assets used to calculate the expected contribution; assets are no longer counted for parents with incomes under $50,000 who file a short federal tax form; the annual minimum student contribution was eliminated; and the required contribution from student earnings was reduced. The net result of these changes was that the average expected family contribution, after adjusting for inflation, was lower in 2000 than in 1990 for all full-time dependent students except those in the highest income quarter, where no change was observed (figure 4).