Understanding the FAFSA ( Free Application for Federal Student Aid )

What is the FAFSA? It is the acronym for "Free Application for Federal Student Aid". Most colleges and universities require that all students applying for any kind of financial aid complete one every year. The information you put on the FAFSA is entered into a formula called the Federal Need Analysis Methodology (or just " federal methodology" for short), which measures the financial strength of your family unit. There are actually three different formulas. One is for dependent students, and two are for independent students (one for students with dependents other than a spouse, and another for students who have no dependants other than a spouse). The central processing system (CPS) uses the formulas to calculate that is called an "expected family contribution" (or EFC) for each applicant. This is the amount of money that the federal government determines your family should pay toward your education. 

An applicant's expected family contribution, or EFC, is a determination made with federal methodology, of the amount of money that the family unit should be expected to contribute toward the higher education of the student. It is not necessarily, what you pay. This expected amount gives financial and administrators a figure to work with when determining your aid. You may actually end up paying more or less than the calculated EFC. This EFC formula has two parts, the parents' portion and the student's portion. 

The parent portion of the EFC is based on the parents' adjusted available income and a portion of the parents' assets. The student's portion of the FAFSA, though often times lower, is of substantial importance. The student's available income is determined by taking his or her total income (both taxed and untaxed), and then subtracting certain allowances. Some of the income protection allowances for figuring out the student's portion are different from those that those that are made for the parents.