As you choose a plan to help save for your child’s edu­ca­tion, you may also want to find out how finan­cial aid can help you pay for high­er edu­ca­tion costs. The prospect of pay­ing for col­lege may seem intim­i­dat­ing, but with prop­er plan­ning, it doesn’t have to be.

How much of your child’s tuition are you expected to pay?

Your share is called your expect­ed fam­i­ly con­tri­bu­tion (EFC). Based on an analy­sis of your (and your child’s) annu­al adjust­ed gross income and assets, the EFC is the basis in deter­min­ing what grants, loans, and work-study pro­grams for which your child qual­i­fies, as well as any finan­cial aid you can expect to receive. Appli­cants will need to com­plete the Free Appli­ca­tion for Fed­er­al Stu­dent Aid (FAFSA) to cal­cu­late the EFC. For stu­dents who have severe finan­cial need, there are eli­gi­bil­i­ty lim­its that will auto­mat­i­cal­ly result in a zero EFC calculation.

It is strong­ly encour­aged for appli­cants to com­plete the FAFSA elec­tron­i­cal­ly because there are edits that reduce appli­ca­tion errors as well as cus­tomized ques­tions based on answers you pre­vi­ous­ly pro­vid­ed. An elec­tron­ic ver­sion will also allow the Depart­ment of Edu­ca­tion to send the results to stu­dents and schools more quickly.

Total Expected Family Contribution (EFC)

The chart below explains how your EFC is cal­cu­lat­ed. It adds parental income and assets, stu­dent income and assets to arrive at your EFC. In gen­er­al, parental income is 0% to 47% of your adjust­ed gross income while parental assets are 0% to 5.6% of your non­re­tire­ment assets, includ­ing 529 sav­ings plans and brokerage/mutual fund accounts.

Stu­dent income is 50% of your child’s income (assum­ing they have a job) over $6,310. Stu­dent assets are 20% of your child’s assets, includ­ing UGMA/UTMA accounts, and oth­er savings.

EFC Calculation

Once the EFC is cal­cu­lat­ed, a school’s finan­cial aid admin­is­tra­tor will sub­tract the EFC from the student’s cost to attend that par­tic­u­lar school. This in turn, will deter­mine their “finan­cial need” in the eyes of the U.S. Depart­ment of Edu­ca­tion and their eli­gi­bil­i­ty for fed­er­al finan­cial aid.

Types of Federal Student Aid

There are three pri­ma­ry cat­e­gories of fed­er­al stu­dent aid: grants, work-study, and loans. They are explained in the table below:

Grants: Money that doesn’t have to be repaid.

Financial Aid Grants

Work-Study: Money that’s earned while attending school and that doesn’t have to be repaid. 

Federal Work Study

Loans: Borrowed money for college or career school. You must repay the loans with interest. 


Other Types of Aid

There are oth­er types of finan­cial aid that are avail­able for ser­vice and spe­cial sit­u­a­tions. For example;

  • Edu­ca­tion Awards for com­mu­ni­ty ser­vice with Ameri­Corps. Ameri­Corps is a net­work of local, state, and nation­al ser­vice pro­grams to meet com­mu­ni­ty needs in edu­ca­tion, the envi­ron­ment, pub­lic safe­ty, health, and home­land security.
  • There are Edu­ca­tion­al and Train­ing Vouch­ers for cur­rent and for­mer fos­ter care youth. In many states, fos­ter youth must leave the social ser­vices sys­tem (“age out”) when they turn 18 or grad­u­ate from high school. Non­prof­it orga­ni­za­tions, such as Fos­ter Care to Suc­cess, pro­vide ser­vices to help col­lege bound fos­ter youth bridge the gap between ado­les­cence and adult­hood. Finan­cial­ly, they pro­vide edu­ca­tion­al vouch­ers, schol­ar­ships and grants, up to $5,000 per year, to students.
  • The Depart­ment of Health and Human Ser­vices, Health Resources and Ser­vices Admin­is­tra­tion (HRSA) offers schol­ar­ships and loan repay­ment ser­vices for those stu­dents look­ing to go into the health­care field. Specif­i­cal­ly, those who will be prac­tic­ing med­i­cine in under­served areas. If you child is look­ing to become a pri­ma­ry care med­ical, den­tal or men­tal health clin­i­cian, a nurse, phar­ma­cist, or prac­tice vet­eri­nary med­i­cine, it would be worth inves­ti­gat­ing the finan­cial options avail­able on the HRSA website.
  • State gov­ern­ments can also be a source of finan­cial aid. You will need to check your state’s web-site to see what aid is available.
  • Your col­lege or career school may also pro­vide aid. Vis­it both your school’s finan­cial aid office and the edu­ca­tion­al depart­ment that is respon­si­ble for your degree pro­gram to see if they have grants and/or schol­ar­ships in your major. Make sure you fill out any appli­ca­tion the school requires for its own aid and make sure you make the deadlines.
  • Final­ly, look for aid from Non­prof­its and/or Pri­vate Orga­ni­za­tions. Many orga­ni­za­tions offer schol­ar­ship and grants to help stu­dents pay for col­lege. There are resources avail­able on the web that will help you find these finan­cial opportunities.

Tax Benefits

And, of course, there are also the tax ben­e­fits. For all the gory details, check out the 90+ page, IRS Pub­li­ca­tion 970, “Tax Ben­e­fits for Edu­ca­tion”. Here are some of the highlights:

  • Amer­i­can Oppor­tu­ni­ty Cred­it allows you to claim up to $2,500 per stu­dent per year for the first four years of school.
  • Life­time Learn­ing Cred­it allows you to claim up to $2,000 per stu­dent per year for any col­lege or career school tuition and fees as well as for books, sup­plies, and equip­ment that were required for the course and had to be pur­chased from the school.
  • Stu­dent Loan Inter­est deduc­tion – you can take a tax deduc­tion for the inter­est paid on stu­dent loans that you took out for your­self, your spouse or your depen­dent up to $2,500 per year.
  • For 529’s and Coverdell Edu­ca­tion Sav­ings Accounts – invest your mon­ey in col­lege sav­ings plans and, when it’s time to with­draw the mon­ey, the earn­ings are tax free.


Regard­less of the source, find­ing free mon­ey can make a real dif­fer­ence in how afford­able your edu­ca­tion becomes. Do your home­work and make col­lege afford­able for your child.


To read all of the Late Stage Col­lege Plan­ning blog series click here.