Your retirement savings are not included in determining EFC

by Grace

Your 401k plans, IRAs, Keoghs and other qualified retirement savings are excluded when your Expected Financial Contribution* (EFC) is calculated using either FAFSA or PROFILE methods.

Saving for your retirement should be an important priority, and it makes sense that this portion of your financial pie is not “supposed to” pay for your child’s education.  In reality, many parents end up dipping into retirement savings to help pay for college.

* Expected Family Contribution (EFC)
The Expected Family Contribution (EFC) is how much money your family is expected to contribute to your college education for one year.
Typically, the lower your EFC, the more financial aid you will receive. Factors such as family size, number of family members in college, family savings, and current earnings (information you provide on the FAFSA) are used to calculate this figure.


6 Responses to “Your retirement savings are not included in determining EFC”

  1. Whew! Thank goodness for that! I would have been very dismayed to find out differently. One thing that I keep meaning to look into is how 529-b plans are considered. I assume they are counted in the EFC, but it sure would be nice if they weren’t.


  2. You’re correct, kcab, 529 plans are generally counted, but as parents’ assets. As such, they are assessed at a maximum of about 5% in the calculations.


  3. Hmmm, that sounds like it will work out reasonably for us then.

    Do you happen to know if there is a standard way that employer-donated college aid for a dependent is handled in FAFSA? DH’s university will contribute a chunk toward college for our kids, but doesn’t outright cover everything. I think it’s some percentage of the costs up to a cap value. When I looked at the policy a few months ago, it wasn’t at all clear to me how to figure out how much of a benefit it would be ahead of time and seemed like I would have to know quite a bit more about how the need determination is made. (Which, obviously, I haven’t been following up on.)


  4. I believe the university’s contribution would be factored in after the EFC is determined. Then, it would be considered as a another “award” and would affect the size of other federal and/or institutional financial aid. That’s how some are treated, but I’m not sure if all are.


  5. That makes sense & is what I decided was most likely when I looked at the benefit wording. Of course, whether we’ll still be here & whether the benefit will still exist are unknowns.



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