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.