Parents often ask me if it is really necessary for them to reduce their EFC (Expected Family Contribution) when they already know their student is going to get a merit scholarship that will far exceed any need-based aid for which they would otherwise be eligible. Though it is possible that a high merit scholarship may eliminate your eligibility for any need-based financial aid, it is still very important to keep your Expected Family Contribution (EFC) as low as possible.
A lowered EFC can be a way protecting yourself from these and other uncertainties:
Your merit scholarship may not be renewed in the sophomore, junior, or senior years.
Every year tens of thousands of students lose their merit scholarships. That’s because merit scholarships require a specific grade point average to be renewed in each of the following years. If your student does not qualify for a renewal, it can be financially devastating to your family.
A lower EFC can come to the rescue by compensating for a significant portion of your loss which the college can now fill with additional need-based financial aid.
Need-based financial aid often exceeds the amount of your scholarship when two or more students are in school at the same time.
Missing additional need-based aid during your overlapping years can also be costly to your family. Many middle-income families with students attending private colleges and universities can benefit greatly though additional need-based aid in those years.
I have seen families miss $50,000 to $75,000 in financial aid simply because they forget that their EFC is reduced by as much as 50% when two students are in school at the same time and didn’t realize the amount of additional financial aid they could have received through a few simple financial moves.
There is no merit aid offered at most top-tier universities.
If a student in your family enters a top-tier university that uses the Institutional Methodology, there is often no merit aid available. Because the only financial aid you will get is need-based, it is critical to middle- and upper-middle-income families to keep their EFC as low as possible.
What’s more, though you may not be eligible for financial aid in the current academic years you may be eligible for a lot of financial aid in the near term, even families with incomes in excess of $200,000 may be eligible for a lot of aid down the road.
Transfer scholarships are usually much less than regular scholarships.
If your student transfers to another school, transfer scholarships are very likely to be lower than the one received when a student enters as a freshman. The difference in your family’s financial need can mean more grants that will help compensate for the decrease in merit aid.
There can be a change in family circumstances that make you eligible for more need-based financial aid.
We all know that life can be full of surprises—some welcome and some not so welcome. A sudden lay-off, for example, could make you eligible for more aid. The lower your EFC, the higher amount of financial aid you are going to be awarded.
Also, it is never too late to review your situation. Even if you didn’t take advantage of all the strategies you could have used, check out what you can do for next year. To learn more about lowering your EFC, contact us at My College Planning Team.